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Network Marketing

Network Marketing

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Published by: surajjosep on Feb 11, 2011
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Network Marketing

‡ Multi-level marketing (MLM), (also called network marketing, direcMultilevel marketing (MLM), (also called network marketing direct selling] and referral marketing) is a term that describes a marketing structure used by some companies as part of their overall marketing strategy. The structure is designed to create a marketing and sales force by compensating promoters of company products not only for sales they personally generate, but also for the sales of other promoters they introduce to the company, creating a downline of distributors and a hierarchy of multiple levels of compensation. ‡ The products and company are usually marketed directly to consumers and potential business partners by means of relationship referrals and word of mouth marketing.

‡ Mainly consist of Independent, unsalaried salespeople, associates, independent business owners, dealers, franchise owners, sales consultants, consultants, independent agents. ‡ are awarded a commission based upon the volume of product sold through their own sales efforts as well as that of their downline organization.

‡ Many pyramid schemes try to present themselves as legitimate MLM businesses. Note:-. Good plans where the money you make is based primarily - on people outside the plan who intend to use the products - rather than on the number of distributors you recruit and your sales to them.

‡ In 1979, Amway was found guilty of price fixing (by requiring "independent" distributors to sell at the low price) and making exaggerated income claims ‡ The FTC also warns that the practice of getting commissions from recruiting new members is outlawed in most states as "pyramiding . ‡ Walter J. Carl stated in a 2004 Western Journal of Communication article that "MLM organizations have been described by some as cults (Butterfield, 1985), pyramid schemes (Fitzpatrick & Reynolds, 1997), or organizations rife with misleading, deceptive, and unethical behavior (Carter, 1999), such as the questionable use of evangelical discourse to promote the business (Hopfl & Maddrell, 1996), and the exploitation of personal relationships for financial gain (Fitzpatrick & Reynolds, 1997)". ‡ the loss rate for recruiting MLM s is approximately 99.9%

‡ Unilevel plans:-Every distributor the person sponsors is considered to be on that sponsor's frontline and there are no width limitations, meaning there is no limit to the amount of people one can sponsor in the frontline. . This is due to the fact that commissions are normally paid out on a limited depth, which typically means sponsor can earn commissions on sales between 5 and 7 levels deep. ‡ Stairstep Breakaway plansThis type of plan is characterized as having representatives who are responsible for both personal and group sales volumes. . Once predefined personal and/or group volumes are achieved, a representative moves up a commission level. This continues until the representative's sales volume reaches the top commission level and "breaks away" from their upline. The original upline usually continues to be compensated through override commissions and other incentives. ‡ Matrix plans This type of plan is similar to a Uni-Level plan, except there is also a limited number of representatives who can be placed on the first level. When all positions in a representative's downline matrix are filled (maximum width and depth is reached for all participants in a matrix), a new matrix may be started. representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas

‡ Binary plans: A binary plan is a multilevel marketing compensation plan which allows distributors to have only two front-line distributors. If a distributor sponsors more than two distributors, the excess are placed at levels below the sponsoring distributor's front-line. ‡ Hybrid plan are compensation plans that are constructed using elements of more than one type of compensation plan.

‡ A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, without any product or service being delivered. Pyramid schemes are a form of fraud.

‡ The "eight-ball" model contains a total of fifteen members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to anarithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15. ‡ Matrix schemes use the same fraudulent non-sustainable system as a pyramid; here, the participants pay to join a waiting list for a desirable product which only a fraction of them can ever receive. . Such schemes operate as a queue, where the person at head of the queue receives an item such as a television, games console, digital camcorder, etc. when a certain number of new people join the end of the queue. The scheme organizer profits because the income from joiners far exceeds the cost of sending out the item to the person at the front.

The "eight-ball" model contains a total of fifteen members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to anarithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme in the picture in contrast is a geometric progression 1 + 2 + 4 + 8 = 15.


‡ In early 2006, Ireland was hit by a wave of schemes with major activity in Cork and Galway. Participants were asked to contribute 20,000 each to a "Liberty" scheme which followed the classic eight-ball model. Payments were made in Munich, Germany to skirt Irish tax laws concerning gifts. Spinoff schemes called "Speedball" and "People in Profit" prompted a number of violent incidents and calls were made by politicians to tighten existing legislation. ‡ On 12 November, 2008, riots broke out in the municipalities of Pasto, Tumaco, Popayan and Santander de Quilichao, Colombia after the collapse of several pyramid schemes. Thousands of victims had invested their money in pyramids that promised them extraordinary interest rates. ‡ The Kyiv Post reported on 26 November, 2008 that American citizen Robert Fletcher (Robert T. Fletcher III; aka "Rob") was arrested by the SBU (Ukraine State Police) after being accused by Ukrainian investors of running a Ponzi scheme and associated pyramid scam netting US$20 million

According toDirect Selling News, the largest direct selling companies, by revenue in 2008[6], were Company Name Year Founded 2008 Revenues (USD)

Avon Products, Inc.


10.9 billion

Amway Corporation


8.2 billion

Vorwerk & Co. KG


3.15 billion

Herbalife Ltd.


2.4 billion

Mary Kay Inc.


2.4 billion

Primerica Financial Services Inc.


2.3 billion

Tupperware Brands Corp.


2.21 billion

Forever Living Products Intl. Inc.


2.1 billion

Oriflame Cosmetics


1.68 billion

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