Principles of Marketing

Case analysis 3

Amway: Reaching Customers through Direct Selling

GROUP 9

Group members:
Tran Sy Hoang BAFNIU18194
Nguyen Thi Thuy Duong BABAWE18160
Nguyen Vo Ha Phuong BAFNIU17032
Tran Thuy Yen Thu BAFNIU17051
Chung Thi Thanh Nhu BAFNIU18247
1.     This case study reflects the activities of a unique and differentiated
organization. Locate where Amway’s competitive advantages lie. How is
Amway better placed than many other organizations? 
Locate where Amway’s competitive advantages lie. How is Amway better placed
than many other orther organizations?
_For a modern business organization, developing goods or services is not enough.
Goods must also be available in the right quantities and in the right locations to
reach customers. For the organizations themselves, the distribution strategy is
never underestimated. One reason for their success is that they reach their
customers in a better and more relevant way than their competitors. Today, the
company has grown into a global corporation that sells more than 400 products and
employs more than 13. 000 people, in more than 70 countries and regions around
the world.
How is Amway better placed than many other organizations?  
There’s a lot to like about a company as Amway that has a great track record and
loads of financial success. It starts with its rather large and diverse product line. The
quality and value of products from multi-level marketing firms can always be
debated, but the range of products offered by Amway is impressive.
  Moreover, it can be difficult to keep everything straight or become an expert on
every product, but the large product line gives distributors a great opportunity to
offer nearly every potential customer something they like or need.
 The low start-up cost of starting your own business with Amway, as well as the
100% satisfaction and money-back guarantee the company offers, are more
reasons to like Amway
2. Compare direct selling to one other form of distribution. Produce a
frank and realistic comparison of direct selling with retail shopping. In
doing so, list the advantages and disadvantages of each
Direct selling:

- Based upon person-to-person relationships. The seller goes to the consumer

rather than the consumer to a shop.

- Refers to selling products directly to the consumer in a non-retail

environment. Instead, sales occur at home, work, online, or other non-store
locations.
Retail shopping:

- Occurs when a business sells a product or service to an individual consumer

for his or her own use.

- The transaction itself can occur through a number of different sales channels,
such as online, through direct sales, or direct mail. The aspect of the sale that
qualifies it as a retail transaction is that the end user is the buyer.

Advantages Disadvantages
Direct _ Rise up revenue _ Illegal pyramid selling and chain letter
Selling _ Variable timetable investment schemes can within the
_ Be your own boss and work from home organizaton
_ Friendships and association _Investment plans to sell pyramids and
_Incentives and acknowledgement illegal mailings may occur within the
_ Business skills organization.
_Personal development _Distributors need to spend a large amount
_ Mentorship of time to reach different areas with
_Tax profit unknown profits -> time consuming. -
_ Discount on product Cannot sell without sales force.
_Risks through direct sales indicated by
customers are higher than other types of
shopping.
_It is difficult to expand the scale because
to expand the sales force, the organization
needs to recruit and train new sales
representatives.
_High barrier to enter new markets
Retail - Retailing enables distributors to Cost for opening a retail store is expensive
shopping provide immediate financial incentive
rewards.
- Multi-channel retailing, by offering a
variety of engagement points for the
customer to make a purchase such as
store, purchases from a website,
telephone ordering, mail orders,
interactive television, catalog ordering,
which expand the convenience and
simplicity of offers. Therefore, boosting
benefit.
- Retail stores which are directly under
control of company always bring a
safety and prestigious feeling to
customers.
Sponsorin _ Convenient flexible earning
g opportunities
_ No formal qualifications required
_ Possibility to establish and to run own
business at minimum cost/low risk
include land renting fee, building fee, etc.
- People may reluctant of shopping in store
because they don’t have leisurely time.
- Instead of actively approaching to the
consumer as direct selling does. Companies
have to spend a lot money in marketing to
attract customers to their stores, which is
much more costly than direct selling
method
_ Direct sellers do not receive domestic
potential customers and they are
responsible for creating the business
themselves.
_ Costs associated with accessing different
regions and investing time with unspecified
profits.

3. How does Amway distribute its products? How are Amway distributors
recruited? In which ways can the distributors generate income?
The operation of each Amway Distributor is determined by Amway sales and
marketing plan. A method of selling goods directly to the consumer by an
independent Distributor. A Distributor can then introduce further Distributors and
generate income from retail profits supplemented by bonus payments based upon
the total sales of the group built by a Distributor.
Income is generated by a distributor through:
·         The retailing of goods to consumers
·         Additional performance and leadership bonuses
·         Various levels of leadership bonuses, dependent upon the overall size and
shape of the business
            => Rests upon the twin foundations of retailing and sponsoring. Retailing
enables distributors to provide immediate financial incentive rewards. Sponsoring
enables distributors to replicate the base with other people, thus allowing the
organization to grow.
4. Is Amway an illegal pyramid scheme? Explain.
No, Amway is not a pyramid scheme. Unfortunately, a lack of understanding and
misperceptions, especially on social media, can incorrectly put this label on direct
selling or multi-level marketing companies, like Amway.
Important factors that differentiate Amway from a pyramid include:
 It is a low risk, low-cost business start-up
 No money is made on recruiting alone
 There is no minimum product order
 An individual can earn more than the person who recruited them
 Amway offers a 100% money-back guarantee on the business registration
fee, as well as a 100% satisfaction guarantee on most products*
 Retail selling is required
 There is a written contract between Amway and a business owner defining
the relationship and providing Rules of Conduct