Multilevel Marketing in India Essay Example

a member are clearly defined. IDSA is a regulatory framework that works in close association with pioneering policymakers of Government of India to ensure ethical business practice in Direct Selling Spheres. The report concludes with annexure of excerpts from interaction with Amway and Oriflame Business Owners, Survey conducted and the results obtained.

The Multi-Level Marketing is a pioneering marketing scheme that has been taken up by several companies. It addresses to a wide range of customers with a personal touch and has been proved to be a very efficient and effective marketing technique. However, it has been misused by some deceptive organisations and bought negative vibes to the MLM Industry. The supervision and motivation of direct sales distributors is an important key helping the bottom-line of this Industry. India has witnessed several facets of the MLM Industry and there have been several local, national and multi-national players trying to have the biggest share in the pie. This report has the following focus

Many Multilevel companies are currently operating in India. Given below is a list of few companies who have managed to grab attention:

• Amway Global
• Avon Products
• Modicare
•  Oriflame
•  Tupperware

Amway Business owners or distributors have several ways to earn money from their relation with Amway. Money and Incentives can be earned as per below mentioned methods:

• Retail Markup
• Leadership Bonus
• Volume rewards
• Higher awards and incentives

RETAIL MARKUP: Amway works out a mix of Markup and Markdown Model to sustain its revenues. The distributor purchases Amway Products at base wholesale price from Amway, Then a suitable Markup is added by the Distributor suiting his/her needs and is directly sold to the consumer. The distributors otherwise called

as Amway Business Owners can sell the Amway products at whichever price band they wish. Amway recommends a 20% to 35% markup on base wholesale price.

This has certain exceptions though, because certain catalogue products have a fixed MRP attached to them. In such cases the distributor receives a certain fixed mark down margin from Amway.

VOLUME REBATES: Amway integrates certain traditional distribution chain features to its multi-level marketing scheme to allow the Amway business owners to earn money. As in traditional distribution chain, the wholesale price is linked to the Volume of good purchased. The unit price becomes cheaper as the distributor purchases from Amway and thus potential Markup increases.

Amway follows a PV System which is used for this purpose. All distributors buy their initial purchase at the same price and at the month end total volume of products purchased by the distributor are added up and volume discount is paid as a rebate according to the PV System in the following month. The volume discount is available across all product lines and offerings. Every Product is allocated a Point Value (PV) and a Business Value (BV). The PV decides on the rebate percentage that can be availed by the distributor. The business value is dependent on the manufacturing of the product.

An Amway business Owner or distributor can increase his/her sales volume by increasing any of the fore mentioned aspect. Generally, products sold to other down line sponsors attract a small margin but the sales volume makes up for the decrease in margin. Thus, this increases the distributor’s propensity to add new down line sponsors who can buy products from him.

LEADERSHIP BONUSES: Amway has a

unique method of providing incentives to people with outstanding sales volume. Amway pays a 4% leadership bonus to any distributor who reaches or exceeds the top of volume rebate sale in a down line.

The distributor who achieves this stint becomes a direct distributor for Amway and constitutes a ‘break-away leg’ but the original initiator still gets paid a part of the bonus for having achieved this. The only condition for the up line distributor to gain the bonus is by having a certain amount of volume (12%-15%) apart from the ‘break-away leg’. If an up line distributor doesn’t have the qualifying volume, then some or the entire bonus is passed to the next hierarchical up line member who qualifies for the same.

The Traditional distribution Chain, as shown in the diagram consists of Manufacturer who sources the raw materials and other services and manufactures the goods that is to be sold. The Wholesaler is present region wise as per the demand of the product and it is warehoused by the warehouse before it can move further down the distribution chain. Then the advertiser and retailer facilitate further movement and finally the goods reach the customer. In this long process, every intermediary wants his share from the pie, thus the customer ends up paying a hefty amount for the goods he consumes.

On the contrary, The MLM Distribution chain has only 3 levels viz. , The Manufacturer, Distributor and Customer. This structure reduces the commissions and percentage margins that were preciously eaten away by the retailers, wholesalers, etc. The saved money is thus distributed among The Independent Distributors who can enjoy a large margin by selling quite a

few products. He can also enjoy margins earned by people laying below him n the chain.

Low Barriers to Entry MLM is a very unrestricted industry to get into. It doesn't have any strict access requirements. One doesn’t need a college degree, or any particular experience to join a network marketer and start working. MLM Companies have low start up costs. This includes the initial registration or subscription amount one has to pay before one becomes a part of the pyramid structure. The amount required might be of the following types: * Initial Subscription or Registration Charges * Minimum purchase of goods offered by the MLM Company at a discount rate * Combination of both the above

There are various MLM Companies operating in India, One can handpick and choose the one that suits his/her needs. As compared to the small franchisee models or business setups the amount required to join a MLM Venture is minimal. * Sales Focus of Distributors The Independent distributors have a single focus attached to their schedules, Sales. The Manufacturing, Quality conformance and delivery of the products is taken care by the MLM Organisation. This saves a lot of time on behalf of the distributor who can devote his entire available time to male sales happen. * Flexible Hours

The work hours one can devote are completely at one’s disposal. Persons having full time employment might choose to work on weekends or evenings to generate sales revenue for the parent MLM Organisation. One can choose to work part-time or work from home if one wishes. * Leveraged Income "Leveraged" means one receives a continuing benefit from a single initial effort. As long as

one chooses one’s down line carefully, one can earn certain variable income depending on the motivation of the down line distributors without putting much of a conscious effort to sale the products.

Multilevel Marketing Plan is essentially different from the pyramid sche which is prevalent in various organisations. The pyramid scheme is not allowed by several governments including the US which has strict regulations governing the direct selling policies of the country. Given below is a list of difference between Multilevel Marketing and Pyramid schemes. Profits are based on time and effort devoted to selling goods or services to consumers.

This association is autonomous and self regulatory for the direct selling Indian Industry. This association serves the purpose of a common purpose vehicle to address the industry and policy makers of the Government to facilitate the Industry. It also aids in advisory and consulting activities. It has over 20 affiliated members. Members: The Members of IDSA receive a plethora of benefits ; services to improve their business and maintain a healthy structure. The Members can use the IDSA Association logo which is approved by WFDSA – World federation of direct selling association.

This ensures products and services of the highest quality is being rendered to the customer. This also works as an ethical business practice guarantee for consumers and policymakers.

CONCLUSION

Multi level Marketing has grown several folds since its inception in India. However, this does not limit the market size and target group given the vast population. Also, there have been several local and multi-national players competing on a level playing field to garner more market share. This makes it a competitive Industry. Moreover, the product offerings have been

increasing in length, width and depth.

Keeping the rural population in mind, Agricultural products of the highest quality are also being included in the product basket. In this era of globalisation and privatisation, Criticism has been a part of several major sectors and industries. Competition defines any sector but still the need of the hour is to make sustainable growth possible by incorporating the right strategies in place and working towards the long term goal. MLM surely has a better days to see and flourishing business to follow. This can be aided by doing further R;D, preferably in India and coming up with creative solutions addressing specific problems.

As a business partner, it is always advisable to check the roots before hanging on to a branch of any MLM Company. The key lies in understanding the business model and being completely sure of the Organisation before making any investments. MLM in India is yet to spread its wings and soar with flying colours but that day is not far.