Wednesday, July 28, 2010
Direct Selling
Direct selling is a retail channel for the distribution of goods and services. At a basic level it may be defined as marketing and selling products, direct to consumers away from a fixed retail location. Sales are typically made through party plan, one to one demonstrations, and other personal contact arrangements. A text book definition is: "The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs."
Industry representative, the World Federation of Direct Selling Associations (WFDSA), reports that its 59 regional member associations accounted for more than US$114 Billion in retail sales in 2007, through the activities of more than 62 million independent sales representatives.
According to the WFDSA, consumers benefit from direct selling because of the convenience and service it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees.In contrast to franchising, the cost for an individual to start an independent direct selling business is typically very low with little or no required inventory or other cash commitments to begin.
The United States Direct Selling Association (DSA) reported that in 2000, 55% of adult Americans had at some time purchased goods or services from a direct selling representative and 20% reported that they were currently(6%) or had been in the past(14%) a direct selling representative.
Most direct selling associations, including the Bundesverband Direktvertrieb Deutschland, the direct selling association of Germany, and the WFDSA and DSA require their members to abide by a code of conduct towards a fair partnership both with customers and salesmen. Most national direct selling associations are represented in the World Federation of Direct Selling Associations (WFDSA).
Direct selling is distinct from direct marketing because it is about individual sales agents reaching and dealing directly with clients. Direct marketing is about business organizations seeking a relationship with their customers without going through an agent/consultant or retail outlet.
By far the majority of direct selling companies use a Muti-Level compensation plan, where the agent is paid not only for their own sales but also a percentage of the sales of other representatives they introduce into the organization and help train.
List of Multi-Level Marketing Companies
This is a list of pages about companies which use Multi-Level Marketing (MLM) for most of their sales.
Legality and Legitimacy
MLM businesses operate in the United States in all 50 states and in more than 100 other countries, and new businesses may use terms like "affiliate marketing" or "home-based business franchising". However, many pyramid schemes try to present themselves as legitimate MLM businesses.
The FTC states "Steer clear of multilevel marketing plans that pay commissions for recruiting new distributors. They're actually illegal pyramid schemes. Why is pyramiding dangerous? Because plans that pay commissions for recruiting new distributors inevitably collapse when no new distributors can be recruited. And when a plan collapses, most people-except perhaps those at the very top of the pyramid-end up empty-handed."
In a 2004 United States Federal Trade Commistion (FTC) Staff Advisory letter to the dierect selling association states:
Much has been made of the personal, or internal, consumption issue in recent years. In fact, the amount of internal consumption in any multi-level compensation business does not determine whether or not the FTC will consider the plan a pyramid scheme. The critical question for the FTC is whether the revenues that primarily support the commissions paid to all participants are generated from purchases of goods and services that are not simply incidental to the purchase of the right to participate in a money-making venture.
The FTC warns "Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It's best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products."and states that research is your best tool and gives eight steps to follow:
- 1) Find — and study — the company’s track record.
- 2) Learn about the product
- 3) Ask questions
- 4) Understand any restrictions
- 5) Talk to other distributors (beware shills)
- 6) Consider using a friend or adviser as a neutral sounding board or for a gut check.
- 7) Take your time.
- 8) Think about whether this plan suits your talents and goals.
However there are people who hold that all MLMs are nothing more than pyramid schemes even if they are legal rendering the whole issue of a particular MLM being legal moot.
History of Multi-Level Marketing
Business network (MLM) under the brand names associated with American chemist Karl Renborg (1887-1973). He was the first who applied the idea of network marketing to life, creating an economic system, an industry is considered the most promising in the 21st century.
Renborg Karl has 20 years living in China and worked in many different companies. Between the years 1920-1930, the government fell to the hands and Karl Chiang Chiang government was arrested along with other foreigners. The living conditions are lack of prison, he saw the role of nutrition for human health. To overcome the living conditions of malnutrition, has found a method Renborg scraped from the iron nails rust mixed into the diet and deal with the warden to get different kinds of vegetables. He and a few prisoners to follow this approach should be more resistant and survived to the date of return.
In 1927, Karl of the U.S. and start processing the nutritional supplements that vary based on an alfalfa grass contains many vitamins, minerals, protein and many other beneficial nutrients. He suggested that those who used his free trial products but no one dared to try because they do not want to do experiments. After much effort, but does not bring results, he realized that no one under review for not good things, so he has launched an idea, which later developed into an advanced business .
He Renborg proposal to introduce you to his nutritional supplements for their friend, if someone bought their products, he promised to pay commission. He also decided to pay commission to someone you know if the next product introduction of their relationship. The result was unexpected: information on nutritional supplements benefit began to spread widely (because each of his friends have many other friends and friends of your friends is infinite). Sales revenue of the company's growth beyond imagination, people met to request reference information about this new product.
In 1934 he founded the company Vitamins California and through this new distribution method, as consumers are also becoming a product distributor, his company has quickly achieved sales of $ 7 million that does not take a co ad. The unique in that by saving the cost of advertising and intermediaries (agents, retailers, warehouses ...) should participate in the system he can get higher remuneration.
What is Multi-level Marketing ?
Multi-level marketing (MLM), is a term that describes a marketing structure used by some companies as part of their overall maketing trategy. The structure is designed to create a marketing and sales force by compensting 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.
MLM companies have been a frequent subject of controversy as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales, encouraging if not requiring salespeople to purchase and use the company's products, potential exploitation of personal relationships which are used as new sales and recruiting targets, complex and sometimes exaggerated compensation schemes, and cult-like techniques which some groups use to enhance their members' enthusiasm and devotion. Not all MLM companies operate the same way, and MLM groups have persistently denied that their techniques are anything but legitimate business practices.