The above presentation on Multilevel Marketing & Direct Distribution defines Multi level or “network” marketing as a way of selling goods or services through “distributors”. The presentation is an initiative by Welingkar’s Distance Learning Division. For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/DistMang Join us on Facebook: http://www.facebook.com/welearnindia Follow us on Twitter: https://twitter.com/WeLearnIndia Read our latest blog at: http://welearnindia.wordpress.com Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP

1. Welingkar’s Distance Learning Division
CHAPTER-9
Multilevel Marketing &
Direct Distribution
We Learn – A Continuous Learning Forum

2. Multilevel Marketing
• Multi level or “network” marketing are a way
of selling goods or services through
”distributors”
• These “distributors” are unlike distributors in
the normal sense of the term or distributors
one comes across the supply chitin of
FMCG/Pharmaceutical
Ch-09 Multilevel Marketing and Direct Distribution

3. Network/Teamwork Marketing
• If one signs up as a “distributor’ he will receive
commission on the “sale” he makes and also on the
“sales” that are made by “distributors” appointed by
him.
• The recruited” distributors” are known as the “down
line”
• In pyramids like network commotions are based on
the number of distributors recruited.
• The sales are to the recruits and not to customs
Ch-09 Multilevel Marketing and Direct Distribution

4. Issues in multilevel marketing
• Depends on the rate of growth of the
distributor base and also on the distributors
being able to do business
• Pyramid may break up in case of products that
do not have customer base, and hence end up
in dissatisfied “distributor” holding stocks they
purchased as part of the “distributor” deal
Ch-09 Multilevel Marketing and Direct Distribution

5. Good sectors for Direct Marketing
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Nutrition
Wellness
High end personal care products
Herbal products
Specialized types of items that sell more on
word of mouth and personal conviction
Ch-09 Multilevel Marketing and Direct Distribution

6. Turnover of Major Organizations in India
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Amway
Rs. 580 Cr
Tupperware
Rs. 100 Cr
Medicare
Rs. 100 Cr
HLL-Network
Rs. 100 Cr
Oriflame
Rs. 65 Cr
Avon
Rs. 65 Cr
Ch-09 Multilevel Marketing and Direct Distribution

7. Issues in multilevel marketing
• Chain moves on the basis of networking
• Worldwide Direct Marketing is over US $ 100
billion
• In India it was Rs. 2500 crores in 2003-04
• Direct Marketing sector was growing at 20%
Ch-09 Multilevel Marketing and Direct Distribution

8. Avon
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US $ 8 billion. Turnover
Presence in over a hundred countries
4 million distributors worldwide
Operates in India with a head office at Delhi
Imports the formulations from US and get the skin
care, beautify care manufactured at facilities in
Assam and Panvel
Ch-09 Multilevel Marketing and Direct Distribution

9. Avon
• Products are supplied to distributors through
couriers
• Main objective is to reduce the cost of the
distribution
• Route is Avon-to-Beauty Advisor-to-Beauty
Representative-to-customer
• Beauty representative gets a 20% discount on buying
Avon products while a beauty advisor gets a 20%
discount plus a points on volume discount, based on
volume of sales which progresses on a slab wise
basis
Ch-09 Multilevel Marketing and Direct Distribution

10. AVON
• Inventory is replenished at the beginning of
each month
• Storage at multi location is avoided
• Reduced cost in distribution is passed on to
the “distributors” as high commission
Ch-09 Multilevel Marketing and Direct Distribution

11. Sangam Direct-HLL
• People in suburb of Mumbai like thane,
wishes to buy groceries and items of daily
necessity, can long on to the appropriate
internet site www.snagamdirect.com and
place an order, or even can place an order
over the phone
• Site stocks 3500 SKUs
Ch-09 Multilevel Marketing and Direct Distribution

12. Sangam Direct-HLL
• One objective is to connect with customers
• Order after receipt is sent to the warehouse
or franchisee at the back end via
interconnect computer network
• The franchisees are only service providers
like C &FAs, the ownership of the products
remaining with the company
Ch-09 Multilevel Marketing and Direct Distribution

13. Sangam Direct-HLL
• The scope of these initiative lies in its size
• The number of SKUs handled are in
thousands, and are growing ultimately with
a scope of becoming a virtual hypermarket.
• The sales are driven buy frequent offers.
Ch-09 Multilevel Marketing and Direct Distribution

14. Direct Marketing Format-Key Implications
• Competes directly with the kirana stores at
one end, and the other end with value for
money based store such as Big Bazaar
• For retention of customers volume based and
repeat purchase discounts are offered
Ch-09 Multilevel Marketing and Direct Distribution

15. International Experiments
• Net Grocer
• Peapod
• These formats to integrate stores/product
brands, direct marketing skills, and the
shopping habits of customers to drive
profitable volumes
Ch-09 Multilevel Marketing and Direct Distribution

16. E-Tailers in India
• Godrej and Amul sites provide customer net
purchase services
• Godrej has arrangements with fabmall.com
• Amul leverages its distributor network to
service orders received on the net, whereby
dealer is also kept happy
Ch-09 Multilevel Marketing and Direct Distribution

17. P & G and Direct Marketing
• In the form of house demonstration cum sales
• Product demos at shops and retail outlets to induce
trails among target groups
• Stocks are routed to the direct marketing agency
through its distributors, for demo and sale to
customers
Ch-09 Multilevel Marketing and Direct Distribution

18. Common Concern In Direct Marketing
• The performance cycle between the point of
sales and the immediately preceding stocking
points has to be as short as possible
• Try and involve the channel partner in
inventory management, so that the stock
holding spread across the chain
Ch-09 Multilevel Marketing and Direct Distribution

19. Summary
• Multi level or “network” marketing are a way of
selling goods or services through ”distributors”
servicing end customer for some commission
• Pyramid may break up in case of products that do
not have customer base, and hence end up in
dissatisfied “distributor” holding stocks they
purchased as part of the “distributor” deal
Ch-09 Multilevel Marketing and Direct Distribution

20. Summary
• Nutrition , wellness etc. are good sectors for
network marketing
• Amway, Tupperware and Medicare are leading
players in India
• HLL, Amul, and Godrej are other e-tailing
initiatives in India
• P& G, and HLL are also not left behind
Ch-09 Multilevel Marketing and Direct Distribution