Transcript Atom and Molecules

Network Marketing
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Page 1
Highlights of the Industry
•
•
•
•
It first popularized by Amway, in 1950s in USA
Total turnover estimated at Rs 301,044 crores
2005 with an annual growth rate of 25%
People have negative perception of direct selling
organizations and network marketing organizations
• The aggressive selling techniques, exaggerations of
facts in recruiting, pyramiding scams and unethical way
of exploiting relationships all together form a basis for
this negative perception.
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Introduction of Network Marketing
• Long relied on direct marketing to target
customers without spending a lot of money
• Marketers have taken the direct model one step
further, i.e. not only they do the sales, but
recruit and train new distributors
• The advantage in network marketing is the
commission paid not only for direct sales made
by the salesperson , but also from the sales
made by the recruits made by him.
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Contd.
• According to the Direct Selling Association in the United
States, 70% of the revenue from the direct selling industry
was generated by network marketing companies
• In the case of Pakistan, network marketing momentum was
conspicuous in India during mid 90’s followed by the
establishment of the Pakistan arm of Gold Mine
International.
• Total turnover of network marketing companies in Pakistan
was estimated at Rs.30, 104 crores
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Contd.
• In 2005 with an annual growth rate of 25% (Tribute, 2006).
GMI, EMI, Tiens, Unaico site talk and Sky Aims are the
major network marketing players in the Pakistani market.
• Pakistani middle class was projected to grow from 1.1
crore households in 2001-02
• 1.7 crore households in 2005-06 and the figure is expected
to be 2.8 crore by 2009-10.
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Contd.
• There are others like Fahad,who have dubbed MLM
schemes as unethical, and guilty of ‘instrumentalising’
relations rooted in love and affection and as such is
socially and psychologically unacceptable to most
people in our society.
• The researchers in this study propose to explore
whether such a phenomenal growth of network
marketing in Pakistan is because of the exploitation of
relationships with friends and relatives.
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Objectives of the Study
• To examine the exploitation of
relationships in Network Marketing
• To deny the wrong perception about
earning in network marketing industry
that one can earn without working.
• To prove that as density or saturation of
the members increased scope of
working does not decreased.
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Hypotheses
• H1:The Network Marketing is not likely to exploit
the relationships.
• H2:The perception about network marketing
that one can earn without working is wrong.
Earning is only done by working.
• H3:Scope decreases with the increase in
density.
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Defining Terms
• Network Marketing is a subset of direct selling and
is also known as “multilevel marketing”, “structure
marketing” or “multilevel direct selling
• First, sales people (distributor) may earn
compensation from their personal sales of goods
and services ”
• Second, they may earn compensation from sales to
or purchase from those persons whom they have
personally sponsored or recruited into the network
(down lines).
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Hence Network Marketing
•
•
•
Buying products,
Selling products,
Finding other agents to buy and sell
products
• Mark up usually ranges from 20% to
50%.
• Distributors receive a monthly
commission for their ‘personal volume’,
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Page 10
Contd.
• Distributors receive a net commission on the
sales of those they recruit into the network.
• The sunflower and pyramid are the two common
business models in network marketing
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Relationship
• For the purpose of our study, the researchers
define relationships as those with the emotional
attachment and/or intimacy existing among
relatives and friends.
• Relatives we mean closely related persons like
siblings, parents, in - laws, cousins, nieces and
such others.
• By ‘friends’ the researchers mean those
persons who are dependable, trustworthy and
loyal.
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Methodology
• (Questionnaire).
• to study the exploitation of relationships in network
marketing, the researcher used the multi level marketing
company, Sky Aims
• Data was collected from 50 respondents using
convenient sampling method
• The sample was drawn from Sky Aims outlet at Lahore
for 5 consecutive days while the channel members were
in the outlets for getting products.
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Contd.
• The sample of respondents were segmented
and classified into three classes based on
experience in Amway’s network marketing.
• Out of 50 respondents, 17 were below 2 years,
• 20 between 2 to 5 years and
• 13 were above 5 years
• 10 relatives,20 friends, 15 Colleagues and 5
others are respondents.
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Relation satisfaction with Upline
Observed Frequencies
Relation satisfaction with Up line
Status
Relatives
Friends
Colleagues
Satisfied
7
15
13
2
37
Unsatisfied
3
5
2
3
13
Total
10
20
15
5
50
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Others
Total
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Relation satisfaction from the downline
Observed Frequencies
Relation Satisfaction with Down line
Status
Relatives
Friends
Colleagues
Satisfied
8
14
15
4
41
Unsatisfied
2
6
0
1
9
Total
10
20
15
5
50
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Others
Total
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Number of people who earned without
working.
Observed Frequencies
Status
Relatives
Friends
Colleagues
Earned
2
3
1
0
6
Not earned
8
17
14
5
44
Total
10
20
15
5
50
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Others
Total
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Relation between scope and density
Observed
Frequencies
Growth
rate
Experience Fast
Moderate
Slow
Total
Below 2
years
4
9
4
17
Between 2
to 5 years
4
11
5
20
Above 5
years
7
4
2
13
Total
15
24
11
50
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Page 18
Conclusions
• Relations are not exploited in network
marketing.
• One can only earn by doing work.
• Density does not decreases the scope
because new market is always available.
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