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Chapter-09Multilevel Marketing and Direct           Distribution
Multilevel Marketing• Multi level or “network” marketing are a  way of selling goods or services through  ”distributors”• ...
Network/Teamwork Marketing• If one signs up as a “distributor’ he will receive  commission on the “sale” he makes and also...
Issues in multilevel marketing• Depends on the rate of growth of the  distributor base and also on the  distributors being...
Good sectors for Direct Marketing•   Nutrition•   Wellness•   High end personal care products•   Herbal products•   Specia...
Turnover of Major Organizations in              India•   Amway         Rs. 580 Cr•   Tupperware    Rs. 100 Cr•   Medicare ...
Issues in multilevel marketing• Chain moves on the basis of networking• Worldwide Direct Marketing is over US $  100 billi...
Avon•   US $ 8 billion. Turnover•   Presence in over a hundred countries•   4 million distributors worldwide•   Operates i...
Avon• Products are supplied to distributors through  couriers• Main objective is to reduce the cost of the  distribution• ...
AVON• Inventory is replenished at the beginning  of each month• Storage at multi location is avoided• Reduced cost in dist...
Sangam Direct-HLL• People in suburb of Mumbai like thane,  wishes to buy groceries and items of daily  necessity, can long...
Sangam Direct-HLL• One objective is to connect with  customers• Order after receipt is sent to the  warehouse or franchise...
Sangam Direct-HLL• The scope of these initiative lies in its  size• The number of SKUs handled are in  thousands, and are ...
Direct Marketing Format-Key            Implications• Competes directly with the kirana stores at  one end, and the other e...
International Experiments• Net Grocer• Peapod• These formats to integrate stores/product  brands, direct marketing skills,...
E-Tailers in India• Godrej and Amul sites provide customer  net purchase services• Godrej has arrangements with  fabmall.c...
P & G and Direct Marketing• In the form of house demonstration cum sales• Product demos at shops and retail outlets to  in...
Common Concern In Direct          Marketing• The performance cycle between the point  of sales and the immediately precedi...
Summary• Multi level or “network” marketing are a way of  selling goods or services through ”distributors”  servicing end ...
Summary• Nutrition , wellness etc. are good sectors  for network marketing• Amway, Tupperware and Medicare are  leading pl...
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Multilevel marketing and direct distribution

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Multi-level marketing involves selling goods directly through distributors. Multi-level marketing does have certain practical issues. First, it depends on the rate of growth of the distributors and also their ability to do business. Nutrition, wellness etc. are good sectors to do network marketing. Leading players in India include Amway, Tupperware and Medicare. HUL, Amul and Godrej are other such e-tailing initiatives.

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Transcript of "Multilevel marketing and direct distribution"

  1. 1. Chapter-09Multilevel Marketing and Direct Distribution
  2. 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. 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. 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. 5. Good sectors for Direct Marketing• 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. 6. Turnover of Major Organizations in India• 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. 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. 8. Avon• 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
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