Network Marketing Explained

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Network Marketing Explained, Different compensation plans, History

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Network Marketing Explained

  1. 1. NETWORK MARKETING
  2. 2. DIRECT SELLING THROUGH RELATIONSHIP MARKETING
  3. 3. WHAT IS DIRECT SELLING? <ul><li>As defined by the “Direct Selling Business School” </li></ul><ul><ul><li>It is a business model that uses direct selling and relationship referrals as a method of creating a distribution channel for a company’s products or services through an Internet Portal </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Low investment </li></ul></ul><ul><ul><li>Residual income </li></ul></ul><ul><ul><li>Time freedom </li></ul></ul>Allows startup companies to build a customer base through referrals without having to outspend advertising budgets
  4. 4. ALWAYS REMEMBER… <ul><li>In Direct Selling you are in business for yourself BUT NOT BY YOURSELF. </li></ul>
  5. 5. A BRIEF HISTORY… <ul><li>In 1800s people bought what they needed at small, family-owned shops…till W T GRANT changed the landscape for customers. </li></ul><ul><li>In 1960s franchising was a revolutionary new technology in business. </li></ul><ul><li>Newspapers and magazines wrote what a scam and rip-off franchising was. Stories of people who lost their life savings to some franchise were everywhere. There was a strong move to make franchising illegal. In fact, franchising actually came within 11 votes of being outlawed by US Congress. </li></ul>
  6. 6. A BRIEF HISTORY… <ul><li>Today this so-called scam is responsible for over 34 percent of all retail sales in North America. </li></ul><ul><li>Franchises sell nearly 800 billion dollars worth of goods and services today. </li></ul><ul><li>Every industry goes through an evolution similar to this!!! </li></ul>
  7. 7. A BRIEF HISTORY… <ul><li>Network Marketing is 50 years young. </li></ul><ul><li>In the early 1940's a company by the name of California Vitamins recognized that all their new sales representatives coming aboard were friends and family of their existing sales force. </li></ul><ul><li>Concept of lots of people selling small quantities vs few superstars selling a lot of products. </li></ul><ul><li>The company combined the two ideas and allowed family & friends also to sell their products…creating a new group of network representatives. </li></ul><ul><li>Few years later the company changed it’s name to NUTRALITE FOOD SUPPLEMENT CORPORATION. </li></ul>
  8. 8. BIRTH OF AMWAY <ul><li>In 1959, former NutraLite distributors Rich DeVoss and Jay Van Andel started the Amway Corporation – to show the American Way of Selling. </li></ul><ul><li>Exponential growth haunted the industry leading to a lot of misunderstanding…which unfortunately persists even today!!! </li></ul><ul><li>Chain letters estimated at about 10 million letters everyday. </li></ul>
  9. 9. FRAUDULENT PRACTICES <ul><li>In 1974, Senator Walter Mondale declared such companies to be the nation's number one consumer fraud. </li></ul><ul><li>Pyramid schemes </li></ul><ul><li>No clear understanding of what constituted a legitimate use of network marketing… the Federal Trade Commission and state agencies across the nation turned their eyes to almost all network marketing companies. </li></ul><ul><li>1975 – LAWSUIT AGAINST AMWAY </li></ul><ul><li>1979 – AMWAY WINS THE CASE </li></ul>
  10. 10. THE AFTERMATH… <ul><li>In the 1980s Network Marketing exploded taking the industry to a completely new level. </li></ul><ul><li>Some statistics… </li></ul><ul><li>There are more than 10,000 network marketing companies across the globe – big & small </li></ul><ul><li>Currently it is reported to be a US $ 100 billion industry and the projected growth is more than US $ 300 billion by 2015 </li></ul><ul><li>Fortune 500 companies & companies listed on the NYSE and Tokyo Stock Exchange are part of this industry </li></ul><ul><li>1993 – 1995: Amway was the fastest growing networking company with sales of US $ 1 billion only in Japan </li></ul>
  11. 11. CHANGES IN THE INDUSTRY 1945-1979 – The Underground Phase 1980-1989 – The Proliferation Phase <ul><ul><li>2000 & beyond </li></ul></ul><ul><ul><li>The </li></ul></ul><ul><ul><li>Universal </li></ul></ul><ul><ul><li>Phase </li></ul></ul>
  12. 12. THE COMPENSATION STRUCTURE <ul><li>Did you know…Watkins Products, a direct selling company for nearly 100 years converted to a network marketing model because they found the compensation structure better!!!  </li></ul>
  13. 13. THE COMPENSATION STRUCTURE <ul><li>4 basic compensation plans </li></ul><ul><ul><li>Unilevel </li></ul></ul><ul><ul><li>Stair Step Breakaway </li></ul></ul><ul><ul><li>Matrix </li></ul></ul><ul><ul><li>Binary </li></ul></ul>
  14. 14. UNILEVEL PLAN <ul><li>Sponsor one line of distributors/representatives </li></ul><ul><li>There are no width limitations to this plan </li></ul><ul><li>Commissions are normally paid out on a limited depth (common plans that have been reviewed pay commissions between 5 and 7 levels deep) </li></ul><ul><li>Multiple cross lines, hence may create challenges in managing the network </li></ul>
  15. 15. MATRIX PLAN <ul><li>Structure that has a set width and depth for which distributors are compensated </li></ul><ul><li>Simple equation distinguishes the width and depth of the plan (i.e. width x depth) </li></ul><ul><li>Representatives are encouraged to assist their downline members to help their organization grow </li></ul><ul><li>Allows representatives to sponsor new recruits deeper into their downline once their frontline is full </li></ul>
  16. 16. STAIR STEP BREAKAWAY PLAN <ul><li>The Stair Step Breakaway Plan was one of the original network marketing compensation plans and is still used by a number of companies today </li></ul><ul><li>The name Stair Step Breakaway is derived from the concept that distributors climb the ladder of success and when they reach a certain level they are allowed to break away from their upline distributors and run their organization independently </li></ul><ul><li>Hard for many to understand and even harder to try and explain it to your prospects </li></ul>
  17. 17. STAIR STEP BREAKAWAY PLAN <ul><li>By breaking away, the volume that your upline previously received from you, no longer flows through your upline’s business at the same rate. For your upline, it is like losing their best customers </li></ul><ul><li>As distributors breakaway, the original sponsor is still entitled to earn a small percentage from each break away distributor's efforts </li></ul>
  18. 18. BINARY PLAN <ul><li>Binary means 2 – reflects the maximum number of people you can have as your immediate downlines </li></ul><ul><li>  Any additional distributors must then be placed under one of your existing frontline members. </li></ul><ul><li>Creates a very supportive environment for new members as the easiest way for associates to achieve success is by assisting their new members to build their organizations </li></ul><ul><li>This team approach makes the binary plan very attractive as there is a lot of support (both initial and ongoing) as all associates within your organization work towards achieving a common goal. </li></ul>
  19. 19. BINARY PLAN <ul><li>The main earning objective of the binary compensation plan is to balance the amount of leg volume flowing through either side of your business/tracking centre </li></ul><ul><li>Normally no depth restrictions to the binary structure and each level of your organization is paid out on a consistent commission percentage making it easy to understand </li></ul><ul><li>Although each business/tracking centre can only earn so much, there is generally no limit as to how many business/tracking centers each distributor can operate </li></ul>
  20. 20. HAVE YOU HEARD THESE??? <ul><li>Commonly/Frequently Asked Questions </li></ul>
  21. 21. IS DS A FAIR DEAL???? <ul><li>Each person who signs up with a DS company chooses what level they want to achieve, based not on a mental decision but based on results.  </li></ul><ul><li>There is not a more fair system than one that rewards someone based on results. </li></ul><ul><li>The most unfair system would be to reward someone based on their resume, their talk, their family connections or their attractiveness. </li></ul>
  22. 22. DS IS “FAIR PLAY” <ul><li>In DS, to participate you buy a product. </li></ul><ul><li>It takes almost NOTHING to achieve this level - therefore many (millions) can achieve this easy standard. </li></ul><ul><li>To be great in DS performance standards have been established in the compensation plan. </li></ul><ul><li>They are not arbitrary standards; they are specific lines of achievement that ANYONE who wants that level of achievement must meet. </li></ul>
  23. 23. COLLAPSING VS CLOSING <ul><li>There is a difference between a business collapsing and a business closing. </li></ul><ul><li>There have been times when DS companies have “closed” because of mismanagement of the business and/or unethical leadership </li></ul><ul><li>A business collapses when investors suddenly withdraw their money. </li></ul><ul><li>But never has an DS business collapsed because it ran out of people on planet Earth. </li></ul>
  24. 24. PERFORMANCE PAYS…… <ul><li>Meeting or exceeding performance standards is the reason someone achieves success in Direct Selling </li></ul>
  25. 25. CHANGE YOUR PARADIGM!! <ul><li>To be a golfer you simply buy some clubs for a few hundred dollars and go play golf - that is the base level “standard” to participate. </li></ul><ul><li>To be considered a good golfer there are higher standards you must meet, to be a great golfer there are even higher standards. </li></ul><ul><li>This is true of every sport, every business and every profession and even parenthood! </li></ul><ul><li>Having a child doesn’t make you a great parent. </li></ul>
  26. 26. <ul><li>Why Direct Selling ? </li></ul>
  27. 27. THE ESSENCE OF MARKETING
  28. 28. DS IS ORGANIC <ul><li>Organic means “Natural” </li></ul><ul><li>DS is the purest way to move a product to a consumer and the purest way to be compensated.  </li></ul><ul><li>In its organic state one person shares a valuable product or service with another (not because they will profit, but because the product is valuable). “I like it, maybe you will too.” </li></ul>
  29. 29. WHY ORGANIC? <ul><li>A person shares a business idea with another - this is the foundation of all businesses throughout history. “I found a business I like and maybe you’d like to work on it with me.” That too is clean and pure. </li></ul><ul><li>The person who shares the business with another ONLY profits IF the person they shared the business with succeeds - that is ultra-responsible, which is also clean and pure. </li></ul>
  30. 30. GIVING THE PERSONAL TOUCH
  31. 31. ME OR THEM
  32. 32. <ul><li>THE EVOLUTION </li></ul>
  33. 33. THE TREND <ul><li>Social Media & Marketing </li></ul>
  34. 34. WHAT IS SOCIAL MEDIA
  35. 35. THE TIMELINE
  36. 36. CONSUMER LOYALTY
  37. 37. SOCIAL MEDIA & TRUST
  38. 38. ADVERTISING – IS THE GAME OVER?
  39. 39. <ul><li>THE FUTURE </li></ul>
  40. 40. THE CHANGING ECONOMIC ORDER
  41. 41. FLASHBACK <ul><li>2007 – PRIME / SUB PRIME CRISIS </li></ul><ul><li>2008 – STOCK MARKET CRASH </li></ul><ul><li>2009 – GLOBAL ECONOMIES COLLAPSE </li></ul><ul><li>2010 – JOB CUTS ON THE RISE </li></ul><ul><li>2011 – FOOD RIOTS – The Crisis continues…. </li></ul>
  42. 42. THE E - REVOLUTION
  43. 43. THE TRENDS
  44. 44. E-COMMERCE IS THE FUTURE
  45. 45. THE DIRECT SELLING INDUSTRY (250-300 BILLION DOLLAR)
  46. 46. The Direct Selling Industry - By the Numbers
  47. 47.
  48. 48. THE NEW ECONOMIC ORDER <ul><li>The recession is not over </li></ul><ul><li>We are entering the age of sustainability </li></ul><ul><li>Talent is abundant </li></ul><ul><li>Its how you inspire and engage the existing talent </li></ul>
  49. 49. THE NEW BUSINESS PARADIGM HIERARCHICAL COLLABORATIVE
  50. 50. <ul><li>This is what Allan Pease has to say: </li></ul><ul><li>“ The network marketing business has evolved virtually overnight without fanfare or advertising and could eventually become the largest business system of them all. Its success relies on the referral – based distribution system and is driven almost entirely by the enthusiasm of its members. It is one of the most dynamic opportunities ever created by the mind of man.” </li></ul>This is the Evolution of a Career through a Silent Revolution

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