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On Network Marketing


1. Q: What is Network Marketing?
A:

This is a type of direct selling where distributors are compensated in both selling the products and the business opportunity. This encourages them to build and maintain their own network distributors, each with their own customers. It comes with many aliases: MLM, Multilevel Marketing, Word of Mouth Marketing, Multiplication-of-Efforts Marketing, among others.

The distributors who are independent contractors and not employees of the company, act as both the company's customer base as well as the marketing and sales arm for a company's products (or services) and business opportunity.

Distributors are compensated in two ways: 1) when they sell products; 2) when their recruits sell products. Merely recruiting new distributors into the network gives you no compensation.

The term multi-level in multi-level marketing describes the various levels of recruits qualified for compensation in a company by independent distributors even if they are not directly involved in the sale of a product or service. The levels refer to those directly and personally recruited as well as those they have personally recruited and so on.

The system encourages distributors to duplicate their network business by building and maintaining their own network of distributors (called downlines), each with their own retail customers. This way, the distributors' downline base expands and the company's distributors' base expands with it, with sales as the common basis for earning by both the company and its distributors.

2. Q: What are some existing Network Marketing companies in the Philippines?
A:

Here are some Network Marketing companies operating in the country:

Food Supplements: E. Excel, Forever Living, Golden Neo-life Diamite, Herbalife, High Dessert, Issho-Genki, Morinda, Nutrition for Life, Sunrider, Symmetry and Viva America.

Water Purifiers: Multi-Pure and WATERS

Premium Cookwares: Health is Life

Fashion Jewelry: Gioeilli Home and

Personal Care Products: Amway, Barclay-Elle Marge, Cosway, Nikken, NSA, and Nu Skin
3. Q:

What are the factors contributing to the phenomenal growth of Network Marketing?

A:

There are three factors, namely:

  1. The proven legality of the network marketing system in 1979 by Amway from the Federal Trade Commission in the United States.
  2. The introduction of faster and cheaper computers.
  3. The ever-changing lifestyles and needs of people all over the world.
4. Q: What are the general benefits of MLM over the traditional business and employment?
A:

Some benefits of the MLM are:

  • Simplicity of the principles behind the business
  • Control their own destiny
  • Equal chance to leverage time and efforts through others
  • Get paid for what they are really worth
  • Work from their homes
  • No boss, no sales quota, no fixed work time
  • No work pressures
  • Can start immediately
  • Educational background does not matter
  • Can promote themselves to a leadership role
  • Easier and low-risk entrepreneurial option
  • Duplicate system of doing business
  • No territory restriction
  • With "sponsors" or uplines
  • Lesser financial investment
  • Expenses are mostly variable
  • No franchise fees
  • Tax advantages as home-based business
  • Personal and professional growth with the company
  • Residual income
  • Psychic rewards
5. Q:

What are the rewards of Network Marketing?

A:

There are three rewards of Network Marketing:

  1. Leveraging
  2. Geometric growth
  3. Residual income
6. Q: What are the characteristics of Network Marketing which differentiate it from the Pyramiding scam?
A:

There are two characteristics:

  1. Independent distributors replace traditional middlemen.
  2. Word-of-Mouth Marketing replaces mass media advertising.

    Traditional Distribution.
    Manufacturer-->Distributors-->Wholesalers-->Retailers-->sEnd-users

    Network Marketing.
    Manufacturer/principal --> Network Marketers --> End-users

    Network Marketing is not the same as the Pyramiding scam:

    a. Pyramiding is fraudulent and not a sustainable operation
    b. Pyramiding is not legal
    c. Pyramiding companies pay commissions on people recruited while Network Marketing schemes pay strictly on retail sales and none on people recruited.
7. Q: What are the consumer safeguards that distinguish legitimate MLM from Pyramiding scams?
A:

There are three consumer safeguards:

  1. A low entry barrier by way of reasonable sales kit or demo materials sold at cost as they sign up as distributor. There is no other investment required.
  2. A low exit barrier by way of a "buy back" policy (at minimum 90% of the price paid) that the firm will repurchase, within a reasonable timeframe from last purchase, the unsold, unopened, unused, unexpired, undamaged inventory held by distributors resigning from the company. There is a protection given to the distributors.
  3. An indispensable need for regular retail requirements for the distributor to earn continuously. There is no offer of income by simply recruiting and products sold at fair market value. 4. An obligation to sell at least 70% of their previously acquired inventory before distributors are allowed to make a repurchase. There is absolutely no inducement for inventory loading.
8. Q: What are the sources of compensation?
A:

The sources of compensation are:

  1. Retail Profit derived from personal sales
  2. Network Income derived from personal sales of downlines, including group rebates, royalty bonuses and other types of bonuses. This may also include personal recruit bonus when a personal recruit makes a sale.



   
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