1. Multi-level Marketing and
Networking as a Subset of
Direct Selling
Reported by: Freneil I.Reyes

2. What is Direct Selling?
 refers primarily to the distribution
system.
 It is the marketing and selling products
directly to consumers away from a
fixed retail location.
 Modern direct selling includes sales
made through the party plan, one-on-
one demonstrations, and other
personal contact arrangements as well
as internet sales.

3. Two types of Direct Selling
 Single Level Marketing
 Multi Level Marketing

4. Single Level Marketing
 Rewards the sellers for their personal
sales activity. They cannot sponsor
any other distributorship or sales
personnel. Income comes only in the
form of commission or bonus.

5. Single Level Marketing

6. Multi-level Marketing
 It is a marketing strategy in which the sales
force is compensated not only for sales they
personally generate, but also for the sales of
others they recruit, creating a downline of
distributors and a hierarchy of multiple levels of
compensation.
 In this strategy, the seller recruits other
distributors or sales people, and also receives
commissions and bonuses on the sales they
make. Downliners are necessary to increase the
sales force, and thus generate a huge number of
sales.
 The term "multi-level marketing" emphasizes the
compensation plan.

7. Is Network Marketing and Multi-
level Marketing Synonymous?
 Network Marketing and Multi-level
Marketing are generally considered to
be synonyms, and a subset of direct
selling.
 Network Marketing tends to be
modern preferred term.
 Other terms are also used, including
word-of-mouth marketing, interactive
distribution, relationship marketing and
others.

8. Multi-level Marketing Setup
 Independent, unsalaried salespeople of multi-
level marketing, referred to as distributors (or
associates, independent business owners,
dealers, franchise owners, sales consultants,
consultants, independent agents, etc.), represent
the company that produces the products or
provides the services they sell. They are
awarded a commission based upon the volume
of product sold through their own sales efforts as
well as that of their downline organization.
 Independent distributors develop their
organizations by either building an active
customer base, who buy direct from the
company, or by recruiting a downline of
independent distributors who also build a
customer base, thereby expanding the overall
organization. Additionally, distributors can also

10. Multi-level/Direct Selling
Companies
 Avon
 Herbalife
 Mary Kay
 Natasha
 Nathaniel
 Sophie Martin
 Red Logo

11. Common types of direct selling
methods.
 Telemarketing - This
is one of the chief
direct sales tactics
prevalent today.
There are different
methods used to get
your sales flowing
and also make
customers happy to
take your calls. You
should be very
pleasant and stay on
the point while
making your sales
pitch.

12. Direct Mail
 This is marketing conducted E-mail
exclusively through mail. Direct
mail may vary in format, but Sales letters
usually conforms to standard
mailing requirements. A direct Postcards
mail package includes a letter,
brochure or even both. Folders
Brochures
Self-mailers
Statement stuffers
House organs
Direct-Mail Advertising

13.  Direct Response - This is an
advertising technique that urges
consumers to respond in a certain
manner, usually to buy a product, and
also provides them the means to do
so. A business reply card is a direct
response tool.

14. Is Network Marketing a
Pyramid Scheme?
 Pyramid Scheme (illegal scam)
◦ A pyramid scheme can be defined as a
fraudulent money-making scheme that is
based on a non-sustainable business model
that involves the exchange of money
primarily for enrolling other people into the
scheme without a legitimate product or
service being delivered. Eventually the
number of new recruits fails to sustain the
payment structure and the scheme collapses
with most people losing the money they paid
in.

15.  In a more practical sense, probably the
easiest way to identify pyramid schemes is
firstly there is no legitimate product or service
involved (ie you do not get a legitimate
product in return for your initial investment).
The second way to identify pyramid schemes
is that you do not get a financial return unless
you have successfully introduced a number
of new recruits into the pyramid. Basically,
pyramid schemes concentrate on the money
that you could earn by recruiting new people
into the pyramid and generally ignore the
marketing and selling of any products or
services.

16. What is a pyramid scheme?
•Of course, we are not talking about building
structures, but about people participating in a program
who are grouped in the shape of a pyramid, with a few
on the top and many on the bottom.

17. Five red flags of a product-
based pyramid scheme
 Recruiting of
participants is
unlimited in an
endless chain
of empowered and
motivated
recruiters
recruiting
recruiters

18.  Advancement in
a hierarchy of
multiple levels of
“distributors” is
achieved by
recruitment,
rather than by
appointment.

19.  Ongoing
purchases by
distributors are
encouraged
in order for them to
be eligible for
commissions and
to advance in the
business (“pay to
play”)

20.  The company
pays
commissions
and/or bonuses
to more than
five levels of
“distributors.”
(Participants are
not really
distributors, but
buyers.)

21.  For each sale,
company payout for
each upline
participant equals or
exceeds that for the
person actually
selling the product.
 This creates an
inadequate incentive
to sell products and
an excessive
incentive to recruit a
huge downline.

22. Network Marketing (legitimate,
legal business model)
 The concept behind network marketing is a
distribution model that allows a company to sell
their products directly to the consumer. Choosing
to use a word of mouth approach (networking)
instead of advertising through traditional streams
(eg media). Therefore instead of paying the
media for advertising, network marketing
companies are structured to reward distributors
through commission in return for selling their
products and finding new customers.
 Therefore the main focus of a network marketing
company is product distribution. In fact, in a
legitimate network marketing company,
distributors are not required to recruit new
distributors in order to earn a commission, they
can earn money purely by selling the company’s

23.  Although distributors can choose to
sell the company’s products to earn
their commissions, not everybody
wants to be a sales person and
therefore choose to recruit more
distributors into their organization as a
means to build their referral base. Not
only does this create a group of loyal
customers, it also allows you
to leverage the efforts of others to
create a residual stream of income.

24. Pyramid Scheme Legitimate Direct Selling
Manufacturer Manufacturer
Upline/“Distributors”
Distributors
Downline/
End-User/
“Distributors” Customers
End-Users???

25. Why victims of recruiting MLM’s
seldom complain
 They have been conditioned to blame
themselves for failing to “work the system.”
 “I failed.”
 They fear consequences from or to their
upline (who may be a close friend or
relative)
 “I won’t tell!”
 Lack of enforcement leads to the belief:
 “They must be legal or they’d have been stopped by
now.”

26. Why People Should Not Join Multilevel Marketing?
 Highly difficult to make a profit  Lack of management control
(less than 1% make a profit). systems with sales territory.
 Image problems with public.  Enormous strain on
 High level of rejection and resources: time and money
resistance from the public. travel (fuel costs)
 Time and labor intensive.  Strains personal
relationships; leverages
 Market saturation of personal relationships
products/services; products are recruitment.
commodity-based.
 Pyramid infrastructure: does
 Attrition Rate. Extremely high not work.
attrition rate.
 Deception. Uses deceptive
practices to recruit individuals.
 Constant meetings ad nausea.
 MLM’ers must constantly drag
people to meetings against
their will.

27. Market
saturation
Split One
Split Two
Split Three
Split Four
Split Five
Split Six
Next slide 27

28. Pyramid Schemes vs. Multilevel Marketing
Pyramid Scheme MLM Characteristics:
Characteristics:  The revenue is split between
 All the money goes to the top those at the top and to the MLM
person in the pyramid. company.
 Focus on growth through  A direct descendant of pyramid
recruitment of people. schemes.
 “Robbing Peter to pay Paul.”  Focus on growth through
Pays initial investors with recruitment of people.
incoming recruits investment.  Recruitment-centered rather than
 Recruitment-centered rather product-centered.
than product-centered.  Monitor performance of
 Require substantial upfront fees independent agents
from people who are recruited.  Have buy-back policies in place
 Pressure recruits to purchase so agents do not get stuck with
corporate products for their own excess inventory.
consumption or stockpile large  Low upfront fees to get in.
amounts of inventory.
 Incessant meetings to attend.
 Pyramid infrastructure
 Pyramid infrastructure.

29. Thank you
For
Listening….
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