Chapter-09

Multilevel Marketing and Direct

Distribution

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

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

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

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

Turnover of Major Organizations in

India

Amway
Tupperware
Medicare
HLL-Network
Oriflame
Avon

Rs. 580 Cr
Rs. 100 Cr
Rs. 100 Cr
Rs. 100 Cr
Rs. 65 Cr
Rs. 65 Cr

Ch-09 Multilevel Marketing and Direct Distribution

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

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

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

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

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

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

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

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

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

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

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

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

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

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