The management of MLM business in Taiwan 1945: Nutrilite Corporation

- 1997: direct selling industry = US$80.47 billion

→ 2.06% growth compared with 1996- 31 million employees → +25%

competition

issues

Political, economic and social

Fraudulent pyramid schemes (since 1960)

April 1998: China suspended all MLM activities

bad image- europe: snow ball system

- japan: silver rat, money rat, rat club

1997: government regulatory agencies, MLM practitioners and media joined effort to change the image of MLM

Taiwan total sale turnover: NT$40.1 billion → - 1.8% (1996)

Taiwan average sale volume: NT$167.16 million → + 5.3% (1996)

Taiwan total number of distributors: 2.72 million → 12.56% of total population → N°3 in the world

Taiwan MLM industry in 1997 Competition from both local and foreign firms Eroded consumer loyalty Changing consumer needs

- 3.36% in the number of new DS distributors

- 4.38% and – 2.52% decrease of orders and bonuses received by DS distributors

N°3 but the productivity of distributors decreased

Opportunities: domestic market liberation measures, globalization

Threats: more pressure

Innovative and flexible management approach

Research objective and method The aim of this research is to provide information about the

current management of DS distributors in Taiwan MLM industry.

Issues: - education and training- the incentive- communication- turnover- application of computer- public relation.

- Method used: personal interview executives from 8 foreign and local MLM

companies

Challenge: to develop an attractive package to cater all the needs of the DS distributor

►CEO of Nutri-Metrics International view:

Strong leadership in MLM business management

Effective management needs: - reward- recognition- ability to duplicate the company’s success formula- good relationship between distributors and the management

Constant training program

Network Marketing Magazine survey (1998): 60% of the respondents stayed less than 1 year after joining a MLM firm.

According to some studies in Britain and the US, people join MLM firm for:

- extra income- achieving short term goals- beeing one’s boss- enjoying discount prices- winning praises from others

Study done with 4 US MLM firms: - self satifaction- accomplishment - flexible hours

Research findings and analysis

Open-ended question

7 major areas: - training and education- bonus program and sales network structure design- inter-company communication- ways of handling high turnover- use of computer system and public relation- industry image and government regulatory- emerging future trends.

training and education

2 functions: - motivate DS distributors- educate the distributor with the product

- In 1997: Annual company conference: + 6.26%Training program: + 1.55%Opportunity meeting: +0.74%

- Interviewed firms provide: Products knowledgesSale skills trainingSales network management

bonus program and sales network structure design MLM need to have a structure to meet the needs of both self-

use consumers and distributors.

commission: retailing commission + leadership commission

- Retailing commission = retail discount + monetary reward paid of the group sale volume

- Leadership commission = compensation for setting up a large scale of down-lines

→ monetary reward = short term effectMLM firms want a new method to motivate distributors.

inter-company communication

Magazines Newsletters Counseling services

ways of handling high turnover

Companies interviewed are not concerned by this issue

Goals:Goals: - to offer quality products

- to offer attractive packages

use of computer system and public relation Computer allows to: - assess inventory sales- monitore sales progress- manage sales force- develop customer profiles.

In the public relation: - Print advertisement - Sponsoring large scale philantropic events

industry image and government regulatory Negative image caused to the MLM industry

Fair Trade Commission should produce guidelines of regulation

future trends development

4 of the interviewed firms want to attract married couples to join and start a « second spring ».

Position : « non-store retailers »

→ provide superior products, carrer opportunities and « personal-touch » experience

Products of the future will be more sophisticated, leisure-oriented, environmental-friendly and educational.

Different structure of MLM firms and new management philosophy

Strategic alliances, internationalization and corporate diversification

Conclusion and suggestion Macro-management level: MLM do efforts in: - Recruiting new members- Training with efficiency- Closer ties with distributors- Media.

Micro-management level: - High quality product- Good image- Management philosophy→ expectation of the government

To prepare to the competition of tomorow, MLM companies should adjust their offerings and change their structures.

Suggestion for short-term

MLM should focus their effort on consolidating their current network operation and enhancing the productivity of their sales forces:

→ develop closer ties with its distributors at all levels

→ develop « Service First » marketing strategy

Suggestion for long-term

→ be technology-driven and market-minded

→ consolidated internal resources and maximize operational efficiency

→ create synergy