The Operation of The Operation of Direct SellingDirect Selling

Prof. Der-Fa Robert ChenProf. Der-Fa Robert Chen

DSRC, National Sun Yat-sen UniversityDSRC, National Sun Yat-sen University//www.dsrc.nsysu.edu.tw//www.dsrc.nsysu.edu.tw

Prof. Der-Fa Robert ChenProf. Der-Fa Robert Chen

DSRC, National Sun Yat-sen UniversityDSRC, National Sun Yat-sen University//www.dsrc.nsysu.edu.tw//www.dsrc.nsysu.edu.tw

Compensation SystemCompensation System Up-lineUp-line 、、 Down-lineDown-line 、、 GenerationGeneration 、、 PVPV Retail profitRetail profit Sales RewardSales Reward Personal Sales VolumePersonal Sales Volume （（ PSVPSV ）） Group Sales VolumeGroup Sales Volume （（ GSVGSV ）） Cumulative or Non-cumulative rewardCumulative or Non-cumulative reward Depth and width of down-linesDepth and width of down-lines Titles and PromotionTitles and Promotion Leader BonusLeader Bonus

Compensation System-1Compensation System-1 Consumer Type vs Business TypeConsumer Type vs Business Type Principles of Compensation SystemPrinciples of Compensation System ：：AA 、「、「 FairnessFairness 」：」： Effort and RewardEffort and RewardBB 、「、「 MotivatingMotivating 」：」： Clear Target andClear Target and Attractive RewardAttractive RewardCC 、「、「 ReachableReachable 」：」： Reasonable GoalReasonable GoalDD 、「、「 No LoopholeNo Loophole 」：」： Avoid ManipulationAvoid ManipulationEE 、「、「 No Free LunchNo Free Lunch 」：」： Earn the RewardEarn the Reward

Explanation of the RewardsExplanation of the Rewards PV (Point Value)PV (Point Value) ：： The unit for calcuThe unit for calculating the reward. Sometimes it is thlating the reward. Sometimes it is the exchange rate of local currency to e exchange rate of local currency to US$. PV could be changed for promotioUS$. PV could be changed for promotion without changing the price of the pn without changing the price of the product. roduct.

Retail ProfitRetail Profit ：： The difference betweeThe difference between retail price and members price.n retail price and members price.

Explanation of the Reward-1Explanation of the Reward-1 Sales RewardSales Reward ：： PSV (Personal Sales VoPSV (Personal Sales Volume) and GSV (Group SV)lume) and GSV (Group SV)

GSV: Include down-lines’PSV. The numGSV: Include down-lines’PSV. The number of generations to be included is ber of generations to be included is up to the company policy. up to the company policy.

The more GSV, the higher the reward %.The more GSV, the higher the reward %. So the up-line could get more reward So the up-line could get more reward with the help of down-lines’PSV.with the help of down-lines’PSV.

Ex. Percentage of RewardEx. Percentage of RewardGSV reachesGSV reaches % of reward% of reward

＄　５＄　５ ,, ００００００ ２％２％

＄１５＄１５ ,, ００００００ ４％４％

＄３０＄３０ ,, ００００００ ６％６％

＄６０＄６０ ,, ００００００ ８％８％

Explanation of the Reward-2Explanation of the Reward-2 PSV of C isPSV of C is ＄５＄５ ,, ００００００ , the PSVs of his d, the PSVs of his d

own-lines D1,D2,D3 are alsoown-lines D1,D2,D3 are also ＄５＄５ ,, ００００００ With only PSV of C, the reward will be With only PSV of C, the reward will be ＄５＄５ ,, ００００００ ×× ２％＝＄１００２％＝＄１００ Including the PSVs of his down-lines, the GIncluding the PSVs of his down-lines, the G

SV of C is SV of C is ＄２０＄２０ ,, ００００００ , and the total r, and the total reward is eward is ＄２０＄２０ ,, ００００００ ×× ４％＝＄８００４％＝＄８００

D1,D2,D3 will get their shares of reward D1,D2,D3 will get their shares of reward ＄１００＄１００ , the remaining $500 goes to C., the remaining $500 goes to C.

Explanation of the Reward-3Explanation of the Reward-3 Due to the contribution of his down-lines, Due to the contribution of his down-lines,

the reward for C increases from the reward for C increases from ＄１００＄１００ toto＄５００＄５００ . The increase is significant.. The increase is significant.

IIf the PSV of C and f the PSV of C and D1 D1 are both are both $60,000$60,000, PS, PSV of the others are still $500, then GSV of V of the others are still $500, then GSV of C is C is $130,000$130,000. The total reward is . The total reward is $130,000$130,000×8×8 ％＝％＝ $10,400$10,400. . The reward for D1 is The reward for D1 is $60,0$60,000×800×8 ％＝％＝ $4,800$4,800. . The reward for The reward for D2D2, D3 is , D3 is $100 each. The reward that C could get is $100 each. The reward that C could get is $$10,400-$4,800-$100-$100=$ 5,40010,400-$4,800-$100-$100=$ 5,400. The contri. The contribution from his down-lines is only bution from his down-lines is only $600$600..

Explanation of the Reward-4Explanation of the Reward-4 Leader CommissionLeader Commission ：： When the GSV of When the GSV of

down-line reaches the same %, the udown-line reaches the same %, the up-line could not get the contributiop-line could not get the contribution from them. Therefore, that chain on from them. Therefore, that chain of down-lines become independent from f down-lines become independent from the up-line. To compensate the loss the up-line. To compensate the loss and encourage the up-line to help doand encourage the up-line to help down-lines, Leader Commission is set uwn-lines, Leader Commission is set up.p.

Explanation of the Reward-5Explanation of the Reward-5 Leader Bonus Leader Bonus ：： Distributor with requDistributor with required number of down-lines who have reired number of down-lines who have reached certain title, his own retail sached certain title, his own retail sales volume reach certain level, is qales volume reach certain level, is qualified for Leader Bonus.ualified for Leader Bonus.

Leader Bonus is certain % of company Leader Bonus is certain % of company sales value which will be shared by qsales value which will be shared by qualified leaders.ualified leaders.

Statistics of TaiwanStatistics of Taiwan

2003 Total Sales NT$ 51.991 billion, 2003 Total Sales NT$ 51.991 billion, Rewards paid NT$ 23.699 billion, whicRewards paid NT$ 23.699 billion, which is 45.58% of total sales.h is 45.58% of total sales.

Number of participants: 3.818 million,Number of participants: 3.818 million, which is 16.94% of total population. which is 16.94% of total population.

Number of distributors received rewarNumber of distributors received rewards: 668,000 people, which is 17.5% of ds: 668,000 people, which is 17.5% of participants, i.e.17.5% of distributoparticipants, i.e.17.5% of distributors are business type.rs are business type.

The set-up of distributors org.The set-up of distributors org.

A: Advisor, B: Bridge, C: ConsumerA: Advisor, B: Bridge, C: Consumer Personal use of product,like it, satisfied.Personal use of product,like it, satisfied. ““Good thing should be shared with good friGood thing should be shared with good fri

ends”.ends”. To find someone who might need the productTo find someone who might need the product Follow up the use of the productFollow up the use of the product Sell the product to those who enjoy itSell the product to those who enjoy it （（ CoCo

nsumer type of distributornsumer type of distributor ）） Ask their willingness to introduce product Ask their willingness to introduce product

to their friendsto their friends

Meetings

OPP (Opportunity Meeting)

NDO (New Distributor Orientation)

Small group meeting

Rally: Meeting for training,

recognition and motivation

The set-up of distributors org.-1The set-up of distributors org.-1

Help the new one with correct attitudeHelp the new one with correct attitude Help attend the company trainingsHelp attend the company trainings Help find the prospective customersHelp find the prospective customers Help introduce product and follow upHelp introduce product and follow up Help sign the new customerHelp sign the new customer Help introduce company profileHelp introduce company profile Organize the down-linesOrganize the down-lines Apply group dynamic to overcome troubleApply group dynamic to overcome trouble

The set-up of distributors org.-2The set-up of distributors org.-2

Establish learning atmosphereEstablish learning atmosphere Build Build in search of excellencein search of excellence desire desire Use inspiration and recognition to fuUse inspiration and recognition to full-fill the accomplishmentll-fill the accomplishment

Characteristics of ProductCharacteristics of Product

Consumer-oriented product or serviceConsumer-oriented product or service Product has specialties that need perProduct has specialties that need personal explanation or demonstrationsonal explanation or demonstration

Repeat consumption type productRepeat consumption type product High quality product that is easy to High quality product that is easy to build good willbuild good will

Pricing PolicyPricing Policy

Consideration of personal sellingConsideration of personal selling Consideration of product imageConsideration of product image Consideration of market competitionConsideration of market competition Consideration of cost and profitConsideration of cost and profit The acceptability of marketThe acceptability of market

Operation of DS CompanyOperation of DS Company

R & D and production of high quality R & D and production of high quality productproduct

Set-up the reward planSet-up the reward plan Set-up the total reward %Set-up the total reward % Set-up distributor codes of conductSet-up distributor codes of conduct Educating, training and servicing of Educating, training and servicing of distributorsdistributors

Operation of DS Company-1Operation of DS Company-1 Computerization of ordering and calcuComputerization of ordering and calculating of sales and rewardlating of sales and reward

Logistics and delivering of productsLogistics and delivering of products Build up company culture and good wilBuild up company culture and good willl

Newsletter of product and activitiesNewsletter of product and activities Application of different ralliesApplication of different rallies

Tell decent from fraudulentTell decent from fraudulent

Profit of distributorsProfit of distributors Profit of DS companyProfit of DS company Conditions to joinConditions to join Product priceProduct price Product warrantyProduct warranty Refund policyRefund policy Protection of distributor rightProtection of distributor right