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How To Distinguish Between Direct Selling And Pyramid Selling

2008/9/10 9:48:00 41826

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Direct selling activities are targeted at products with actual use value, and buyers are the ultimate consumers; illegal pyramid selling pactions are only carriers of illegal pyramid selling organizers for commercial fraudulent activities (some do not even have real goods), and the price of products is far higher than the actual value. Buyers are reselling products to the bottom line to obtain high profits.

The Direct Selling Company only charges a lower membership fee for new distributors, and some countries also require new entrants to withdraw within a certain period after joining, and may refund the membership fee.

Illegal pyramid selling usually charges a high membership fee when entering, or purchases a certain quantity of goods at high price and can not be refunded.

Direct Selling Company is based on selling goods that are of value to the ultimate consumer, and thereby making a profit.

Illegal pyramid selling companies rely on new recruits to pay high admission fees and sell products at high prices to the bottom of the market. Therefore, the illegal pyramid selling system is difficult to continue to develop at a certain level, and the whole system collapses, and many losses are often caused by many low-level participants.

The legitimate Direct Selling Company sells products on the basis of sales, and the salesmen give bonuses according to their sales volume. The illegal pyramid selling companies are not rewarded by salesmen according to sales volume, but are rewarded according to the number of development lines (heads).

Legitimate Direct Selling Company do not encourage sellers to hoard excessive commodities and provide opportunities for joining or withdrawing direct selling plans, and those who wish to withdraw may return goods that are not used or still available for sale to the company.

Illegal pyramid selling companies are encouraged by the "fast becoming rich" as a bait. They even ask the participants to buy a large number of products, and they can not be returned.

According to classical economic theory, value should consist of three parts, that is, C+V+M.

Among them, C stands for fixed cost, V stands for variable cost, and M represents profit.

In essence, the remuneration of a salesperson should be part of variable cost (V) and should be the work income of a salesperson.

Since the remuneration is the labor of the salesmen, it should be "more work and more gains".

China's "Direct Selling Management Ordinance" clearly stipulates that the remuneration paid by direct selling enterprises to direct sellers can only be calculated according to the income of the salesperson directly selling products to the final consumers. The total remuneration (including commission, bonus, various forms of reward and other economic benefits) shall not exceed 30% of the sales revenue of the salesperson himself directly to the final consumer.

The direct selling regulation has abolished the rules of team payment. There will be no multi-level direct selling in the future.

Similarly, for direct selling enterprises, there is no foundation for team and system marketing, and the performance of direct selling can not be doubled like that of multi-level marketing in the past.

In the process of "direct sale", direct selling personnel usually introduce two things to consumers, one is to introduce products or services provided by sales, the two is to introduce direct selling plans as career opportunities.

Through introducing, selling products (services) to consumers, or (and) developing and absorbing consumers (not limited to consumers) to engage in direct selling business, and become their offline partners to get corresponding returns.

Of course, the bottom line should be paid for the opportunity to get the business.

And the "opportunity" of the purchase business has almost the same rights as on-line.

Therefore, I believe that the "opportunity" of business has actually been sold as a "target".

Single level direct selling (Single-levelmarketing) is also known as single level pyramid selling, which means sales people sell goods directly from manufacturers to consumers.

In 1997, the administrative measures for pyramid selling promulgated by the Administration for Industry and commerce, in China, defined the single level pyramid selling, that is, the production enterprises do not sell through the shops, but through the development of a level of pyramid selling staff and the sale of the products of the enterprises directly to consumers by the pyramid selling staff.

It is also defined as a business mode for direct selling enterprises to directly sell their products to consumers through the development of a single level salesman.

The author tends to the latter definition, because single level direct marketing is not necessarily limited to manufacturers (enterprises), other sales enterprises can also organize single level sales, not only limited to "manufacturers", so the definition of "direct selling enterprises" is more reasonable.

Multi level direct marketing is also called "Networkmarketing", "Structuremarketing" or "multi-level marketing" (Multi-leveldirectselling).

The Federal Trade Commission of the United States has made such a definition for the multilevel marketing plan ("Multi-levelmarketingprogram"), "in the marketing plan, the participants pay the organizers of the plan in exchange for such rights.

(1) develop new entrants, or develop other new entrants through organizers or others to become participants, branches, partners, bonus centers (incomecenter) or other similar planning organizations.

(2) selling goods or providing services;

(3) get remuneration or bonus; but on the premise that (a) the salaries of the participants are mainly (primarily) coming from the supply of final goods or services, rather than from the development of other new entrants, nor from the development of other new entrants into the next line, branches, partners, bonus centers (incomecenter) or other similar planning bodies, and (b) the marketing plan to establish and implement a set of rules to ensure that the plan is not mainly (primarily) to make profits through the development of new entrants instead of sales.