Achievements of Multi-Level Marketing Activities in the World

and helpful handbooks for companies and independent distributors.

The sole purpose of the DSA and MLMIA is to support the MLM industry, its companies and distributors.

1.3. Achievements of multi-level marketing activities in the world

Up to now, MLM activities have achieved remarkable achievements as shown by the following statistics:

- In 1998, the world had about 30,000 MLM companies with sales of more than 400 billion dollars.

- MLM's annual growth rate is 20% - 30%

- In the United States - the cradle of MLM, there are 2000 MLM companies operating, 1 in 10 families has 1 person doing MLM, accounting for 15% of the population. More than

500,000 people became millionaires thanks to MLM

- Japan, the second largest power in the world, has up to 90% of goods and services distributed in the form of MLM. Nearly 2.5 million distributors achieve a revenue of 30 billion USD.

- Australia: MLM revenue reaches 1.5 billion USD

- Germany, France, Italy: each country reached over 2 billion USD.

- UK: Revenue reached over 1 billion USD.

- Russia: There are over 100 MLM companies with over 2 million distributors

- Taiwan has 1 in 12 people following MLM

- Malaysia has more than 1 million distributors with revenue of 1 billion USD.

Every day, on average, more than 60,000 people join MLM worldwide.

For every 100 millionaires in the world, 40 come from the MLM industry.

The 21st century is estimated to have 70% of goods and services developed according to

this form

2. Development situation of multi-level marketing activities in Vietnam

2.1 Scale of multi-level marketing organization activities

In the early 90s of the 20th century, the MLM form began to develop strongly in the Asian region, especially in some countries such as China, Thailand, Singapore, Malaysia, Indonesia... In Vietnam, MLM first appeared in Ho Chi Minh City in 1998, by a group of people from Taiwan in a joint venture with Incomex Company. Their product was a foam mattress priced at 12 million/piece. Because it did not meet market demand, this product was not accepted. It was not until December 2000 that Sinh Loi Company was born with more diverse electronic products such as ozone machines, pressure cookers, induction cookers, massage machines... that MLM gradually attracted public attention. Following that, a number of other companies also tried their hand at this very new business field such as: Aloe, NONI, Vision, Tan Hy Vong, Tan Thanh Phat, Thuong Xuan, Loi Luc, Phan Hung Long, Toplife, Khang Hong Thinh, Vivalife, Harvet, AMWAY, Khai Viet, Trung Thao Vuong, The Gioi Hoan My, Sang The Ky Moi, Questnet... Up to now, there have been over 20 MLM businesses operating with business items mainly related to human health such as food, nutritional drinks, cosmetics, ozone machines, and household appliances such as massage machines, rice cookers... The appearance and business activities of multi-level marketing businesses have become a phenomenon in many big cities such as Hanoi, Hai Phong, Ho Chi Minh City, Da Nang...

The list of multi-level marketing enterprises as of January 31, 2007 is presented in Appendix 1.

2.2 Compensation schemes commonly applied in Vietnam

2.2.1 Business diagram of Phan Hung Long company

Phan Hung Long Company is headquartered in Hanoi. Its main products are:

The company is a nutritional food. Currently, the company is applying a symmetrical business model.

Figure 7: Symmetrical Compensation Plan

Source: Phan Hung Long Company, internal circulation document, page 12.

According to this model, after participating in introducing two direct downlines 1 and 2, the distributor will of course receive direct remuneration from these two people. However, if he wants to receive indirect remuneration from a new person arising in the network of the first direct downline 1', it is mandatory that in the network of the second direct downline, another downline 2' must also arise to match the downline 1' of the first person. Similarly, when a distributor introduces a third direct downline, if he wants to receive remuneration, he must continue to introduce a fourth downline. Thus, the distributor's network must develop symmetrically and evenly for that distributor to have income. At first, the distributor will be able to receive a very high remuneration due to motivated work, but later on, it will be more difficult for the distributor to maintain a high and stable remuneration for himself in the long term.

2.2.2 Business diagram of Thuong Xuan Cosmetics Company

Thuong Xuan Cosmetics Co., Ltd. sells cosmetics and makeup tools under the Oriflame brand. According to Thuong Xuan's compensation plan, Consultants (TVV) will receive two remunerations equivalent to two types of values: Business Volume (BV) and Business Point (BP). This means that TVV will receive 30% of direct remuneration calculated on each individual's purchase volume when purchasing at TVV prices and selling to customers at the price on the catalogue, and will receive a discount for monthly business activities calculated on the sales of the first-level TVVs they recruit as well as of the TVVs sponsored by the first-level TVVs. TVVs also receive BP on their personal sales volume.

Table 5: Table of percentages corresponding to the group's BP score

Group BP Score

Percentage
From 10,000 and up	21
6600 – 9999	18
4000 – 6599	15
2400 – 3999	12
1200 – 2399	9
6600 – 1199	6
200 – 599	3

Maybe you are interested!

Source: Thuong Xuan Cosmetics Company Limited, internal document, Building your business through the Oriflame success plan, Page 18.

For example: A TVV recruits 6 TVVs on the 1st floor. Each TVV on the 1st floor recruits 2 other TVVs. Each of them has a monthly sales of 2,145,000 VND, equivalent to creating 1,500,000 BV and 250 BP. At this time, the BP of the first TVV is at 15% (250*[1+6+12]=4,750 BP) and that of each TVV on the 1st floor is 6% (250*[1+2]=750 BP)

- Profit from personal sales is: 30%*2,145,000 = 643,500 VND

- Discount for business activities from group sales is: [(15% - 6%)*6*(1+2)]*1,500,000 = 2,460,000 VND

- Discount for personal sales activities is: 15%*1,500,000 = 225,000 VND

Total income for the month is:

643,500 + 2,460,000 + 225,000 = 3,328,500 VND

2.2.3. Business diagram of Thien Ngoc Minh Uy company

 Promotion conditions and benefits for business specialists (CVKD)

In order to ensure that the company's selling price is always consistent with the world market price, the company has established a separate internal accounting index called PV value (PV: Personal Value means personal accumulated capital) and uses this value to calculate remuneration for all levels of CVKD. The PV value index will be fixed for a certain period of time but can change based on fluctuations in raw material prices, transportation costs, import exchange rates and other expenses.

Diagram 8: Ladder diagram in the distribution system of Thien Ngoc Minh Uy company

Source: Thien Ngoc Minh Uy Company, Career Handbook, Guide to remuneration regime, Page 23)

Compensation, commission:

- Six total remunerations: 55.25%

+ Direct remuneration: 20%-40%

+ Indirect remuneration: 1% - 20%

+ Honor bonus: 1% (9 levels)

+ Profit commission: 4.25%

+ Network management fee: 1%

+ Network training fee: 1% Three bonuses total: 3%

+ “Golden Hawk” Bonus 1.5%

+ “Diamond” Bonus 1%

+ “Winner” Bonus 0.5%

- Sales Specialist (Specialist)

Achieve cumulative level from 1PV to under 500,000 PV to enjoy 2% direct remuneration from retail marketing

Achieving cumulative level from 500,000 PV to under 2 million PV will receive 5% direct remuneration

- Senior Business Specialist (CCKDCC)

Achieve personal accumulation of 2,000,000 PV or more to receive 20% direct remuneration

- Sales Team Leader (TTKD)

Train 3 CVKDCC with a total network achievement of 8,000,000 PV or train 2 CVKDCC at the same level with a total network achievement of

16,000,000 PV

Enjoy: + 24% - 26% direct salary

+ 1% - 6% indirect remuneration

- Business Manager (CNKD)

Trained 3 TTKD with total network achievement of 26,000,000

PV or 2TTKD with total network achievement of 52,000,000 PV Enjoy: +28% - 30% direct compensation

+ 1% -10% indirect compensation

+ 1% honorarium

- Deputy Sales Manager (PPKD)

Train 3 CNKD lines with a total network achievement of 200,000,000 PV or 2 CNKD lines with a total network achievement of 300,000,000 PV

Enjoy: + 36% - 38% direct salary

+ 1% - 18% indirect remuneration

+ 1% honorarium

- Sales Manager (Sales Manager)

Trained 3 PPKD lines with a total network achievement of 720,000,000 PV or 2 PPKD lines with a total network achievement of 1,400,000,000 PV

Enjoy: +40% direct compensation

+ 1% - 20% indirect compensation

+ 1% honorarium

+ 1% profit commission

+ 1% network management fee

- Cristal Department Head (Cristal City) Trained 2 TPKD lines

Enjoy all TPKD remuneration + 1% Cristal profit remuneration

- Head of Rubi Department (Rubi City) Trained 3 lines of TPKD

Enjoy all TP Cristal compensation + 1.5% Rubi bonus 0.75% Rubi profit compensation

- Diamond Manager (Diamond City) Trained 3 Cristal City

Enjoy all TP Rubi rewards + 1% Diamond bonus + 0.5% Diamond profit reward

- Director

Trained 3 Rubi City

Enjoy all TP Diamond rewards + 0.5% Winner bonus

 Meaning of remuneration:

Direct remuneration: This is the first remuneration that a sales representative receives because he has introduced a customer to the company and sold a product. This remuneration is large or small depending on the level that the sales representative is at. For example: 1 sales representative introduces 1 direct achievement, the remuneration he receives is 2,000,000 * 20% * 1 = 400,000 VND

Same for 1TPKD:

Direct remuneration = 2,000,000 * 40% * 1 = 800,000 VND

Indirect remuneration: Is the remuneration paid to the Sales Representative or higher when the subordinate Sales Representative introduces direct achievements. This remuneration represents the management fee because the Sales Representative has to spend effort to train the subordinate Sales Representative how to work. Calculation formula:

Indirect remuneration = TLTT of superiors – TLTT of subordinates

For example: Indirect remuneration of a sales representative when a subordinate sales representative makes an achievement is 2,000,000*(24% - 20%)*1=80,000 VND

Indirect compensation is the essence of the multi-level marketing industry because it proves that CVKD does not need to directly sell products but still has the ability to earn extra income. As long as he manages the system well, he can rest without having to worry about financial problems.

However, a situation occurs when the upline has a downline.

Comment