Prof' DerFa Robert Chen

1
The Operation of Direct Selling

• Prof. Der-Fa Robert Chen
• DSRC, National Sun Yat-sen University
• //www.dsrc.nsysu.edu.tw

2
Compensation System

• Up-line?Down-line?Generation?PV
• Retail profit
• Sales Reward
• Personal Sales Volume(PSV)
• Group Sales Volume(GSV)
• Cumulative or Non-cumulative reward
• Depth and width of down-lines
• Titles and Promotion
• Leader Bonus

3
Compensation System-1

• Consumer Type vs Business Type
• Principles of Compensation System
• A??Fairness?Effort and Reward
• B??Motivating?Clear Target and
• Attractive Reward
• C??Reachable?Reasonable Goal
• D??No Loophole?Avoid Manipulation
• E??No Free Lunch?Earn the Reward

4
Explanation of the Rewards

• PV (Point Value)The unit for calculating the
  reward. Sometimes it is the exchange rate of
  local currency to US. PV could be changed for
  promotion without changing the price of the
  product.
• Retail ProfitThe difference between retail price
  and members price.

5
Explanation of the Reward-1

• Sales RewardPSV (Personal Sales Volume) and GSV
  (Group SV)
• GSV Include down-linesPSV. The number of
  generations to be included is up to the company
  policy.
• The more GSV, the higher the reward . So the
  up-line could get more reward with the help of
  down-linesPSV.

6
Ex. Percentage of Reward
7
Explanation of the Reward-2

• PSV of C is5,000, the PSVs of his down-lines
  D1,D2,D3 are also5,000
• With only PSV of C, the reward will be
• 5,0002100
• Including the PSVs of his down-lines, the GSV of
  C is 20,000, and the total reward is
  20,0004800
• D1,D2,D3 will get their shares of reward
• 100, the remaining 500 goes to C.

8
Explanation of the Reward-3

• Due to the contribution of his down-lines, the
  reward for C increases from 100to500. The
  increase is significant.
• If the PSV of C and D1 are both 60,000, PSV of
  the others are still 500, then GSV of C is
  130,000. The total reward is 130,000810,400.
  The reward for D1 is 60,00084,800. The
  reward for D2, D3 is 100 each. The reward that C
  could get is 10,400-4,800-100-100 5,400.
  The contribution from his down-lines is only
  600.

9
Explanation of the Reward-4

• Leader CommissionWhen the GSV of down-line
  reaches the same , the up-line could not get the
  contribution from them. Therefore, that chain of
  down-lines become independent from the up-line.
  To compensate the loss and encourage the up-line
  to help down-lines, Leader Commission is set up.

10
Explanation of the Reward-5

• Leader Bonus Distributor with required number of
  down-lines who have reached certain title, his
  own retail sales volume reach certain level, is
  qualified for Leader Bonus.
• Leader Bonus is certain of company sales value
  which will be shared by qualified leaders.

11
Statistics of Taiwan

• 2003 Total Sales NT 51.991 billion, Rewards paid
  NT 23.699 billion, which is 45.58 of total
  sales.
• Number of participants 3.818 million, which is
  16.94 of total population.
• Number of distributors received rewards 668,000
  people, which is 17.5 of participants, i.e.17.5
  of distributors are business type.

12
The set-up of distributors org.

• A Advisor, B Bridge, C Consumer
• Personal use of product,like it, satisfied.
• Good thing should be shared with good friends.
• To find someone who might need the product
• Follow up the use of the product
• Sell the product to those who enjoy it(Consumer
  type of distributor)
• Ask their willingness to introduce product to
  their friends

13
Meetings OPP (Opportunity Meeting) NDO (New
Distributor Orientation) Small group
meeting Rally Meeting for training,
recognition and motivation
14
The set-up of distributors org.-1

• Help the new one with correct attitude
• Help attend the company trainings
• Help find the prospective customers
• Help introduce product and follow up
• Help sign the new customer
• Help introduce company profile
• Organize the down-lines
• Apply group dynamic to overcome trouble

15
The set-up of distributors org.-2

• Establish learning atmosphere
• Build in search of excellence desire
• Use inspiration and recognition to full-fill the
  accomplishment

16
Characteristics of Product

• Consumer-oriented product or service
• Product has specialties that need personal
  explanation or demonstration
• Repeat consumption type product
• High quality product that is easy to build good
  will

17
Pricing Policy

• Consideration of personal selling
• Consideration of product image
• Consideration of market competition
• Consideration of cost and profit
• The acceptability of market

18
Operation of DS Company

• R D and production of high quality product
• Set-up the reward plan
• Set-up the total reward
• Set-up distributor codes of conduct
• Educating, training and servicing of distributors

19
Operation of DS Company-1

• Computerization of ordering and calculating of
  sales and reward
• Logistics and delivering of products
• Build up company culture and good will
• Newsletter of product and activities
• Application of different rallies

20
Tell decent from fraudulent

• Profit of distributors
• Profit of DS company
• Conditions to join
• Product price
• Product warranty
• Refund policy
• Protection of distributor right