The management of MLM business in Taiwan 1945: Nutrilite Corporation : direct selling industry = US$80.47 billion → 2.06% growth compared with 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$40.1 billion → - 1.8% (1996) Taiwan average sale volume: NT$ 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 % in the number of new DS distributors % 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: % Training program: % Opportunity meeting: +0.74% - Interviewed firms provide: Products knowledges Sale skills training Sales 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 effect MLM 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