1. The Operation of Direct Selling Prof. Der-Fa Robert Chen DSRC, National Sun Yat-sen University //www.dsrc.nsysu.edu.tw 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 Up-line 、 Down-line 、 Generation 、 PV Retail profit Retail profit Sales Reward Sales Reward Personal Sales Volume （ PSV ） Personal Sales Volume （ PSV ） Group Sales Volume （ GSV ） Group Sales Volume （ GSV ） Cumulative or Non-cumulative reward Cumulative or Non-cumulative reward Depth and width of down-lines Depth and width of down-lines Titles and Promotion Titles and Promotion Leader Bonus Leader Bonus

3. Compensation System-1 Consumer Type vs Business Type Consumer Type vs Business Type Principles of Compensation System ： Principles of Compensation System ： A 、「 Fairness 」： Effort and Reward B 、「 Motivating 」： Clear Target and Attractive Reward 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$. PV could be changed for promotion without changing the price of the product. PV (Point Value) ： The unit for calculating the reward. Sometimes it is the exchange rate of local currency to US$. PV could be changed for promotion without changing the price of the product. Retail Profit ： The difference between retail price and members price. Retail Profit ： The difference between retail price and members price.

5. Explanation of the Reward-1 Sales Reward ： PSV (Personal Sales Volume) and GSV (Group SV) Sales Reward ： PSV (Personal Sales Volume) and GSV (Group SV) GSV: Include down-lines’PSV. The number of generations to be included is up to the company policy. GSV: Include down-lines’PSV. 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-lines’PSV. The more GSV, the higher the reward %. So the up-line could get more reward with the help of down-lines’PSV.

6. Ex. Percentage of Reward GSV reaches % of reward ＄ ５, ０００ ２％ ＄１５, ０００ ４％ ＄３０, ０００ ６％ ＄６０, ０００ ８％

7. Explanation of the Reward-2 PSV of C is ＄５, ０００, the PSVs of his down- lines D1,D2,D3 are also ＄５, ０００ PSV of C is ＄５, ０００, the PSVs of his down- lines D1,D2,D3 are also ＄５, ０００ With only PSV of C, the reward will be With only PSV of C, the reward will be ＄５, ０００ × ２％＝＄１００ ＄５, ０００ × ２％＝＄１００ Including the PSVs of his down-lines, the GSV of C is ＄２０, ０００, and the total reward is ＄２ ０, ０００ × ４％＝＄８００ Including the PSVs of his down-lines, the GSV of C is ＄２０, ０００, and the total reward is ＄２ ０, ０００ × ４％＝＄８００ D1,D2,D3 will get their shares of reward D1,D2,D3 will get their shares of reward ＄１００, the remaining $500 goes to C. ＄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 ＄１００ to ＄５００. The increase is significant. Due to the contribution of his down-lines, the reward for C increases from ＄１００ to ＄５００. 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 $130,000×8 ％＝ $10,400. The reward for D1 is $60,000×8 ％＝ $4,800. 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. 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 $130,000×8 ％＝ $10,400. The reward for D1 is $60,000×8 ％＝ $4,800. 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 Commission ： When 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. Leader Commission ： When 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 ： 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. 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. 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 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. 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 A: 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 friends”. “Good thing should be shared with good friends”. To find someone who might need the product To find someone who might need the product Follow up the use of the product Follow up the use of the product Sell the product to those who enjoy it （ Consumer type of distributor ） Sell the product to those who enjoy it （ Consumer type of distributor ） Ask their willingness to introduce product to their friends 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 the new one with correct attitude Help attend the company trainings Help attend the company trainings Help find the prospective customers Help find the prospective customers Help introduce product and follow up Help introduce product and follow up Help sign the new customer Help sign the new customer Help introduce company profile Help introduce company profile Organize the down-lines Organize the down-lines Apply group dynamic to overcome trouble Apply group dynamic to overcome trouble

15. The set-up of distributors org.-2 Establish learning atmosphere Establish learning atmosphere Build in search of excellence desire Build in search of excellence desire Use inspiration and recognition to full-fill the accomplishment Use inspiration and recognition to full-fill the accomplishment

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

17. Pricing Policy Consideration of personal selling Consideration of personal selling Consideration of product image Consideration of product image Consideration of market competition Consideration of market competition Consideration of cost and profit Consideration of cost and profit The acceptability of market The acceptability of market

18. Operation of DS Company R & D and production of high quality product R & D and production of high quality product Set-up the reward plan Set-up the reward plan Set-up the total reward % Set-up the total reward % Set-up distributor codes of conduct Set-up distributor codes of conduct Educating, training and servicing of distributors Educating, training and servicing of distributors

19. Operation of DS Company-1 Computerization of ordering and calculating of sales and reward Computerization of ordering and calculating of sales and reward Logistics and delivering of products Logistics and delivering of products Build up company culture and good will Build up company culture and good will Newsletter of product and activities Newsletter of product and activities Application of different rallies Application of different rallies

20. Tell decent from fraudulent Profit of distributors Profit of distributors Profit of DS company Profit of DS company Conditions to join Conditions to join Product price Product price Product warranty Product warranty Refund policy Refund policy Protection of distributor right Protection of distributor right