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

1. Prof. Der-Fa Robert Chen DSRC, National Sun Yat-sen University //www.dsrc.nsysu.edu.tw The Operation of Direct Selling

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 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) • 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.

6. Ex. Percentage of Reward

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 • With only PSV of C, the reward will be ＄５,０００×２％＝＄１００ • Including the PSVs of his down-lines, the GSV of C is ＄２０,０００, and the total reward is ＄２０,０００×４％＝＄８００ • 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 ＄１００to＄５００. The increase is significant. • If the PSV of C and D1are 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.

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