Reaching customers through direct selling
An Amway case study

Page 11: The results

'With the full support of the Direct Selling Association (DSA), the industry body representing direct selling companies, Amway has lobbied both MPs and opinion formers and achieved extensive media exposure, highlighting the need for the legislation to be amended. As a result of these concerns, Sir Nicholas Scott MP introduced a Private Members Bill tightening legislation - The Trading Schemes Bill - which received Royal Assent on 4 July 1996. This Act will come into force following consultation on the regulations required.'

There are many differences between illegal pyramid selling and direct selling companies. For example, illegal pyramid selling may have the following characteristics:

  • Payment of a recruitment fee Sellers receive a payment solely for the act of recruiting new participants.
  • "Down loading" Participants sell stock on to the next person at a profit. The process continues until the final participants are left with stock which cannot be sold because of the inflated price of the product.
  • Money matrix style structure These are often described as investment pyramids, with an absence of a realistic saleable product and where regular monthly payments are made with the promise of an accumulated sum at the end.
  • Unusable stock People are encouraged to buy a large amount of stock which they cannot sell and cannot return to the company.

On the other hand ethical direct selling companies have the following features:

  • There is no recruitment fee paid for the act of signing up another person.
  • All distributors pay the same wholesale price for products and sell to their customers at a 'suggested retail price'.
  • The product merchandise is of key importance, with emphasis on the regular sale of the product range. (The Amway Rules of Conduct recommend that every Amway distributor should have a minimum of 10 customers at any one time in order to receive a performance bonus).
  • Customer return policy, Satisfaction Guarantee.
  • Distributor return policy.
  • The Prevention of stockpiling. Amway stipulates that 70of any product purchased in any given month by a distributor, must be sold in order for the distributor to be eligible to receive bonuses.

Amway | Reaching customers through direct selling

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