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Marketing Management

Essay by   •  September 18, 2011  •  Essay  •  415 Words (2 Pages)  •  1,724 Views

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Amway is a direct selling company and manufacturer that uses network marketing to sell a variety of products, primarily in the health, beauty, and home care markets.[3][4][5] Amway was founded in 1959 by Jay Van Andel and Richard DeVos. Based in Ada, Michigan, the company and family of companies under Alticor reported sales growth of 9.5%, reaching US$9.2 billion for the year ending December 31, 2010 Its product lines include home care products, personal care products, jewelry, electronics, Nutrilite dietary supplements, water purifiers, air purifiers, insurance and cosmetics. In 2004, Health & Beauty products accounted for nearly 60% of worldwide sales.[6][dead link] Amway conducts business through a number of affiliated companies in more than a hundred countries and territories around the world

Business model

Amway combines direct selling with a multi-level marketing (network marketing) strategy. "Independent Business Owners" (IBOs) may market products directly to potential customers and may also recruit (sponsor) and train other people to become IBOs. Each IBO may earn income both from the retail markup on any products they sell personally, plus a performance bonus based on the sales volume they and their down line have generated.

Multi-level marketing (MLM):

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation Other terms for MLM include network marketing,pyramid selling,and referral marketing.

MLM companies have been a frequent subject of criticism as well as the target of lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, price-fixing of products, high initial start-up costs, emphasis on recruitment of lower-tiered salespeople over actual sales.

In contrast to MLM is single-level marketing. In single-level marketing, the salesperson is rewarded for selling the product directly to the consumer.

Direct selling, network marketing, and multi-level marketing

While "direct selling" and "network marketing" refer primarily to the distribution system, the term "multi-level marketing" emphasizes the compensation plan more. Other terms that are sometimes used to describe multi-level marketing include "word-of-mouth marketing", "interactive distribution", and "relationship marketing".

The Direct Selling Association, an American industry body, reported that in 1990 twenty-five percent of members used MLM, growing to 77.3 percent in 1999. Companies such as Avon, Electrolux, Tupperware, and Kirby all originally used single level

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