1. Multi-Level Marketing – A Case Study of Amway Corp Inc.
Mr. Gilbert O’Neil Mushure
Abstract
Multi-level marketing is an exploitative system which has been declared illegal in some countries because of its similarity to pyramid schemes. If everyone becomes a distributor, who will become a buyer? Developing countries where there are high levels of unemployment and poverty should be wary about the rise in popularity of multi-level marketing schemes amongst those the poor and vulnerable.

2. What is Multi-Level Marketing (MLM)?
A marketing strategy
Sales force compensated for SALES +
RECRUITMENT of people into sales force
Compensation by commission and/or recruitment fee

3. Amway Corporation Inc.
Amway is an American company which pioneered the concept of MLM
It had a sales force of 3 million distributors called ‘Independent Business Operators’ (IBOs) of niche products in skin care, health and home categories it manufactured
It also sold other products through MLM

4. 3 Main Reasons why MLM is a good strategy.
Consumer market penetration
Consumers cum Distributors can sell product better
Relationship marketing
Amway succeeded into a global success

5. Why MLM does not work? MARKET SATURATION
If everyone becomes a distributor, who will become a consumer?
MLM is unsustainable
Consumer exploitation
Reputation (fraud, pyramids etc.)

6. Traditional Distribution vs. MLM
Manufacturer
Wholesaler
Retailer
Consumer
Manufacturer
Distributor
Distributor
Distributor
Distributor
Market
Saturation
Distributor
Distributor

7. Traditional Distribution vs. MLM
ADV of Traditional = sustainable
DISADV of Traditional = less penetration
DISADV of Traditional = less direct selling
PAR Traditional can employ Relationship Marketing

8. Did MLM work in Malaysia?
Reputation – consumers in Malaysia have access to information on bad experiences globally
Condemned under Sharia Law – Malaysia is a Muslim country

9. Amway’s survival strategy…
Amway avoided classification as an illegal pyramid scheme through:
No entrance fee by recruits
Product sales as condition for bonus
Buying back excess inventory
Encouraging sales to retail customers
However,
Commission is still paid for sales made by IBO’s recruits (pyramid structure)
Majority of IBO’s do not make money

10. The future of Amway
Change from MLM to Traditional Distribution System to compete directly with FMCG majors Unilever and P&G
It makes sense
Amway has established manufacturing capabilities
Amway has high quality products
Customer base has tried its products

11. References References
Brown, David (November 27, 2007). "Marketing group merely ‘selling a dream’". The Times. retrieved 4/6/2012 from .uk%2Ftto%2Fbusiness%2Findustries%2Fmedia%2F
Bloch, Brian (1996) "Multilevel marketing: what's the catch?" Journal of Consumer Marketing 13:4 pp
 Carl, Walter J. (2004) "The Interactional Business of Doing Business: Managing Legitimacy and Co-constructing Entrepreneurial Identities in E-Commerce Multilevel Marketing Discourse" Western Journal of Communication, Vol. 68.
Edwards, Paul; Sarah Edwards, Peter Economy (2010) Home-Based Business For Dummies, 3rd Edition pg 38-39
Philip Kotler, Kevin Lane Keller, Ang Swee Hoon, Leong Siew Meng and Tan Chin Tiong, (1999), Marketing Management: An Asian Perspective, 5th edition, Upper Saddle River, NJ: Prentice-Hall p.13
Xardel Dominique (1993). The Direct Selling Revolution. Understanding the Growth of the Amway Corporation. Blackwell Publishing. pp. 1–4
In the Matter of Amway Corporation, Inc., et al.93 F.T.C 618 retrieved 6/3/2012 from _JUNE_1979)PAGES_ pdf