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The Power of Network Marketing in Providing an Individual, Soundly Based Global Business Opportunity for Self Employment with
Forever Living Products


Copyright © 1996 -  AloeVera Company UK. All Rights Reserved.

 

The purpose of this article is to discuss the mechanism and power of network marketing in providing an individual, soundly-based business opportunity for self employment.

TABLE OF CONTENTS

  • Part 1 provides an introduction to the concepts of network marketing with particular reference to Forever Living Products.
  • Part 2 presents the Forever Living Products network marketing plan.
  • Part 3 provides details of Passive Income, Car Plan, Profit Share and the structure of Advanced Levels and benefits in the Forever Living Products network marketing plan.
  • Part 4 presents the practical requirements of building a successful business in Forever Living Products
  • Part 5 illustrates Earning pathways in Forever Living Products to various income levels via Retailing, Team Building and Leadership.

The implementation of the mechanism and the power of network marketing has been fully extended by FLP to the Internet in 2012. A global network marketing platform is now provided for FLP distributors to extend their business internationally. By introducing on-line shopping with drop shipping of Aloe Vera based health and nutrition products, FLP distributors can now find customers in any of the countries that have online ALOE Stores. The facilities and training information for building a global network are fully supported both by land-based marketing techniques and internet marketing methods. The internet dimension offers the potential for accelerated development of network teams, rapid progress up the FLP Marketing Plan, and increased distributor income with little increase in expenditure.

 

PART 1: INTRODUCTION TO CONCEPTS OF NETWORK MARKETING

Overview of Network Marketing with Forever Living Products

Rex Maughan, President and Founder of Forever Living Products, devised his network marketing scheme over thirty three years ago. His is recognised as one of the most generous Marketing Plans in today's network marketing arena. Perhaps because of this, FLP is the number 1 distributor of health, nutrition, skincare and beauty products in every country where it has been established long enough - including the UK. During the mid to late 90s Network Marketing came of age here: clearly, it is difficult to ignore any kind of business which consistently grows year after year - especially in these tough times with many businesses falling by the wayside. We are more familiar with the notion that growth of 2 to 4% is phenomenally good in the UK, so double-digit growth is almost beyond belief.

So why does network marketing work so well? What is so special about this method of moving goods from the manufacturer to the customer? Why have network marketing companies in general, and FLP in particular, grown even faster during recessions than they did in the booming 80s? This is the reverse of the trend in conventional marketing enterprises, like retail shops, large stores and mail-order catalogues. Even huge franchises like MacDonalds and Kall Kwik are having difficulty finding new high-level locations: the major High Streets and Shopping Malls are finite entities, and the secondary areas will not generate the required turnover.

Perhaps it is because Network Marketing offers so many of the advantages of franchising, without the disadvantages, that it is enjoying such success. For example, as an independent distributor of Forever Living Products:

  • you are your own boss - nobody can make you redundant - yet you are part of a very large, very successful, very well-established company, with a worldwide turnover of over 2 billion-dollars.
  • you are running your own business - yet you are supported by your Sponsor into the business and the superb FLP Area Manager system.
  • you have low initial outlay, there are no annual fees, and you will never need to hold stock - you buy products, as and when you need them, from the Central Order Line or via the Online Aloe Store.
  • you can work the hours you wish, at your own pace, to achieve your personal goals, and you will have very low overheads since you will almost certainly work from home.
  • you have freedom to move location within the UK or to another country - your business continues to earn income for you, wherever you are.
  • the Area Development Directors run regular free Business Briefings in your area - you can take along your guests to introduce them to FLP, and they will hear quality presentations by experienced top-level speakers, on the business, the marketing plan, and the products.
  • local training is available all over the UK to help you learn more about the products, and the concepts of network marketing and team-building.
  • there is absolutely minimal paperwork - FLP does it all for you.
  • you can only move UP in FLP - all positions in the Marketing Plan are permanent, so there are no penalties for taking a month or two away from your work.
  • you are never required to pay your team member's bonuses - all bonuses are paid by FLP, directly into your bank account, on the 15th of every month - without fail.
  • bonus payments are based upon the Retail Value of all products purchased at wholesale prices during the previous month.
  • invoices are logged daily, so if you achieve a higher level in the Marketing Plan in mid-order, your higher bonus will be applied immediately in that invoice and to all subsequent invoices.
  • distributors below you in your team can never pass you by to reach a higher level - you will automatically be moved up to the same level.
In short, you are empowered to develop your business to your specific requirements to achieve the financial and personal goals you set for yourself

 

THE CONCEPTS OF NETWORK MARKETING

Marketing in general is the provision of goods or services to meet consumer needs. For a product-driven company, marketing may be more closely defined as the process whose primary objective is to distribute the maximum volume of product from the manufacturer to the consumer.

Assuming no limitations in manufacture of product and a limitless reservoir of consumers, the effectiveness of the marketing process is determined by the distribution mechanism. The general marketing process is illustrated as follows:



In the conventional marketing process, the distribution mechanism consists of four major elements each of which has its own particular structure: advertising, sales force, wholesale procedures, and retail operations. The general structure of the distribution mechanism in conventional marketing is static - each of the elements is connected in line and each element is designated a fixed set of tasks. The static structure of the distribution mechanism is independent of the customer.

In contrast, the distribution mechanism in network marketing consists of a single major element: the individual Independent Distributor. The Independent Distributor performs all the functions required to sell and distribute the product to the customer. Each Independent Distributor is linked to other distributors through a dynamic hierarchical non-linear network which grows by geometrical progression. [The details and functionality of this dynamic network are described below].

Moreover, the process of generating new customers provides a natural path for developing the distributor network. Each new customer represents potentially a new distributor source. Thus a positive feedback loop is established which naturally expands the distributor network. The dynamic structure of the distributor mechanism in network marketing is therefore partially dependent on the consumer element. This is shown in the following diagram:



The extent of the positive feedback relationship is determined by the particular company. For Forever Living Products, with its superb product ranges, this consumer-dependent relationship can be strong.

The dynamic hierarchical network is characterised by geometrical progression. For example, a distributor sponsors two new people as distributors and they in turn each sign on two further distributors and so on. In this simple growth progression, by the fifth generation, the total number of distributors in the network has reached 31. This sum is easily calculated from the formula:



where S is the total number of distributors in the network reached by the nth generation and R is the ratio between terms. In this example R = 2, n = 5 and S = 31. If each distributor signed up 5 instead of just 2, then R = 5, n = 5 and the total number of distributors is S = 781. This represents a dramatic increase for just 3 additional people per distributor and demonstrates the power of geometric progression.

It is clear that the network can grow rapidly and that in practice the network is more complex, since each distributor at each generation may sponsor more or fewer than the numbers given in these examples, some distributors may cease to operate and the network generation may extend well beyond the 5th generation. A simple more realistic 4th generation distributor network may look like this:



The 1st generation shown in the diagram as the cream coloured circles is defined as the 'frontline' in network marketing parlance and represents those distributors directly signed up under YOU. The 2nd generation level shown as the cyan circles and the 3rd generation level shown as magenta circles constitute the remainder of the downline.

The specific advantages of the network marketing mechanism are as follows:

Each distributor builds his or her team network using the principle of duplication of training methods at every level of the network. In the case of Forever Living Products, integrity is an essential element in the duplication process. Within the broad pattern of the duplication process there is a modicum of room for individual implementation.

Each distributor uses the products and is convinced of their efficacy.

Direct contact by word of mouth provides the most powerful proven method of advertising. Sharing experiences with personal contacts, friends and family provides the cornerstone of most distributor networks.

A personal bonus scheme is applied on the personal volume of product sold. The personal bonus percentage increases as the distributor rises up the ladder. An additional group volume bonus scheme is applied depending on the performance of the network belonging to the distributor and varying bonus levels applied within the given network. It is the group volume bonus that provides an additional positive feedback mechanism which drives the incentive of each distributor to continue expanding their network.

Forever Living Products' bonus schemes are generous compared to those of other network marketing companies. The particular marketing plan operated by Forever Living Products is discussed in Part 2.

The recruitment process consists of two essential ongoing activities: building and expanding the network team of individual independent distributors as well as building and expanding the consumer customer base.

The understanding of the relationship between these two activities is critical to the development of a sound network business. The relationship is illustrated in the following diagram:



To develop the distributor network at the expense of the development of the customer base will severely limit the flow of money throughout the system and may consequently inhibit the recruitment process, as pointed out by Edward Ludbrook in "The Fundamentals of Network Marketing" (see reference at end of this section). Similarly, restricting the recruitment process solely to the development of a consumer customer base will result in limiting peak performance levels resulting from the cost balance of maximum sustainable customer maintenance levels and customer losses. Clearly, the recruitment process is compromised by neglecting either activity.

For optimum recruitment performance both the building and expansion of the customer base and the independent distributor network are essential and should be developed in parallel. In addition to recruiting directly for new distributors, the consumer base may provide a built-in positive feedback mechanism for the growth of new independent network distributors as discussed above. As suggested in the current diagram, a natural pathway exists between retail and wholesale customers. When total retail sales to a given customer reaches a specified value, the customer may then be offered the opportunity to purchase at the wholesale rate, market the products at the retail rate and join the network team.

Thus, the conversion from retail customers to wholesale customers (baseline distributors) represents a distinct possibility to create additional new independent distributors - this is the wholesale positive feedback loop. Of course there will be a fraction of retail customers who recognise directly the advantages of becoming an independent distributor and join the network team straight away - this is the retail positive feedback loop.

The success of the recruitment process is determined by two primary growth lines: the independent distributor growth time line TD, and the customer growth time line TC. These growth time lines are indicators of the growth rate of new distributors and customers respectively. The customer growth time line TC is further subdivided into retail TR and wholesale growth time TW lines respectively. In practice, effective recruitment process management requires the ongoing maintenance, continuous follow-up and promotion of all the growth time lines.

For further reference we suggest you visit Knowledge is King, the specialist bookshop online for books, CDs and DVDs on Network Marketing and Personal Development: http://www.knowledgeisking.co.uk

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PART 2: FOREVER LIVING PRODUCTS NETWORK MARKETING PLAN

The Forever Living Products (FLP) Network Marketing Plan, shown graphically below, is an excellent plan: it aims to reward distributors generously at every level of the business. There is no fee to sign up as an FLP Distributor, there are no annual fees to pay and it is not necessary to hold stock. Everyone in the Distributor Level progression from Assistant Supervisor to Manager and beyond buys their FLP products at the same 30% discounted price.

To achieve the level of Assistant Supervisor the new entrant buys a 'New Distributor Pack' for 199.75 - and from this point onward all purchases are made at the full 30% discount level. The NDP is a comprehensive pack of products and includes also an excellent business information package of flyers, price lists, discs - everything that is needed to get off to a flying start.

To help people who cannot immediately lay out 199.75, FLP has introduced 'New Distributor Pricing' at the 15% discount level. During the qualification period New Distributors purchase products until they qualify at the Assistant Supervisor level. This must be completed within two consecutive months. As soon as the qualifying total is achieved, they move up to Assistant Supervisor - even if this happens in the middle of an Invoice!


FLP Marketing Plan by AloeVera Company UK


The additional monthly Personal Volume Bonus varies from 5% to 18% depending on Distributor Level position along the progression starting from Assistant Supervisor and is calculated on the Retail Prices of all purchases each month. Hence the total profit on purchases will vary from 35% at the Assistant Supervisor level to 48% at the Manager level. In addition, as the network team grows, a Group Volume Bonus (Team-Leading Bonus) is applied according to the Distributor Level in the team. It is this Group Volume Bonus that provides the drive power of the marketing network engine.

The colour-coded graph above displays the basic structure and mechanism of the marketing plan up to Manager Level [Advanced Manager Levels are discussed in Part 3 of this article]. The following discussion illustrates the Distributor Level progression as a function of Case Credits over a period and the corresponding Personal Volume Bonus(PVB) and Group Volume Bonus(GVB).

DISTRIBUTOR LEVEL PROGRESSION
Everyone joins the company as an Independent Distributor by signing the single-page Application Form, which is counter-signed by your Sponsor into the FLP business. You receive your unique FLP identity number and you buy products via the Central Order Line (or online via the FLP website).

NEW DISTRIBUTOR: If a new prospect is unable to purchase the New Distributor Pack at 199.75, they can buy products at the 15% discount level over a period of two consecutive months until they reach the qualifying total. At this point they will rise to Assistant Supervisor, the first qualifying level in the FLP Marketing Plan, and be able to purchase all future products at the full 30% discount price.

ASSISTANT SUPERVISOR: To qualify immediately as an Assistant Supervisor you buy the New Distributor Pack for 199.75 with its value of 2 Case Credits (see the explanation of 'Case Credits' below). Thereafter you will receive a monthly Bonus directly from FLP, deposited directly in your bank account, representing 5% Personal Volume Bonus - this is 5% of the Retail Value of all wholesale purchases made in the previous month.

SUPERVISOR: You reach Supervisor level when you and the members of your team purchase products totalling 25 CCs over any two-month period. As a Supervisor your Personal Volume Bonus on all the products you purchase is 8% and you receive an additional Group Volume Bonus (Team-Leading Bonus) of 3% on all products purchased by your Assistant Supervisor team members. If someone in your team becomes a Supervisor, you cease earning the Group Volume Bonus on their team until you progress to Assistant Manager level.

ASSISTANT MANAGER: To rise from Supervisor to Assistant Manager you and the members of your team purchase products totalling 75 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 13% and you receive additional Group Volume Bonus (Team-Leading Bonus) of 5% on all products purchased by frontline Supervisors in your team and 8% on your frontline Assistant Supervisors.

MANAGER: To make Manager you and the members of your team purchase products totalling 120 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 18% and you receive additional Group Volume Bonus (Team-Leading Bonus) of 5% on all purchases by frontline Assistant Managers in your team, 10% on frontline Supervisors, and 13% on your frontline Assistant Supervisors.

It is clear that the Group Volume Bonus kicks in at the Supervisor level and the higher levels along the Distributor Level progression accrue an increasing Group Volume Bonus from levels below.

The Group Volume Bonus is the positive feedback mechanism which provides the incentive to maintain, develop and expand the 'downline' network. You will soon learn that every single aspect of the Forever Living Marketing Plan is designed to help you build a very sound networking business that will, over time, give you great rewards. It is vital that you understand this yourself and you share this knowledge.

CASE CREDITS, PROFITS & BONUSES
The international currency unit used by FLP for calculating Distributor turnover and bonuses is the Case Credit. Every product in the FLP range has an assigned Case Credit value which is related to the value of each item, excluding VAT. In the UK, the average value of 1 Case Credit is 114.19.

Profits and Bonuses:
Your Bonus Cheque is based upon the retail value of all purchases you personally make in a month and the total retail value of purchases made by your network group. Your Total Profit consists of three components: the Baseline Profit (BP) which is defined as the difference in value between all retail and wholesale purchases at the VAT-inclusive value; your Personal Volume Bonus (PVB) percentage contribution and your Group Volume Bonus (GVB) percentage contribution. Both the Personal Volume Bonus and Group Volume Bonus contributions are calculated on the VAT exclusive retail value of purchases.

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PART 3: PASSIVE INCOME & ADVANCED LEVELS IN FLP's NETWORK MARKETING PLAN



PASSIVE INCOME: As you work with your Team, helping them to become Managers in the business, you start to access Royalty Bonuses. FLP pays these additional bonuses on three generations of your Manager business at a starting level of 6% on your 1st generation Managers, 3% on the 2nd generation, and 2% on the 3rd generation. As you develop more and more Manager-businesses, this can rise to a maximum of 9%, 6% and 5% Royalty Bonuses respectively for a Diamond Manager. The 7th Manager Level - Double Diamond Manager is reached when the distributor develops 50 recognised 1st generation sponsored managers.

Earned Incentive Scheme: (known as Car Plan, but can be for a boat, plane, school fees etc). If you - with your Team - hit specific turnover targets in 3 consecutive months FLP pays 36 monthly payments of 250 (Level 1), 375 (Level 2), or 550 (Level 3). At the end of the 36 months the car is yours to keep permanently. In fact, after three years most people will have requalified, so FLP will pay for another new car, frequently at a higher level than the first.

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PART 4: PRACTICAL REQUIREMENTS OF BUILDING A SUCCESSFUL BUSINESS IN FLP


The 4 Case Credit Strategy

BUILDING A FOUR CASE-CREDIT BUSINESS

CASE CREDIT: The international currency unit used by FLP to calculate Distributor turnover and bonuses. Every product in the FLP range has an assigned Case Credit value which is related to the monetary value of each item. For example, the New Distributor Pack is valued at 2 Case Credits (CCs), and cases (12 bottles) of the Gel, Juice and Berry Nectar are worth 1.257 CCs each. The average value excluding VAT of 1 Case Credit = 114.19

4 CC BUSINESS: It is vital for everyone to aim for a 4 CC business: (i) to generate the essential turnover that drives money around the system and creates our bonus cheques and (ii) to lay the foundation for team-building and moving up the FLP ladder. A good proportion of this turnover should come from Customer Sales, as well as products for your own use and the sponsoring of new distributors. Note: of the 4 CCs total, at least 1CC must be under your own ID - this is your minimum personal turnover each month to be recognized as an Active Distributor. The remainder will come from product sales and the sponsoring of new distributors. You can see that sponsoring 2 new people a month (who buy the New Distributor Pack) will give you a total of 4CCs in addition to your personal 1CC. Or you might sponsor 1 new distributor (2CCs), buy your personal minimum (1CC) and sell at least 1CC of products to your customers.

When you achieve 4 CCs each month in your business, this will be worth approximately 658 at retail and 460 at wholesale. This means you will have made around 198 gross profit on the monthly sales (43%). You will also receive a bonus cheque for just under 33 (based on the retail price ex VAT at the 5% bonus level). That amounts to approximately 230 total income on an outlay of 460.

RETAILING A customer base of 20 or more is recommended for the development of a sound networking business. You are aiming for customer loyalty - people who re-order every month or so without prompting. Inevitably some customers will only buy occasionally, and some will drop out completely (they may even join your team!) - so keep on looking for new customers. It is essential to have a sound follow-up system: if you look after your customers well, they will come back to you over and over again. Set a time frame to achieve 20 customers - three months is reasonable. These customers should generate 1 or 2 of your required 4 CCs total. Be ready around week 3 of the month to boost the CCs by additional sales through, for example, Aloe Awareness evenings, fundraising activities, or perhaps a table display at local events. Aim for 2 to 3 CCs from personal Retailing and own use.

SPONSORING Try to Sponsor 1 new person a month into your team. Ideally, they will buy a New Distributor Pack to get their business off to a flying start - worth 2 CCs to you. If they need to retail their way into the business, you will aim to do three Product Launches with them in their first month or two which should easily give them the 2 CCs they need to qualify. You will start coaching them from Day 1 to do what you have done - achieve 4 CCs per month personal volume and Sponsor a new person each month.

Aim for 1 to 2 CCs per month from Sponsoring - don't forget to ask your best customers if they would like to join your business and buy their products at the wholesale prices.

TRACKING Keep a running total of your CCs to ensure you are achieving at least 4 CCs every month. Train your team to let you know their cc totals on a weekly basis so you can keep track of your team CC total. You can also log in as a Distributor to the Forever Living website at any time and click on 'My Volume' to see your cc totals.

Carry forward the total from the previous month: new positions are based upon CCs earned over a 2-month period (Base month & Qualifying month). Careful tracking is needed to ensure you reach the correct 2-month total CCs for success. Keep coaching your team members to do the same. Remember, you can use the second qualifying month for one position as the base month for the next.

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PART 5: EARNING PATHWAYS IN FOREVER LIVING PRODUCTS

INTRODUCTION
The FLP Earning Pathways graph represents an example of the annual income achievable as a function of time for three distinct pathways: Retailing, Team Building and Leadership. The curves shown in this example demonstrate the time-dependent relationship of the different earning pathways. In reality a "family" of curves would be generated, shifting significantly along the time axis, since some distributors take the fast track, develop large teams quickly, and achieve substantial income growth in their first year or two, while others may be satisfied with moderate income growth over several years. It is helpful for distributors to be able to estimate their expected income over any specific period, according to their position on the Marketing Plan, and the size and "shape" of their team (the number of downline distributors they have at each level in the Marketing Plan).

RETAILING
When a distributor chooses to concentrate solely on retailing products, and to work on a very part-time basis of around 6 or 7 hours per week, then it is clear that earnings will grow to a point which is self-limiting: there is insufficient time for further sales to be made. If it is assumed that the distributor is at Assistant Supervisor level in the marketing plan and averages 4 CCs per month, then the total profit will be around 2,500 per annum.

This level of additional disposable income approaches a practical maximum of about 3,000 per annum, yet this still may be extremely useful for an individual - making it possible for them to take a family holiday, for example, or to run a second car. It is difficult to achieve the next level of Supervisor or beyond by retailing alone (though, of course, there are exceptions to this rule).

TEAM BUILDING
When distributors decide to start building their own networks by recruiting like-minded people to work with them in their business, they can generate significantly larger incomes. They will be earning group volume bonuses or "team-leading bonuses" on their downline distributors, whilst maintaining their retail customer base. It is vital for everyone at Supervisor level and above to ensure they personally turn over at least 4 CCs of product every month, in order to earn bonuses on turnover produced by their network downline distributors. To give you an idea of potential income, assuming your combined network team (your downline) produces an average total of 55 CC's per month, then the Manager's annual income will be approximately 14,000. This level of annual income may serve as a modest primary income for many people, or perhaps as a robust secondary income stream.

Achieving Manager status completes the basic team-building process - the critical developmental stage on the path to Leadership and passive income.

LEADERSHIP
As indicated in the graph above, the Leadership process may begin at any time from 1 to 5 years or more, according to the time and energy the individual distributor can invest in the business, and their leadership abilities - but 18 months or more into the team-building process is common. Leadership Bonuses are earned when a Manager in the business works with individuals in the team, helping them to reach Manager level: at this point the downline Manager business becomes a discrete entity and Leadership Bonuses come into play. As more downline distributors are brought up to Manager status, each one becomes an independent business unit, and graded Royalty Bonuses are payable on the total turnover of each unit as the distributor moves up through the Senior Manager levels.

Each Manager business may be expected to generate an income of around 1,000 to 2,000 per month for the Senior Manager - so a single Manager business unit, plus the remaining downline turnover, should generate about 20,000 per annum. A more mature team with two downline Manager units will commonly produce an annual income in excess of 30,000. As the team continues to grow, and more independent Manager business units are developed, then the Royalty Bonuses will grow also. After sixteen years in this country the top FLP distributors are earning over 1 million pounds and several others have earnings of well over 250,000 per annum.

It is clear that the leadership growth curve as shown in the graph illustrates a very steep rise and thus provides an earning pathway which generates a handsome primary annual income. Thus Leadership and Manager-development is the path to a passive income, which will grow as the team continues to grow. As long as the Manager remains active (turning over at least 4 CCs every month), then the bonus payments will be made - whether or not there is any effort being made to develop the team further. Other benefits that may be earned at this level include the luxury car scheme, international travel and profit-sharing. These will depend upon reaching specific group turnover levels within a defined 12-month period, and may additionally require certain other targets to be met.

SUMMARY
The Retailing pathway alone may provide a supplementary annual income ranging from about 2,000 to 3,000 (on a very part-time basis) but tends to be limited in income growth potential.

The Team building pathway offers a modest primary income, or a robust secondary income stream, and a continuous modest growth potential. Team building may typically provide an annual income in the range of 3,000 to 14,000 or thereabouts.

The Leadership earnings pathway provides a handsome primary income ranging from around 20,000 to 30,000 plus per year initially, but which is virtually unlimited in its growth potential.

In addition, the Royalty Bonuses paid on downline Manager businesses will generate passive income which continues throughout the lifetime of the distributor. On the distributor's death the business may be willed on to a family member (provided they are at least 18 years of age), and to earn a continuing income they must maintain active distributor status. As long as the family member maintains a 4CC turnover per month, he or she will continue to receive the inherited royalty bonuses.

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Copyright © 1996 -  AloeVera Company UK. All Rights Reserved.