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- From: fritz@fc.sde.hp.com (Gary Fritz)
- Newsgroups: misc.entrepreneurs
- Subject: Re: Diff between MLM, Netwk Mkting and Pyramid
- Date: 28 Jan 1993 17:09:18 GMT
- Organization: HP SESD, Fort Collins, CO
- Lines: 41
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-
- Jeff Marold (jmarold@netlink.cts.com) wrote:
- : Multi level marketing and network marketing are the same thing - they are
- : a sales and distribution strategy in which a product passes through
- : several sales layers on the way to the final customer. Each level is in
- : effect a seperate business - i.e., you sell to someone who sells to
- : someone else who sells to the final customer. The advantage is that the
- : company manufacturing the product doesnt have to invest in warehouses and
- : sales offices and employees . The disadvantage is every level invloved in
- : a sale takes a cut of the product - thus the price to the final customer
- : is much hugher than normal.
-
- Sorry, no. While that USED to be true for most/all MLM companies,
- and still is for some, it is NOT true in general. The example I am
- most familiar with is my company, Espial: usually no one touches the
- products except the company, UPS, and the consumer. There is no "selling to
- someone who sells to someone who sells to someone", nor do Espial associates
- warehouse the inventory for the company, nor is the final-customer cost
- high, even for commodity consumer goods. I did a cost comparison of
- Espial's products against the comparable products at the local supermarket,
- and found Espial's prices to be comparable or lower.
-
- By the way, the "selling to someone who sells to someone, etc.", with
- markups at each stop, is a very accurate description of the distribution
- mechanism for normal retail-sales outlets like stores and supermarkets.
- (Manufacturers sell to national distributors, who sell to regional
- warehousers, who sell to state/local distributors, who sell to retailers.)
- That's why a tube of toothpaste that costs Procter&Gamble $0.13 to
- manufacture costs $2-3 in the grocery store. It's exactly this sort of
- overhead (and all the billions of $$s of advertising that goes along with it)
- that is avoided by a system like Espial's.
-
- In a setup like Espial's, we are effectively acting as the advertising
- arm for a catalog-shopping company. Rather than flooding the mail
- and the landfills with promptly-tossed glossy catalogs, Espial uses
- word-of-mouth advertising to locate customers. Once the customers are
- hooked up with Espial, they order directly from the company, and the
- company ships directly to them -- and sends the bonus checks directly
- to us. Very simple, and it doesn't have all the pitfalls of the
- old-fashioned system you mentioned.
-
- Gary
-