The Effectiveness of the Multi-Level Marketing of DXN Company as

Perceived by its Distributions.

Dr. Filemon C. Aguilar Memorial College
Golden Gate Subdivision Talon III, Las Pinas City
This Chapter presents a review of related literatures and studies which the
information that we gathered from these will serve as information to the present
study.

Local Literature
Max de Leon. (2003) Max joined forever-living product Philippines in October 2000
and shelled 10,000 pesos for the opportunity to earn big money the fast and easy
way. Max even thought of giving up law to go full time into the business. Max found
FLPPIS marketing and compensation plan every successful. But after a few months,
Marks enthusiasm faded. Max become so frustrated because everytime Max wants
to recruit downline often times Max get rejected. Max also added that it was like he
was buying and using the companys product that were grossly overpriced and that
in those times that he did the business. Max cant get back the money he invested.
Moreover: Jaime Olmos (2003) stated that many companies are engaged in MLM
schemes in the country. Jaime noted that the department becomes aware of an MLM
firm only when a complaint have been filed against it, because the department is
required to invite the supposed earning firm for marketing presentation and
questioning. We dont keep a list of companies engage in MLM, says Olmos. What
we do is invite certain companies to look into their marketing plan to see whether
they are legitimate or are using the pyramid scheme. Olmos also said that the
earnings in recruitment should not be incidental and always smaller than the
commission for the sale of the products.
In addition to: Joey Sarmiento (2003) said that MLM is a kind of direct selling or
person to person that pays distributors commission base on the sale of product and
services at fair market value. Sarmiento added what when compensation is
anchored on recruitment it becomes pyramiding as distributor of the company will
tend to concentrate or recruiting person rather than selling the product and
services. She also said padding the price of the productr and services are obviously
meant to facilitate the payment of commission out of the recruitment of downlines.
Sarmiento also noted that the scheme would become pyramiding of those on top of
the chain. Often called uplines would continue to earn big even if they have stopped
selling the goods and services.
However: Teodisio (1996) added that high entrance fees or requirements to
purchase expensive inventories could usually identify fraudulent MLM schemes.
Most Multi-Level Marketing Company Collapse quickly when the merchandise cannot

be resold, leaving all but those at the top of the pyramid with financial losses. This
will take your mind of the fact that no matter how big your town or market it is
finite. They will go dry soon enough. There will always be same distributors who will
make money in an MLM scheme. The majority, however, will fail due to the intrinsic
nature of all pyramid schemes.
In addition to: Angeles (1994) Multi-level marketing is a system of marketing which
puts more emphasis upon the recruiting of distributors than on selling of product. As
such, it is intrinsically flawed. MLM is very attractive, however, because it sells hope
and appears to be outside the mainstream of business as usual. It promises wealth
and independence to all. Unfortunately, no matter what the product, MLM is
doomed to produce more failure than success. For every MLM distributor who make
a decent living or even a decent supplemental income, there are at least ten who do
little more than buy products and promotional materials, costing them much more
than they will ever earn as an MLM agent.
Foreign Literature
John Taylor (2000) States that a pyramid scheme is a plan or operation by which a
person receive compensation that is derived primarily from a persons introduction
of other persons to participation in the plan or operation rather than for the sale of
products by a person introduced into the plan or operation. Taylor also stated that
when an MLM is classified as a first degree pyramid scheme the effects are very
predictable which is an emphasis on income from recruiting new distributors rather
than on the sale of products and services at retail prices.
On the other hand: Billy Hardy (2001) said on his writing that a true Multi-level plan
is one which there is an agreement between yourself and a manufacturer or
distributor to purchase product at wholesale and sell them at retail. Also the right to
sponsor other thus multiplying his sales base and profits by receiving percent of the
sales made through your down line.
Similarly: Jack Smith (1998) states that most multi-level marketing state that you
can make thousands of dollars by duplicating yourself and your downline doing the
same. But smith also stated that it never work that ways. A person is fortunate if a
small percent of his downline produces much of anything unless that person are
able to spend a great deal of time teaching and promoting their business as well as
your own.
In addition to: Ward Lucas (1999) reveals on his report about the MPT Smogbuster
fuel Disc a hottest new item sold by an MLM company in America. The Smogbuster
promoters claims that it send holographic frequencies into the gas tank and
changes the molecular structure of the gasoline. But according to some scientist
that conducted a series of test on the disc to see if it contained any miraculous or
unknown technology. Their conclusion is that this is only a waste of money. Ward

Lucas said that this is only proved that MLM products are sceptical and that even
the members of multi-level marketing world are all sceptical.
Terry Parker (1995) said that one must make sure that the organization that he
chooses and the programs they offer are legal and that if it is just a pyramid
scheme whereby members are merely signing up others of a fee and little if any
merchandise is being sold it could be illegal. And that in any event, this type of
operation will produce little if any money making opportunity. If in doubt it is
advisable to check out the firm with the betterness bureau or with the postal
authorities when it involves direct mail method.
Local Studies
Huang (1990) in his study indicates that MLM, marketing is, in essence, a legal
pyramid scheme. The basic idea is for sales persons. This is very advantageous to
those who own the company and supply the products especially since the sales
person would think it is to his or her advantage to increase the number of
competing sales person.
In connection with this: Tan (1998) in his study states that a Ponzi scheme) is any
kind of money-making opportunity where you get paid by recruiting, enlisting or
soliciting other people to follow your lead and continue a chain of events. In other
words, youll be paid a commission from the people your recruit- 1: from the people
they recruit 2: from the people they recruit 3: and on into infinity.
Similarly: Cervanes (1992) studied that many people fear risk because they lack of
the ability to see the potential of taking a risk. Other are fully aware that taking a
risk can lead to success. Yet they set limits on the level of risk theyre prepared to
take so they risk nothing at all. Whether your concern is taking a risk the area of
finances, time or your ability to succeed. Multi- level marketing allows you to choose
your level of commitment whilst providing ongoing support and guidance to ensure
that whatever risk get brings you the rewards you seek. MLM allows you to take the
calculated risks get the risk to reward ratio can be huge so long as you have vision
and determination to succeed.
In Addition to: Susa (1996) studied that systematic nature of direct marketing has
also made it easier ever to succeed. A good company will have a few years to trial
and error under their belt when it comes to training. The cost of owning your own
business is cheaper than ever as well. Many legitimate companies are asking for
hundreds of pesos for the opportunity to be your own boss and operate at your
leisure. This is significantly cheaper than the hundreds of thousand it cost to own a
franchise.
According to: Khadka (1994) on his studies on how one can avoid a pyramiding
scheme state the necessary precaution. Beware a plan that ask new distributors to
purchase expensive inventory. These plan can collapse quickly and also may be

thinly disguised pyramids. Be cautions of a plan that claim you will make money
through continued growth of your downline the commission on sales made by new
distributors you recruit rather than through sales of product someone make
yourself. Beware of plans that claims to sell miracle products or promise enormous
earnings. Just because a promoter of a plan makes a claim doesnt mean its true!
Ask the promoter of the plan to substantiate claim with hard evidence. Beware of
shills decoy references paid by a plans promoter to describe their fictional success
in earning money through the plan.
Foreign Studies
Sarah King (2005) stated in her study the difference between MLM and Pyramid
Schemes of old one that pyramid schemes are illegal and multi-level marketing is
not. It is important to know this when people challenge your decision to pursue an
MLM business. When investigating a MLM business, look for one that allows you to
advertise. Many people wont even consider a MLM business because they dont
want to tell to their friends and unfortunately many MLM Business require you to do
just that and only that, because they dont allow business owners to advertise.
Being unable to advertise also mean your scope for business growth is United.
Sarah also states in her study that there are ten s of millions of people out there
who are dissatisfied with their job. Their financial situation and the path of their life
has taken. And in fact 80% of people employed in full-time work hate their jobs.
Moreover: Daniel Chung (2005) in his study of direct marketing concludes that
direct marketing is simply a business without the traditional overhead costs. There
are no commercials and no rent for buildings hence the term direct marketing. It
is a words of mouth business and all it requires is an army of well-trained personnel
and a corporate structure. The rest is hopefully a good product and large profit for
the entrepreneurial minded. The benefits of working for a sound direct marketing
company are many. In his study Chung also include to use of computer, phone and
internet connection. These are tools are needed to create business. The in format
age has made it easier than ever to run with a business idea.
Gerald P. Nehra (1978) have analyzed in detail the differences and legal significance
of plan design 100% in the control of the company and plan implementation where
distributors conduct is often the challenge. He also conducted studies negotiated
with the FTC, FDA, CPSC and other agencies regarding Amyways products and
services and sales Plan positioning. Nehra also reviewed and modified labels and
literature to comply with regulatory requirements.