Marketing: Custom Edition for Texas A&M University 17th Edition by William Pride,Ferrell

Exercise 4

Direct Selling in China Booms in the 21st Century
What activities come to mind when you think of the words "evil," "cultish," and "superstitious"? In China, the government has used these words to describe direct selling. Direct selling, to the benefit of consumers, involves marketing products through face-to-face sales presentations at home or in the workplace. With social media, this concept has expanded to digital person-to-person communication. In countries like China, direct selling, or as it is often called network selling, often finds prospects through relatives, friends, and neighbors. While direct selling was once criticized by the government as being a questionable activity, consumers in China respect direct selling and are aware that direct sales companies' products are often among the highest quality products available to consumers. Today, Amway's Nutrilite is the number one selling dietary supplement and the official supplement of the Chinese Olympic team.
The Chinese government's negative attitude toward direct selling was the result of prior abuses through illegal pyramid schemes, which led to riots. Pyramid schemes occur when money is exchanged for recruiting other people into the scheme. Leaders of successful schemes make the most money, while those who fail to recruit others lose out. Multilevel marketing, on the other hand, is a very legitimate activity; it is not designed to exploit others, and support is given to sell products directly to consumers.
In 2006, direct selling was allowed in China under the provision that pyramid schemes and multilevel selling were forbidden. In fact, multilevel selling and pyramid sales in China can result in serious fines and even criminal prosecution. Although some people in China still hold negative views toward direct selling, for many women, direct selling has gone from "evil" to "empowering." Today, direct selling is flourishing in China, offering women a way to earn income and maintain enough flexibility to perform domestic responsibilities.
In countries where women are not usually able to start their own businesses, direct selling offers advancement opportunities and training. Additionally, despite the worldwide economic downturn, items like cosmetics and Tupperware remain in high demand, enabling direct selling companies to flourish. Direct selling has become a multi-billion dollar industry, with Avon as a leading seller of beauty and related products. Avon sets up retail stores and provides the products to salespeople to sell directly to consumers on the streets and in their neighborhoods. Although Amway is known for being a multilevel marketer in the United States, it sells its products through the same system. The success of both of these companies has been incredible. For example, Amway's Nutrilite vitamins and Artistry cosmetics are market leaders. Direct selling cosmetics company Mary Kay also sees opportunities in China and anticipates that the country will become its largest market.
Some people do not view direct selling sales reps as authentic salespeople. But many products, even business-to- business products like telecommunications, financial services, and scientific solutions, are sold through direct selling channels. The basic approaches to personal selling are used by sales representatives from companies like Amway and Avon. The salespeople have to be involved in the personal selling process of prospecting, pre-approach, approach, making the presentation, overcoming objections, and closing the sale. There are sales managers who have to recruit, train, and motivate the company's sales representatives. Many direct sales representatives develop long-term associations with the customers through regular communications over prolonged periods of time. Besides direct personal relationships and contacts, many of the sales reps are using social networking to simulate communication that would otherwise occur face-to-face. The importance of direct selling can be seen with global sales results of $10.9 billion for Amway, more than $11.3 billion for Avon, and total wholesale revenue of $66 billion for the industry. Today, there are more than 43 million sales representatives/ distributors across the world.Some Chinese officials still regard direct selling with suspicion since a common tactic of con artists is to pose as direct sellers. Therefore, China implemented laws limiting the ways direct selling companies could compensate their sales force and banned teachers, doctors, and civil servants from becoming direct sellers. Taking all of that into account, many direct sellers find the benefits outweigh the costs. Not only is direct selling flexible, it also helps women earn income in uncertain financial times when family members are out of work. Even women who do not earn much money in sales appreciate the flexibility and corporate culture. They look forward to the promise of future rewards with the company. Direct selling companies are also benefiting, with Mary Kay predicting a 30 percent sales increase in China. Although direct selling may be taken for granted in America, it is gaining an eager fan base among women in China.
Why are direct selling personal sales representatives legitimate or authentic salespeople?