MARKETING SYSTEM OF ORIFLAME IN INDIA DIRECT MARKETING AND MULTI-LEVEL

MARKETING.

SUBMITTED BY:

RASHI SHUKLA

ROLL NO. : 00710601709

BBA (GEN.) IIIrd SEMESTER

ANSAL INSTITUTE OF TECHNOLOGY

RESEARCH SUPERVISOR

MRS. NIDHI PRASAD

ANSAL INSTITUTE OF TECHNOLOGY

Submitted to:

GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

KASHMERE GATE, DELHI- 110006

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GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

CERTIFICATE

THIS IS TO CERTIFY THAT RASHI SHUKLA WORKED UNDER MY

GUIDANCE FOR THE PROJECT ON MARKETING SYSTEM OF ORIFLAME IN INDIA DIRECT MARKETING AND

MULTI-LEVEL MARKETING

WAS IN CONSTANT TOUCH WITH ME DURING THE WHOLE PERIOD AND I APPROVE THE MATTER HERE TO BE ORIGINAL IN NATURE AND THUS,

APPROVED AND SENT FOR EVALUATION.

I WISH HER ALL THE BEST IN ALL HIS ENDEVOURS.

MRS. NIDHI PRASADANSAL INSTITUTE OF TECHNOLOGY

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ACKNOWLEDGEMENT

My sincere thanks go to Mrs. NIDHI PRASAD my supervisor for this

project work, for her valuable guidance at every stage of

preparation and submission of this project report and collecting the

required data for preparation of this project report.

I also convey my thanks to other employees of the organization who

have helped me in carrying out the survey report and getting the

required information for preparation of this project report.

RASHI SHUKLA

INTRODUCTION

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Oriflame is an internationally successful company providing consumers with

Scandinavian natural skin care and cosmetic products marketed through direct

sales systems. In accordance with its vision, it started its operation in the largest

consumer market of world in India in July 1996 through a joint venture. Now, the

company has good reputation among Indian consumers, but its direct sales,

systems and multi-level marketing systems has made the academics and

practitioners of Indian corporate market to focus centrally on the issue. It is in this

concern that, finding the issue most interestingly; I selected this topic and

company for my final year project.

The present study makes an attempt to inquire about the impact of innovation in

marketing system (direct marketing and multi-level marketing) on Oriflame’s

performance in relation to making improvements in customer service system.

For this study both the primary and secondary methods of research methodology

have been applied. Based on these a brief findings and analysis follows. After the

completion of whole study, plainly suitable suggestions and recommendations

have been made, which would be useful not only for the future operation of

Oriflame, but several other companies wishing to adopt the concerned marketing

system, may learn a lot and in this way the utility of this study goes without

saying.

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5

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RESEARCH METHODOLOGY

2.1 Formulation of the Research Question

The Research Questions/Hypothesis used is imperative in directing the

scope and process of this dissertation. The Research questions/hypothesis

established for the present study clearly brings out the present state of

hospitality industry by stating various arguments opinion based on

investigation and statements put across here, which are subject to

verification throughout the dissertation. Hence, the conclusion drawn at last

either seeks to support or reject the Hypothesis.

A careful study of numerous texts, articles and research materials on the

“Mult-Level Marketing : Oriflame – A Case Study”. Further, this study

gave a sound framework for this research. These relations were tested in the

light of opinions, given by people belonging to this industry. So as a first

step towards proving this topic, these opinions were recorded and put down

on comments.

2.2 Secondary Research

To assert the validity of the subject, a secondary research in the form of a

Literature review was undertaken. The objective was to collect thoughts of

experts on the subject matter.

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All necessary theoretical information relating to the subject was initially

obtained through various textbooks & journals. To supplement this,

academic research journals concerning to this topic both technical and

occasional were also consulted. I myself also visited number of libraries to

collect the information.

2.3 Data Collection

The method of structured interview was adopted in Data Collection. Here,

questionnaires were prepared (see Appendix) and questions were presented

in the same order and same wordings to all interviewees of the Customers.

The interviewer had full command on the questionnaire all along the

interview process.

My aim throughout was to extract as much honest opinion and information

from these interviews as possible.

Also, the objective was to achieve ‘quantitative’ as well as ‘qualitative’

data. The structured interviews included a set of questions, with utmost

sincerity and sensitivity to make it sure that they veritably measured up to

the degree of efficacy and validity characterizing the essence of the present

study.

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2.4 Limitation of the Study

Though, I’m satisfied with what I have done for the final project, yet I can

say that I had performed much better than this if I would have more time to

finish this project. Apart from this, while conducting interview I faced so

many problems and sometimes I got frustrated when the approached

customer took the interview lightly. It was really very tough to make them

ready for answering the questions.

Besides these, everything I found well in doing this task and it can be

emphatically said that there is limitation of everything and so nothing I

found new in my case. Whatever experienced I have gained, I will make

use of these in my future professional life.

2.5 Interview Questions formulation

Open-ended questions were chosen for the questionnaire.

The classification of questions that were chosen in the Questionnaire were

‘Open Type’. The author feels:

The questions were easy to ask.

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It gave the respondents the opportunity to express their views on the

Industry and its practices.

They are appropriate for the subject matter.

Allowed a great deal of freedom to probe various areas and to raise

specific queries during the course of the interview.

2.6 Questionnaire Design

The author had a set of ideas and expected result based on those ideas from

the questionnaire. For this reason questions were:

Related to the field of study

Related to the research hypothesis.

Besides, deciding what to ask, the author subsequently identified the

guidelines as to how the questions should be asked. It included:

Questions must bear significance to concerned area of

research.

Questions must seek information, unattainable from other

sources.

They must be short as possible but comprehensive enough to

allow the author to derive his requirement of his research.

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Questions were well laid out

Utmost care was taken to avoid ambiguity in the questions.

The segment selected for the interview process viz. Customer Level

was reached out to receive more accurate and balanced data.

2.7 Choice of Sample

Lot of importance was given for selecting the right sample. I ensured that

the characteristics of the sample were the same and that it belonged to the

cosmetic industry. It was also imperative to select a sample from which

data could be analysed and conclusions drawn. The criteria, which was

decided upon by me was Delhi – based busy markets i.e. (1) Sarojini

Market, (2) Lajpat Nagar Market, (3) South Ext. Market and Munirka

Market.

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3. OBJECTIVES OF THE STUDY

To get an insight of the Oriflame company and its operation in India.

To critically evaluate the marketing system of Oriflame in India Direct

Marketing and Multi-level Marketing.

To review the literature relating to Direct Marketing and Multi level marketing.

To inquire about what revolutionary changes taking place in Oriflame after

innovation in marketing system.

To critically evaluate the impact of direct marketing (selling) on the

performance of Oriflame.

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4. ORIFRAME AND ITS OPERATION IN INDIA

The brothers Joanas and Robert of Jochnick and Bengt Hellsten founded

ORIFLAME in 1967 in Sweden. It is a $450(45) million Swdis multinational.

Oriflame International SA is the holding company of international group,

which operates in more than 45 countries. It is the number one Scandinavian Skin

Care Company. This international group manufacturers and markets a

completed range of skin care and cosmetic products through direct sales, mail

order and pharmacies. The business primarily consists of selling it products,

directly to the end-users. Since it was established in Sweden, Oriflame has

expanded world wide and now operates through out Europe, the Americas and

the Far East. The Brand names of Oriflame group are marketed in 48 countries

world wide through approximately 600,000 consultants and members. The World

wide sales force consists of over 500,000 (5 million) Distributors.

Their International success is based on a simple idea-combining beneficial

quality of natural botanical extracts with the revolutionary discoveries of modern

science to create the world’s finest skin-care products. Oriflame develops,

formulates & produces its own cosmetics using plant based natural ingredients

and combining the best of science and nature. The Principal manufacturing sites

are in Republic of Ireland, Poland and India (mid’96).

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Oriflame’s corporate business concept is to provide consumers with

Scandinavian Natural Skin Care and cosmetic products marketed through direct

sales systems. Oriflame’s vision is to be recognized as a global marketer of

Scandinavian Natural Beauty Products, for the quality of its business operations,

an its commitment to investors, customers, distributors, employees and the

environment.

Oriflame International SA is a public Company with its shares listed on the

London stock Exchange. Oriflame’s markets can be broadly classified into the

traditional mature markets of Western Europe and South America. In addition

there are exciting potential markets in India & China. The three largest product

sectors in Europe are Fragrances, Hair Care and Skin Care. In India Oriflame is

concentrating more in the Skin Care sector by generating awareness about the

aspects of Skin Care in prospective Consumers.

The company ahs a well-established corporate network; thus Oriflame

distributors have the benefit of a multinational organization with years of

experience in supporting their activities in every city. Town or Village where

there is an Oriflame Distributors.

Oriflame Eastern Europe S.A. (ORESA) was established in 1990 to meet the rising

demand in Eastern Europe. OISA holds 4 percent of shares in ORESA, which

holds a license to sell Oriflame'’ products in Eastern Europe and other markets.

Oriflame has a strong position in the international market due to good products at

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competitive prices. The have a well-defined concept with directs distribution,

which they are streamlining and introducing in old and new markets. They have

an impressive geographical spread. They have a strong corporate culture, short

decision making paths and a firm on cost control. When Oriflame enters a new

market, they first concentrate on the factors that are needed to ensure long-term

prosperity for Oriflame Distributors. It has researched all the relevant legal,

economic & commercial aspects until satisfied of a suitable & positive

environment both for Oriflame and Distributors. This was true in case of India

also. Oriflame entered the Indian market in 1995.

4.1 ORIFLAME-THE INDIAN PERSPECTIVE

Oriflame has entered India with an environment of $7 million (about Rs. 2

crores). Oriflame India Pvt. Ltd. Oriflame India has formed on July 4, 1996 as a

result of Joint venture announced by Mr. Robert of Jochnick for manufacture of

cosmetics and marketing of Oriflame’s international brand of Skin Care and

cosmetics products in India.

Delhi based RollsCon (India) Pvt. Ltd. Founded in 1987, specializes in

developing and operating international at balanced trade and related the

transactional corporation in India. the alliance with Oriflame International to set

up Oriflame India Pvt. LT, represents a diversification into Skin Care and

cosmetic through the Direct selling concept.

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Oriflame India Pvt. Ltd. Has set up a centrally air-conditioned modern and well

equipped manufacturing facility at Noida Phase II is Uttar Predesh, thereby

making India Oriflame third production base besides Dublin and Warsaw. The

company is based in New Delhi and carried out all functional support

responsibilities for the Oriflame Distributor organization. Currently, Oriflame

produces its own products in its factory in Ireland, where the researches

Laboratories are situated.

4.1.2 The Expansion Phenomenon

Oriflame India Pvt. Ltd. Is today operating the concept of MLM in India all over

India. Since December 1995 when they started invoicing first they have come a

long way. They carried a 10 months test-marking phase in Delhi, which proved

to a proved to a great success. Then after this MLM strategy is a form of direct

selling where there is only one intermediary between the company and the

consumer, the “distributor”. This means that Oriflame works with independent

Distributors who deal directly with the end customer and offer her/him a direct

and personal services.

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DIRECT SELLING

DISTRIBUTOR CUSTOMER

FACTORY

Oriflame set up a service center in Delhi to recruit the first level of distributors.

These were the people usually known to the officials of the company and were

called the core group”. These distributors had the authority to recruit more

distributors who are called the “downline” . So, the chain goes on and is

multiplied.

Now, the distributors who are recruited by the company are allowed only to sell

to friends, relatives and acquaintances. Oriflame range of Skin-Care an colour

cosmetics products are deliberately premium range of products is hardly likely to

be effective and runs the danger of degenerating into forced selling. In India, the

salesman is still looked upon with suspicion. As a result, the products he harks

will hardly be viewed with confidence.

Every Oriflame distributors starts the same way. One has to be recruited by

another Oriflame distributor. The trick is to look for a distributor profile, which

is similar to the target customer. The Distributor Application form is to be filled

by the person. The prerequisites visit are that the person should be more than 18

years age and should be introduced by an existing distributor. Once the form is

deposited with a registration fee of Rs. 800/- a starter kit is being provided. This is

a unique sales kit having product samples and literature this is to be used as a

display and demonstration tool to start the business. This kit also contains free

AF and distributor order forms.

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Oriflame provides all the help to its new recruits before they move in to start their

real business. It conducts regular classroom training sessions aimed at upgrading

products knowledge. The are intensively trained not only about the product range

but also about the nuances of direct selling. These sessions also serve as a forum

for experience sharing aimed at enhancing selling skills. The distributor is

expected to perform the role of a beauty consultant. An important objective of the

training programme in to bring out the merits of selling a premium cosmetic

range to people whom the distributor and comfortable with, so that the exclusive

and premium image of the product is maintained.

The distributor once ready to enter the real market and approach the customers has

to proceed in a systematic manner. The daily schedule (photograph).

The initial expected goal should be to service 20 regular customers, and to call on

them at least once a month. This is way to give personalized service and establish

a business with a steady income.

The sales start by taking orders right there on visits to the customers. This brings

in the income with the products being ordered by an order form at the Head

Office. The company provides a credit facility to all its distributors. It extent a

credit limit of Rs 5000/- where products worth of this amount an be picked up and

sold to the customer. Distributors order products at the Distributors price and sell

products at the recommended retail price. There is a mark-up 255 on all

products purchased, at intensively trained not only about the product range but

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also about the nuances of direct selling. These sessions serve as a forum for

experience sharing aimed at enhancing selling testing & research phase in

October 1996 they started the open recruitment’ on an all India basis. Thus the

existing distributors could recruit from any part of India. Oriflame geared up

timely for this all India Launch by opening up service Center across major metro-

cities in the India subcontinent, i.e.;

Banglore

Madras

Calcutta

Mumbai (Bombay)

Delhi

Hydrabad

And 3 more which have become operational now in July ’97. These are in

Chandigarh, Pune and Jaipur. Each service Center is linked up with the main

computer at Delhi Head office thus ensuring quicker services to the distributors.

Thus “Oriflame India is here and they are to lead the beauty revolution from the

India home. The day is not far when Oriflame will be household name with its

multi location presence, strong sales and marketing support.” Says Lajinder

Bawa, CEO.

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4.3 MEDIA SUPPORT

As a direct sales outlet Oriflame plans to use print advertising to simply make

consumers families with its brand and leave it to the distributor the crucial task of

educating the customer about the entire product range & the recommended usage.

That way it allows the distributor to orchestrate has sale pitch. As a result,

Oriflame’s advertising costs imply a fraction of that of a typical retail sales

driven outfit.

The all India launch of Oriflame was further strengthened by media support

besides the infrastructural support systems. Oriflame d campaigns were to

communicate the message of the business opportunity and the Product Range,

thus creating a strong brand image and awareness.

Media releases commenced from first week of November 1996 and continued till

March 1997 for the financial year. These ads of Oriflame were published in

weakened color Supplements of Delhi, Mumbai, Banglore and Calcutta dailies

magazines such as Cosmopolitan, Femina, Filfare, Savvy and Reader’s Digest

also features these ads.

Oriflame will be starting its new product ad campaign beginning from June

1997 till March 1998. The primary objective of the present campaign is to help

out distributor increase their sales by creating countrywide awareness about the

products of Oriflame. It will consists of releases of ads to some of Oriflame’s

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Best sellers-Aspasia, Maximum, Alow Wash, Natural Skin Care system and

Lipsticks.

The ads will be released in leading magazines all over the country like Femina,

Cosmopolitan, Filfare, Savvy, Ella, Woman’s Era, CineBlitz, Reader’s Digest,

Grihshobha.

4.5 PRODUCTS PROFILE

Special Quotes from Brochures,

1. Excellent Product formulation .

2. Best of nature and science put together.

3. Good skin doesn’t come off the shelf-it needs special effort from, special

products.

4. “Natural” is the Key Word.

5. Primarily into skin care.

Oriflame combines Scandinavian beauty secrets with the most modern research

Technology, which has led to the development of products, built on active natural

ingredients. The result is a remarkable collection of state-off-the –art skin care

products that will help users look & felt their best.

In today’s increasingly harsh environment it is essential to discover ways to

combat the dangerous effect o stress. Oriflame is pursuing research into skin care

to ensure health, safety and environmental quality for today’s generation.

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Oriflame products are developed and produced at manufacturing plants in Europe,

which is sited in pollution-free location.

The cosmetics are developed, refined and evaluated in Ultra-Modern Laboratories

before being produced under the strict micro biological and analytical guidelines

required as laid down by the European union. The company has a policy not to

test any of he products on animals. Instead, they are tested on human volunteers in

controlled laboratory conditions under the supervision of an internationally

recognized professor of Dermatology.

Legendary botanical research provided them the inspiration. Carefully chosen

plant extract work together in perfect harmony to create gentle highly effective

formulations. Some of he natural ingredients used by Oriflame. Are:

1. Camomile : A delicate flower.

2. Witch Hazel: Its leaves & back.

3. Birch: Tree of Venus: Its birch is the foundation of Oriflame basis skin

care range.

4. Comfy: Its root is used.

5. Wheat Germ Extract.

6. Hawthorn : Fruit & Flower.

7. Marigold: Flowers & leaves. It is a proven herb even in India Ayurved.

8. Cothsfoot- leaves & Flowers.

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9. Wild pansy.

10. Aloe Vera: Renowned natural oil. All these chosen were the “pick of the

crop” with a history and reputation for their soothing, calming, healing,

cleansing, toning and rejuvenating properties.

The products are thus totally vegetarian formulated by purely plant extract,

without the use of any animal ingredients. The packaging is also done in

environmentally friendly components as far as possible. Thus, Oriflame has

permission to use some special logos along with it’s products, which ensure the

above principals.

Oriflame products are so safe and pure that they can be used even by Vegans by

any fear, being purely vegetarian. The products as classified into 4 major

categories:

4.5.1 Narural Skin Care

Oriflame has developed different skin care lines, to suit varying ages and skin

types. The purifying range is a basic skin care region for young skin and is aimed

both for me & women. The Oriflame Natural skin care system for normal. Dry

and oily skin is a comprehensive range of products. Thus Oriflame first

emphasizes its distributors to help the customer identify the real skin type and

then recommend the best skin care system for that particular skin. The use of he

right product only will yield those magical results which Oriflame aims at.

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The Royal Velvet range is specially formulated to provide dry & mature skins

with the rich lubrication they need to help minimize fine lines and smooth out

wrinkles.

The purifying range is for young and oily skins. Especially for teenagers, more

active and prone to access, pimples and rashes. This range is for cleaning and

purifying the skin, which is susceptible to injury due to extensive pollution &

sun.

Now, Oriflame has introduced new range specially for India skin and weather

conditions. They include the sun protection and fairness creams. This range is

expected to do very well in India as the fair & glowing skin is always aspired by

Indians.

Oriflame emphasizes that this skin care range should be used as a system in 3

types: Cleanness, Toners and Moisturizer. For extra care of skin care of skin the

face pacts and scrubs are available which are not be applied in small quantities.

Thus, the skin care range covers the overall collection of products as per

required by customers.

4.5.2 Colour Cosmetics & Make Up

Oriflame color cosmetics allow your customers to choose the look they desire.

There is foundation to provide the prefect base for any make up and a range of

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color for eyes and tips to add the finishing touch, this range included some

absolutely new products for India. people have been purchasing these unique

items on their visits abroad, but now they are being available in India.

4.5.3 Toiletries

Oriflame offers a wide range of toiletries using natural active ingredients in hair

care, foot care & body care, suitable for whole family. There are special products.

4.5.4 Fragrances

Oriflame take natural ingredients & oils and blends them together to create a range

of exciting fragrance far other men & women. They have deodorants, perfumes,

after shaves and colognes will scintillating fragrances to choose from. The have

introduced a concept. Every perfume resembles a triangle.

Top Note- The first thing that is smelt, for few minutes.

Heart- The body note of heart, which gives character and richness.

Base- The basis is the fixative, which gives lasting power & aromatic warmth.

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Top

Note

Heart

Base

All products are very specific and unique in formulation. They are developed

keeping in mind special skin types and varying needs of humans. It is therefore

very important that their application and use is also done will care. The products

are expected to yield desired results only on proper applications as results only on

proper application as per instructions. For their purpose the distributors are given

special training about products and their application. The distributors help the

customers to identify their skin type and special requirement and only then after

them the right products. This distribution help the customer to identify their skin

type and special requirement and only then after them the right product. This

ensures very effective and quick results of these products.

The products are a result of long and laborious research by skin scientists in

Dublin. The maximum Treatment cream is a result of 7 years of research carried

out to provide mature skin will all the possible care and treatment. All the

products are very effective so they are to be applied sparsely. Excessive

applications won’t yield results. The products are such they won’t cause any

harm as for allergies or irritations on normal application and condition. But if

applied on wrong skin types or more than required amounts they may cause

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problems in few causes. For this reason Oriflame emphasis on proper care while

selling of products only by trained distributors.

Though Oriflame is confident of its preparations provide they are used for correct

purpose, using directions as given. It says its products should not cause injury.

But in case of any allergy or harm to the users it assures to return back full value

of product.

5. MARKETING SYSTEM IN DIRECT AND MULTI-

LEVEL

OF ORIFLAME IN INDIA

5.1 THE PROCESS

For the first time, a form of direct marketing will be used as an alternative channel

of distribution and sales in this country. The innovative marketers are imported

this unusual channel of multi-level marketing. Where the shelves in the country’s

retail stores are overflowing already this new technique is outright do some good

to them.

What MLM supporters are counting on is that Indian housewives will jump at the

opportunity to make money in their spare time besides being able to win friends

& influence people to use their company’s products.

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The managing director of Modi Care explains. “There is no large capital

investments required, no employees, no bosses and best of all, no risks.”

At Oriflame within a period of 10 months a network of 5,000 distributors was

built initially when this concept was first launched by it in India. it sales of over

Rs 10 crores were incredible. It targets between 50,000 and 70,000 distributors at

projected investment of Rs 7 Crore for Dec. 97.

How is all this achieved with question that comes to once mind? The process

behind reaching these mind blowing figures is not very complex. It starts the very

level of a simple India housewife, who wants to do something new and exciting of

her own. She is the target and promising distributor of Oriflame products in the

market. How? Yes, this question needs elaborate answer. In the conventional

channel the product moves from the manufacturer. To the stockiest, wholesaler,

retailer and finally to the consumer in network selling the product is not available

at any retail outlets.

DIRECT SELLING

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RATAIL SHOPS SALES TEAMSADVERTISINGWHOESALERS

STOCKISTSTRANSPORT

CUSTOMER

DISTRIBUTOR

FACTORY

MLM strategy is a form of direct selling where there is only one intermediary

between the company and the consumer, the “distributor”. This means that

Oriflame works with independent Distributors who deal directly with the end

customer and offer her/him a direct and personal service.

Oriflame set up a service center in Delhi to recruit the first level of distributor.

These were the people usually known to the officials of the company and were

called the core group”. These distributors had the authority to recruit more

distributors who are called the “downline”. So, the chain goes on and is multiplied.

29

FACTORY

CUSTOMER

THE MLM DISTRIBUTION SYSTEM

30

COMPANY

FIRST LEVEL DISTRIBUTORS

RECRUIT SELLS

CUSTOMERS

SECOND LEVEL DISTRIBUTOR

SECOND LEVEL DISTRIBUTOR

SECOND LEVEL DISTRIBUTOR

SELLSRECRUITS RECRUITS SELLS RECRUITS SELLS

CUSTOMERS

THIRD LEVEL DISTRIBUTION

THIRD LEVEL DISTRIBUTION

THIRD LEVEL DISTRIBUTION

RECRUITS RECRUITS RECRUITSSELLS SELLS SELLS

THIRD LEVEL DISTRIBUTION

THIRD LEVEL DISTRIBUTION

THIRD LEVEL DISTRIBUTIONTHIRD LEVEL

DISTRIBUTION

RECRUITS RECRUITS RECRUITS

RECRUITS

SELLS SELLS SELLS

SELLS

THIRD LEVEL DISTRIBUTION

CUSTOMER

The distributor is expected to perform the role of a beauty consultant. An

important objective of the training programme is to bring out the merits of selling

a premium cosmetic range to people who the distributor are comfortable with, so

that the exclusive and premium image of the product is maintained.

The distributor once ready to enter the real market and approach the customers has

to proceed in a systematic manner. The daily schedule (photograph).

The initial expected goal should be to service 20 regular customers. This bring in

the income with the products being ordered by an order from at the Head office.

The company provides a credit facility to all its distributors. T extents a credit

limit of Rs. 5000/- where products worth of this amount can be picked up and

sold to the customers. Distributors price and sell products at the recommended

retail price. There is a mark-up of 25% on all products purchased, at the

distributor price, so there is an immediate profit of 25% on the very first sale. The

payments are to be cleared within the 1-month period for the products taken on

credit.

The process, however, only begins here. The system is structured in such a way

that the more products a distributor sells, the higher her commissions. The

business income of a distributor is based on a monthly accumulation of points. All

products are assigned 2 sets of numbers; Bonus Points and Business Volume.

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BP Bonus Points- which normally are points assigned to each product

corresponding to their vale of these points remain constant. These determine the

performance discount.

BV Business Volume- It is a monetary value that change if prices change. The

value of the BV equals the Distributor Price less sales Tax. This represents the

monthly sales.

Volume- The selling of products with a BP of Bay, 10 points could earn an

additional commission the total BP of all the products one buys and sells during

the course of a month will determine the performance discount. The monthly

performance discount, is base not only own business volume but also on the

business volume generated by any distributor willing the group.

The discount payment are calculated and paid on the total business volume

generated by each distributor group in accordance with the performance discount

schedule. The bonus points ensure that the effort required to reach performance

discount level remains same despite inflation or other factors.

Bonus Points Your Monthly Performance

Discount

% of bonus points

10,000+ 21%

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18%

15%

125

9%

6%

200-599 3%

For e.g. Product sale of BV of 400 points could can commission of 3% of the

price at which she brought the products from the company. In this case say

Rs45000.

So, Performance is count is 3% x 4500 = Rs 135

The total income for month is:

Total monthly profit and Performance discount: (1225 + 135) = 1360

However, no distributor is expected to make all these sales on her own. Instead

the system involved her recruiting a second ring of distributor. The first-tier

distributor who sells products worth 200BP on her own, and recruits 6 more

distributor each of wh9om sales another 200BP or Rs 1000 worth products can

actually claim as additional commission equivalent to 200BP, or her own as well

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as those of her recruits. Or their combined sales of Rs 7000, therefore, her

additional commission will ramp up to 9 per cent.

Of course, she has to share some of this with her recruits each of wh0m is

entitled to an additional commission of 3% on her Rs 1000. However, after

playing them their share the first distributor is left with a hefty amount besides

the original commission. The logical conclusion: it is more profitable for any

distributor to recruit an additional ring around her own, with the result the

network will keep expanding.

Consider one more case of a distributor , who sells cosmetics worth Rs. 4,000 a

month on her own. As three-month-old MLM distributor pointed our:

“I sell products of to a customer base of 7 to 8 people every month, adding up to

between Rs 4000 and Rs 5000. The equation is simple: 2 purchase per month

customer, with the average Oriflame products costing R250. Her regular

commission of 25 percent, and an added commission of 3% thus nets her on

earning of about Rs 14000 per month.

By hiring 6 more distributors who can sell the same amount as her would raise

her monthly earning to Rs. 097.

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5.2 REACHING HIGHER LEVELS FOR REWARDS

When a distributor group achieves a total of 10,000 BP per month for f three

consecutive month, the Oriflame Director level is reached. At this level, special

rewards are presented they achieve the leadership, eligibility for seminars and

honours.

Oriflame has attractive rewards are recognition’s to extra ordinary performance.

There are great motivators for Distributors. There are “leadership training”, where

the leader or distributors who have achieved high sales. This acts as experience

sharing to give tips to inactive distributors and also serves as recognition and

praise for the star performance. Apart from this regular tips or princes are

arranged. All these interactions serve to induce a feeling of belonging to Oriflame

family and is itself is a great motivator. They are also give recognition through

monthly newsletters mentioning their names along with their photographs and

levels reached by them.

Thus the entry of Oriflame with its multilevel direct selling system could change

the very way the discipline is handled in India and also increase its importance.

5.3 ORIFLAME INTERNATIONAL AS A MEMBER OF WORLD

FEDERATION OF DIRECT SELLING ASSOCIATION

The World federation of Direct Selling Association has prescribed world direct

selling code of conduct towards consumers Direct Selling & Companies.

35

The Indian direct selling Association has been established in India. Oriflame is a

founder member of this association. Thus, Oriflame is bound to follow the codes

of conduct set by the association in the Indian Scenario. The code is aimed at

achieving the satisfaction & production of consumers, the promotion of fair

competition and the enhancement of the public image of Direct Selling.

The code is a measure of Self-regulation by the direct selling industry. Non-

observances dos not create any civil law responsibility.

5.4. CONDUCT TOWARDS CONSUMERS

1. Prohibition of all misleading, deceptive or unfair sales practices. At Oriflame

the distributors are given instruction about, not to subject customers to

“pressure selling” nor are they obliged to make any purchase.

To give relevant and genuine information on product features. In addition to offer

skin analysis and personal advice on skincare at customers homes.

2. Identification: The direct sellers are provided a Distributor number, which is

their identification at the company. The distributor has to give his complete

identification to the customer in a timely fashion without being requested

3. All aspects of product offering are required to be accurate and completed.

The distributors are given tips & complete in for about products during the

training sessions before they all upon customer.

1. Order forms: The distributor order forms are issued to the distributor   which

are to be filled accurately and delivered to the service center / H. O . from

36

where the products are dispatched. The forms have all terms of  the sales

spelled out clearly.

2. Verbal Promises: The distributors are clearly told to make such claims before

the customers, which are genuine and realistic about product features &

quality. At the training sessions they are specifically told not to mention any

odd promises about products. Once more reason for his is that the products

are very specific and to be used according to proper instructions.

3. Cooling off and returns of Goods: A reasonable cooling off period must be

provided in order from and all payments or goods traded in must be returned

within reasonable period to the consumer. At Oriflame the damaged or those

causing allergy to the users can be returned back within 4 weeks of delivery

or invoice day. This facility is under the Guarantee of Excellence. Oriflame

give unconditional rights of return to the customer.

4. The Guarantee and after sale service is to be set forth in the literature.

Oriflame gives the guarantee seal on every product catalogue & manual. It

also mentions the details of after sale service as being offered by distributors

on a continuously monthly basis.

5. Literature is not deceptive & misleading as per the code.

6. Comparisons and Denigration are not allowed. The distributors are told not to

compare the products on any grounds with other products and to just

mention the natural ingredient formulation of them to them to the customers

without confusing them.

37

7. Respect for privacy: Distributors are guided to take prior appointment when

visiting customers to preserve their Privacy.

8. Referral selling. This relies on some ensure future event in prohibited. This

section does not prohibit giving immediate and certain price reductions or

payments for referrals given with a sale.

9. The timeliness of delivery is required: The orders must be dispatched within

a reasonable the distributor’s reputation. For this Oriflame needs to deliver

and process orders as soon as possible avoiding any delays.

The enforcement of the code is the responsibility of the company. Direct selling

Association or the code administrator being appointed to monitor & resolve

complaints.

5.5 CONDUCT TOWARDS DIRECT SELLING

1. Recruiting: The misleading, deceptive or unfair recruiting are prohibited by

law. The willing people are offered distributorship after explaining the

genuine terms and conditions.

2. Business Information: Oriflame provides its direct sellers the information,

which is accurate, complete and verifiable. The distributors are given elaborate

explanation about the business opportunity during training sessions to give

them confidence.

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3. Earning claims: All distributors are to set targets for themselves ad decide the

levels they want to reach. Thus, Oriflame gives them opportunity to claim

earn in proportion the their efforts.

4. Fees: The registration fees of Rs. 800 only are charged. This is under the

reasonable limits as set by he code.

5. Termination : Under this the companies are required to buy back inventory,

which include promotional material and sales aids and kits at the cost to the

direct seller less a deduction up to a maximum of 10 %

6. Inventory: Oriflame does not encourage distributors to place range orders in

normal circumstances. In fact they have a provision in the order-processing

package of reaching the quantity if it exceeds a limit of say 10 items.

7. Remuneration and Accounts: The code says that money owned to Direct

Sellers must be paid in commercially reasonable time. Oriflame clears all

accounts by paying the performance and bonus checks till 25 th of each month

to all its distributors.

8. Training and Education: Proper training sessions are arranged for the

distributors to make them apt with all latest changes and improvements. They

are regularly informed about the company policies and performances via

widely distributed monthly new letters.

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5.6 DATA PROCESSING SYSTEM

The distributors application form (DAF) are received at head office form:

1. Immediate service by hand/in person.

2. Post

3. Service Centers

DAF’s are send to the DAF processing department which is a part of the customer

service cell. At the processing table following steps are performed.

HOW CARE FOR DAT PROCESSING

40

CHECK FOR ALL DETAIAILS BEING

SELECT THE “ADD NEW DISTRIBUTOR” OPTION FROM “DISTRIBUTORS” OPTION

ITS THE RECRUITER D. No. GIVEN ON

ENTER THE RECRUITER’S D.NO. IN THE QUERY BOX ONTEH SCREEN

ENTER THE D.NO. CORRESPONDING TO

SEE THE NAME OF CRECRUITER

BROSE THROUGH THE DISTRIBUTOR FILE

IF FOUN

INVALID DAF

NO

YE

41

SCREEN APPERAS HERE ENTER THE NEW DISTRIBUTOR NAME AND DATE OR BIRTH

DOB YEAR<1980 INVALID DAF

ENTER THE PERSONAL DETAILS OF DISTRIBUTORIN NEXT

ENTER THE SERVICE CENTRE NUMBER O FOR DELHI & 91 FOR

CHECK THE MODE OF DELIVERY FOR STARTER KIT AND STAMP IT

ENTER YES/NO FOR THE CREDIT LIMIT TO BE GRANTED AS PER REQUREST

IDD PROOF COLLATERAL CHEQUE ATTACH

NO

YES

5.7 THE INSIDE STORY

Till now we have seen how does the sale and distribution takes place under the

MLM strategy of direct selling at Oriflame. Now, the real working at the Oriflame

India will give the understanding of this organization.

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ENTERY FOR THE QUERY

CREIT NOT GRANTED

VALED COLLATER

CREDIT LIMIT OF Rs 2000 GRANTED

PROFF OF ATTENDING PPT

CREDIT LIMIT OF RS. 5000 GRANDED

NEW DISTRIBUTOR NO. ALLOTED TO THE DAF BEING PROCESSED .

ENTER ON THE DAF ALSO

NO

YES

NO NO

ORGANISATION CHART

ORIFLAME INDIA PVT. LTD.

MANAGEMENT

The various departments are headed by Managers who have the staff at specific

positions to assist in their work as a family.

The country has been divided into 4 zones North, West, South, East. The service

centers for these regions are having the staff function situated in various cities

like:

North Delhi ,

Jaipur,

Chandigarh

West Mumbai

Pune

South Banglore

Madras,

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CHIEF EXECUTIVE OFFICER

GENERAL MANAGER

OPERATIONS

CUSTOMER SERVICE PROJECT

COUNTRY SALES

MANAGER

EDP MANAGER

FINANCE MANAGER

Hydrabad

East Calcutta

Various departments at Oriflame are:-

1. Operations.

2. Customer services.

3. Sales and Marketing

4. EP-Electronic at a Processing

5. Finance & Accounts department.

The Region / Zone wise set up of each department in given.

The customer service department would be taken up hers. I was associated with

the customer service department, under the customer service and project manager.

5.7.1 Customer Service Department

The department is one of the most important department at Oriflame or perhaps at

any direct selling company. It is this department which id in continuous and direct

contact with the customer i.e., the distributor. As already mentioned Oriflame

believes in using its own customer to sell its products to other customers. This, it

is important that this own customer or Distributor is satisfied. To provide them a

service which is best in all aspects. It is with this objective that is department is

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set up. This department communicates with the distributors directly, caters to their

orders, solves their queries, listens and rectifies their varied complaints.

The communication with the distributors is made by every possible made. The

customer service personnel are in contact with customer through:

1. Telephone-An online service assisted with computer facility.

2. Post

3. Fax

4. Immediate service

5. Service Windows at service centers they are I direct contact with H.O.

service cell.

5.7.1.1Who Makes The C. S. Department

Customer service cell-this is further sub-divided as:

a. DAF counter.

b. DOD counter.

c. Telephone Order/ Queries.

d. Senior Controller/ Customer service executive.

Immediate service.

Complaint cell-This has been designed as a separate cell named ORIHELP.

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The customer service cell has been provided with an online computer set up of 10

computers. All the customer records are fed into the computer on an online basis

as and when calls are received. The staff is trained in a manner to answer any

queries and process all records of distributor.

All the distributor records and database is being maintained by the

application software names “ORICO” developed for Oriflame International.

This package is developed in Fox-pro and works on MS-Windows.

This enables the customer service cell to function in most efficient manner being

very user friendly. The service is thus very fast and fool proof. The orders received

on telephone are processed by the girls of this cell on-line.

The queries received are immediately answered to, by browsing through “Orico”

and any action i.e., updating or deletion required is done right there.

DAF Counter

Thus, the distributor application forms received from applicant distributors are

processed by this department. This has been described in the form of flow chart.

After the DAF are processed the eligible distributor is issued a Distributor

Number, which is the identifications of the distributors there after with the

company. The distributor is also issued a “Distributor card” which is the

identification token of the distributors of Oriflame. This is very important while

any business transactions of Oriflame.

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The DOF Counter

The distributor order forms receives are processed by this department. The orders

once fed in the computers by this service cell reach the warehouse which is

connected LAN. The warehouse receive the order details and dispatch the same

on the same day in a line.

DOF & DAF flow charts show the step wise procedures to serve the

CUSTOMERS in the most efficient manner.

Immediate Service

This is the first and foremost counter which is customer interface with Oriflame

at the head office. This is a state of the art facility provide immediate service to

Oriflame distributors. This has 2 staff persons on duty. They take all orders or

attend to any queries and receive payments from distributors who visit

personally and want to pick up orders by hand. This service is very quick and

efficient with least time lags as all transactions occur on line and directly in

person. The immediate orders & other services are given the top priority at

Oriflame as the customer is present right there and is to be serviced in the best

possible manner.

5.7.2 DEVELOPMENT OF ORIHELP: Complaints cell

This is a recent development at Oriflame. Though the complaints were handled

earlier also but, as the network started increasing with Oriflame going national,

47

there was a need felt for a full-fledged complaints cell. This started taking shape

in May’97.

I as a summer trainee was assigned the job of assisting in its designing and

functioning. This job was to be done in phases.

The first phase was to start sorting out pending complaint and studying them. This

was done to study the nature of complaints received from the Oriflame

distributors.

The second phase comprised of devising methods to solve these cases of varied

nature. This required a step wise approach to be followed for each.

Deciding on the formats of the Log-sheets for logging in the complaints so

distributor wise record can be maintained.

Formatting the letters to be sent to the distributors replaying & informing about

the action taken.

Designing he MIS of Orihelp’s monthly records for the management use. The

whole process of designing phase took one month.

5.7.3 Orihelp at Oriflame

OBJECTIVE- To up hold the Goodwill of Oriflame by distributor and

the company. Thereby satisfying & pleasing the customers.

5.7.3.1Inputs For Orihelp

Complaints received from distributors. They are received by various modes.

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1. From sales department- People sent their problems the sale department

regarding damages or inquires about credit status etc. These are forwarded to

the complaints department.

2. Customer services- The customer cell gives the complaints received on

phone, the department. This is usually he case with specific queries. These fall

beyond he preview of customer service cell.

3. Post- Daily there are plenty of letters specifically addressed to complaints

department with varied nature of complaints.

4. Phone- Many distributors call up directly the complaints department

regarding their problems.

5. FAX- The fax messages are also received on a round the clock basis at

Orihelp.

6. Service centers & single windows- All complaints from service centres are

also received by the end of day.

7. Immediate service- Distributors come personally at the Head office and tall

their complaints at the immediate service counter. They are again forwarded to

Orihelp and a readmitted on priority basis as the customer is waiting for an

immediate replay.

Now have a problem is solved by Orihelp?

49

The following general steps re followed to deal with a problem:

Analysis/ Study

Logging

Auctioning

Feedback

Reporting

Monthly Records (MIS)

5.8. TRAINING OF DISTRIBUTORS AT ORIFLAME

A Oriflame training of Distributors is one of the vital aspect. Business has to be

carried by the direct sellers i.e., ‘Distributors’. The MLM concept being

introduced in India for the first time is very near has to be rightly promoted and

explained to people so that it is adopted.

In India the Conventional retail system is deep rooted. Thus, there is a stiff

competition for this new sales strategy. Oriflame’ s network selling model has

succeeded largely in the European Countries, which are sparsely populated and the

special distribution of retail outlets is very low, contrast that with India, where

the density of population is not only high, but there is already a large well

established retail network in place, as a result, market leader Lakme sells

through over 50,000 outlets across the country. The existing distribution thus

offers great convenience to the consumer.

50

This call for well planned moves. Once the channel is developed through

continuous recruitment special training sessions (PPT) are arranged. The training

sessions are arranged very regularly and in all possible locations throughout the

country. These sessions are specifically designed for people who are fresh in the

field of selling.

Here, the distributors are motivated through a variety of programmes. New

distributors are trained on issues such as recruitment planning, selling skills and

business development, so that she has enough confidence in her abilities in

starting the business.

Monthly training schedules are sent to all distributors so that they are able to

plan out and attend these as per convenience. The service centres in all the 9

cities have regular training sessions weekly. The distributors are encouraged to

attend these sessions at least twice before starting the visits to customers. All new

distributors are informed about these sessions and the importance to attend them.

It is the dusty of the sponsor to inform the recruit about training sessions. They

are supposed to encourage the recruit to attend the session y providing all

necessary information about the place and timing. If possible the sponsor should

also visit training sessions with the recruit.

The new distributors are again encouraged by a provision in the credit

scheme. The credit limit is raised to Rs. 5000/- only when the distributor

51

attends one PPT session. So people are motivated to come and attend these

sessions.

Initially the number of distributors attending the PPT sessions were very less and

then this scheme was introduced whereby the numbers started increasing.

Now, daily session are organized at G. K. Delhi which are for a 3hours duration.

The aspects covered mainly are the direct selling strategy, company profile,

recruitment planning, product introduction and detailed description, selling

skills and rewards & remuneration systems offered by the company.

The first half i.e.1 ½ hours covers the Business aspects. The second half covers

the product description and product testing. The members are encouraged to raise

as many queries to clear all doubts. The punctuality of time is strictly adhered to

as the whole 3 hours session is important. The company wants its distributors to

have all necessary information before they go and start the business in the real

market. If the distributors lack any critical information, it will make them loose

their confidence. Thus, they are encouraged to reach in time and attend the

complete session to have adequate information.

The training sessions are nicely arranged and tuned. The language used is easily

understood. Both Hindi and English are used as per the situation. The trainer

emphasis on the superior product quality an their personal experience of products

and the results.

Analysis and Suggestions.

52

1. The sessions are lacking in interaction between the 2 sides i.e., the

participants i.e., distributors and the trainees. This makes it a one-way,

lecture type session. The reason for this is the lack of time. During the 3 hrs

period, a lot of aspects have to be covered and if a discussion is encouraged

the time runs short. The sessions have to be stretched to some 5hrs, which

can be covered in 2 sessions slots of 2 days. These sessions should be

interaction sessions so that the distributors can be heard of their problem or

queries.

2. Right now the PPT session is more of an informative session rather then

a Training session for distributors. They are just informed about the

important aspects of the business. All this is present in the success plan. They

should be training sessions with live examples and demonstrations and

role plays etc. The first part of PPT is dull and thus lose its importance. This

has to be made interesting by introducing exciting examples of achievers from

India and abroad. So that distributors get motivated to sell the products and

earn.

3. Demonstrations should be introduced. During the increased time, product

use demonstrations, live sales demos or role plays be arranged. Some

special and extraordinary beauty care tips be displayed for the products in the

range. A beauty consultant is in the making, so she should be given training

by a professional, how to use of these products? They should know the

53

exact method and amount of product to be used for best results. The live

demos are always more effective them lecture method in case of sales.

Distributors should be asked to volunteer for demonstrations, so that they

get a feel of the real products and thus making them user.

4. The sales demonstrations should also be arranged where some role plays

can be tried out and improvements suggested. New selling tips should also

be shared with distributors. The selling aspect should not be left.

5. The distributors should have a feeling of belonging to the Oriflame family.

This can be done even at the training sessions. The use of words such as our

Products and not your and our separately and make the difference. The word

“our” should mean (Oriflame + distributors) sitting in same room, being

one family.

6. The amount/quantity of products to be applied is not clearly mentioned.

They are to be used in small quantities, but “small” as different meaning for

different people. Indians s it sis have very different usage patterns &

styles.

7. Many international products lose their effectiveness because of this when

introduced in India. Thus , live & practical display of applications is very

important. These products are very specific and effective only when used as

pr directions, it is thus all the more necessary. Indians are used to putting

54

ample amounts or cosmetics that would be ineffective, if not harmful in this

case.

8. In this MLM mode recruiting is most important both fir the company and

distributor. There is a lot of stress on recruiting further and less emphasis on

selling. But, this is not right the initial stage. People should be encouraged

to sell as well as recruit further. Other wise the sale will stagnate and

distributors will stop selling the products. The market won’t expand. There

should be a lot of products along with recruiting

55

6. LITERATURE REVIEW

6.1 WHAT IS DIRECT SELLING?

Direct marketing is an important aspect of the strategic P; penetrating. Direct

selling is an ultimate crucial step in offering value to the customer.

“The companies say that direct marketing identifies the unfulfilled needs of the

ordinary customers. The customer would rather be happy if he receives a product

of his choice with proper service person. They (customer) rather think that direct

selling impinges on the customer’s privacy and in the end the appeal to the

customer is lost.

Direct selling- When a company bridges the last link in the genetic value-chain

between the retailer and the residence, and sells its products at the customer’s door

steps itself, the process of direct selling is complete.

Few years back any companies, believed that direct selling will not work in this

country for them or for them or of the customer. In the post liberalization area,

with the dynamic market conditions the importance of direct selling is being

realized and more and more companies, are opting for this expensive but

effective routs. In today’s market place the sales- driven company must transit to

a customer-oriented one.

“Smart companies” – do not just sell and demanding customers do not just buy.

56

It all started with a small group/community of people coming up with the idea

of circulation of certain commodity on demand.

The circulation area was limited to dose friends and relatives.

A sort of verbal sales promotion entirely on basis of faith and personal

contacts.

Gradually, the circle grew

E.g. – Reader’s digest launched through direct selling where the magazines

were available to customers by post on demand basis. It is only through this

method of circulation that an extensive network was established in the entire

world for the Reader’s Digest. Today it enjoys one of the largest circulation’s

in the world.

Bull worker- German Company (35 years.)

Starting –adds in magazines. Still it is restricted to magazines ads, only never

seen in any shop. Today it is also one of the most popular Gym. Items and

exercising machine.

India only adopted this and one every popular coy came up with attractive results-

Eureka Forbes.

Today, many companies have adopted the multilevel marketing model. These

are Amway, AVON, MODICARE, OFIFLAME, LBH, EUREKA FORBES.

57

After all, these companies have realized that, what could be more effective than a

face to face dialogue between a salesperson and a customer. In an environment

where the latter is utterly receptive – her home – whereby, the salesperson has a

complete control and attention of the customer, which is very important to

communicate (to him) the attributes of his product.

Direct selling is a very important technique in this complex and com0eptitive

market place. It encourages the salesman to go out and clinch a deal. But at the

same time direct selling could result in the lifelong loss of a potential buyer, if it

does not maximize customer value. The whole sale has to be carefully planned

and thought over even before making the first call at a prospective customer,

which is of course, not very easy always. Because, it only takes a minute to

clinch a sale but choosing the right minute to contact the customer involves a

day’s work for a direct marketer. This is all the more necessary because the direct

marketer is much like an uninvited guest and, therefore, must ensure that he does

not impost on the customer’s time. Thus, direct sellers can offer additional value

by placing a premium on the customer’s time.

Times are changing and it is the ‘performance’, which is being valued today and

not just the product. So for companies like Eureka Forbes which has to introduce

and sell a concept not just the product direct selling was the best alternative. For

many cosmetic manufactures also. The direct contact between the distributor

ensures that the latter actually gets to experience how smoothly a lipstick can be

58

applied, or how oil free a moisturizing lotion id Direct Selling, therefore, is not

about crude sales calls but a carefully crafted performance when the product’s

value to the customer is clearly demonstrated. Today the need is to sell

performance, not just products.

Even in the case of industrial products, the performance – over product equation

holds equality true in case of INDAL, which sells its aluminum sheets directly.

When its salesmen were trying, to introduce aluminum applications, they faced

resistance from automobile body builders. They said, ‘aluminum applications

was unfit to the used as a roofing material sine it would get corroded by bird

dropping and would, therefore, lead to holes in the roof.

A desperate INDAL, salesman began carrying samples of aluminum sheets with

days old bird droppings with him to prove to builders that INDAL’S sheets

would not get corroded. The bus manufacturers started replacing steel with

cheaper and lighter aluminum.

“It is only through direct selling that needed flexibility can be mat”. Clearly, b

focusing our performance, and not first the product, the direct marketer can fully

demonstrate the value proposition to the customer.

Direct marketing companies have an advantage over conventional selling is that

the relationship between k he company and the customer starts building even

before a sale is made. The salesperson have the satisfaction of generating a pool

of goodwill because. “ A satisfied customer in our best salesperson”.

59

Thus the evident advantages that direct selling have over conventional selling can be

summarized as:

ADVANTAGE STRATEGY

Flexibility By contracting customers at their

convenience rather then yours.

Demonstration Using the opportunities to conduct

detailed demos at customs at

customer comfort and before potential

user and the buyer both.

Building Relationship Goodwill By satisfying a customer sight from 1st

call i.e. till the service giving stages.

Reducing confusion and saving time By giving personalized visits,

customers get attention and

understand product attributes clearly

getting confused by other products.

Multi-level marketing Using your customer to sell your

product to other customer by

enlisting direct sales agents from its

customer base.

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A deal is closed immediately by

reaching the customer directly.

By allowing salesperson to take

pricing decisions on the spot when he

can conclude the deal immediately.

According to the World Federation of Direct Selling Associations, “Direct

Selling is the marketing of consumer products directly to consumes, generally

in their homes or in the homes of others, at their work place and other places

away from permanent retail locations. Usually through explanation or

demonstration of the products by a Direct Seller”.

The direct selling works on the basis of a distribution channel, which relies on

personal touch. Direct selling has some specific advantages for the customers.

1. Provide time for family and relaxation with is becoming a scarcity.

2. It provides convenience of ordering goods from home.

3. Others personalized service, demos, satisfaction and Customer protection as

the most essential attribute.

6.2 PRODUCTS

Direct selling is the appropriate strategy of marketing for products of high

performance items requiring detailed explanation or demonstration. Some such

products can be mentioned here where the direct selling has bright prospects.

1. Cleaning systems, Vacuum cleaners.

61

2. Microwave ovens.

3. Kitchenware.

4. High quality cosmetic and toiletries.

5. Educational programs and multimedia items.

Direct selling can be broadly classified as Single Level, Multilevel or Party Plan.

Single Level Direct Selling: A concept, which allows only one level of

distributors, who are recruited directly by the company. This has been used in

India for years now.

Multi Level Marketing Network Marketing: It goes beyond the conventional

one level of distributors. Each distributor can recruit many distributors under,

him who in turn can again further recruit more people under them and all these

would constitute a ‘Down Line’ of the distributors who initially joined the

company. It is a relatively new concept in India.

Party Plan: where the host/hostess organizes a party or a get-together at his/her

house or a venue with the purpose of demonstration the products collectively to

the group. All the participants are aware of the purpose of the meeting and they

share the interest. Orders are obtained during the course of the party or after the

demonstration/presentation of the products is complete.

Although single level and multilevel marketing concepts have been launched in

India. Eureka Forbes, Modi Telstra, INDAL have been selling their products by

62

single level direct selling. Where s the companies like Amway, AVON Oriflame

and Modicare have adopted the multilevel marketing. The party plan concept has

yet to take off in a big way.

There is on thing common to all the methods of Direct Selling, which is ALL OF

THEM ESTABLISH A DIRECT CONTACT between the prospective customer

and the company by cutting down the intermediary steps of the conventional

selling.

They direct selling concept has the following key points.

1. Truly entrepreneurial,

2. Low/no capital investment,

3. ‘Learnable’ profession.

By truly entrepreneurial nature it means that three is an open opportunity for

earning in proportion to the efforts. This can be full fledged business p provided

all the necessary inputs, where very one is his/her own boss.

There is practically on or very less capital investment is compared with any other

business at the initial stages. All one needs to do is to get the distributorship with a

very nominal fees and start the business, which brings results in proportion to

the efforts put in.

63

Then, thirdly it has a ‘Learnable’ nature as a profession. One learns as one carries

it on, from own experiences but there are a very few setbacks to be faced alone as

there is always a company backing the distributors.

6.3 INTERNATIONAL PERSPECTIVE OF DIRECT SELLING

On the International front direct selling has been always an important concept in

the marketing world. This promotion of the direct selling concept is the

important objective. To fulfill this objective the World Federation of Direct

Selling Association was established. Today the direct selling associations are

operational in 43 countries all over the World. These associations have the direct

selling companies as their members. The direct selling associations have the

principle objectives such as:

1. Promote Direct Selling industry in the particular country.

2. Meet the collective need of the member companies.

3. Protect the rights of consumers.

The World Federation of Direct Selling Associations, ensures full protection to

consumers and assures ethical behavior among direct selling company and

customer through its cods of conduct. The member company should:

I) Respect the right of consumers and promote a healthy environment it the

industry.

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II) To serve with honesty, sincerity, and commitment.

6.3.1 Reasons why DSAs are Valued

The direct selling associations are very important bodies in over 43 countries.

This is because of the following features they offer.

Code of conduct as set by DSA.

Voice to talk to the Government.

Help and Advice.

Training and Education.

World-wide Contacts.

Specialists suppliers as Associate Members.

Product diversification.

Encouragement to small and start-up companies.

6.4 THE INDIAN SCENARIO

The direct selling concept is relatively new in India. But now with the post-

liberalization area in India, this concept has been adopted by many companies.

Thus a need for establishment of the direct selling association was establishes

with the objective of the direct selling industry in India.

The founder members of Indian Direct Selling Association (IDSA) are:

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1. Amway India Enterprises

A – 5 Kailash Colony, New Delhi.

2. Avon Beauty Products (I) Pvt. Ltd.

M- 38, G. K. – 11, New Delhi.

3. L . Publishers & Distributors Pvt. Ltd.

90-91, M. G. Road, Bangalore.

4. Eureka Farbes

5. Oriflame India (Pvt.) Ltd.,

F – 90/12 Oklhla – 1, New Delhi.

IDSA outlines d the following basic criteria for the direct selling concept to be

carried our clearly & successfully in India conditions:

Direct selling primarily takes place in the home.

We must be good guests.

If we don’t behave, we will be made to behave.

Last but not the least ‘Self regulation’.

6.4.1 Facilities you get, being a IDSA member

A member company is entitled to carry the ISA logo, which is perceived as the

standards bearer of direct selling.

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The association is a platform to be is close touch with the government and have

say in policy matters related to the direct selling industry.

It will promote the direct selling industry through media publicity, seminars

events & help in creation k of a trustworthy image of the entire industry and its

promotion. It will educate people about the earning opportunity it offers and how

working with a direct selling company can change people’s lover.

It will promote ethical practice amongst the members & independent

distributors, which would promote a healthy environment in the industry.

It will disseminator information on international trends and new developments

in the direct selling industry taking place world over. Besides offering a unique

opportunity to exchange views with the stalwarts of the industry.

It would encourage new enterprise which, may start at a very small level and

may need guidance & information on the industry.

6.5 MULTILEVEL MARKETING MODEL

6.5.1 Can this radical distribution model really work in India?

Network marketing began life in 1886 when door to door salesman avid H.

McConnel founded the California Perfume Company, and set up a sales team

using the concept. His first saleslady Mrs. P.F.E. Albee not only vended the little

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to perfume set. But also recruited other women to her team. McConnel’s next

company Avon set up in 1928 followed the system faithfully.

In today’s Network aged MLM can be a multi-marketing solution. It ahs the

power to rush the product into the customer’s home neatly by passing the

complex conventional system. Its advantage, being that it asks for no investments

in advertising, promotion and infrastructure building. The MLM company

completely bypasses the retail chain, distributing products through person to

person contacts.

6.5.2 Unique selling proposition of Multilevel Marketing

A lot of companies world over have adopted MLM model where a concentric

and ever growing ring of distributors help carry products from the company to

the customers. MLM offers some unique features above the conventional system.

1. No formal marketing infrastructure is required. The investment for setting

up an collaborate marketing system comprising of sales person, showrooms,

or even an extensive marketing dept. Is not required.

2. The products are always sold directly to customers. This gives a very

personalized service to them. Thus buildings strong relationships. The

products are presented and demonstrated right is customer’s home, which

adds value to them requiring special attention. This facility can not be

experienced while purchasing at the retail shops.

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3. Distributors belong to the target customer group. The model emphasizes

to use the customer to sell our products to other customers. And this is

possible when the distributors become our best customers. Only if a

distributor who is a satisfied customer will become an effective

salesperson. The findings show that the distributors of MLM companies in

the US on an average sell only 10% of their products to new customers.

These. MLM distributors themselves account for out every five customers.

4. The conventional retail route is completely bypasses .i. e.

Warehouse Depot Distributor Retailer

route.

5. Advertising and promotions are not necessary. Once an awareness is

generated among the prospective customers about the product range not     much

of an investment is required in advertising of products. The     product quality

doses the rest, i.e., it makes the customer ding to     them provided the

service is more than satisfying. Here the word of     mouth is more important

and effective than sales promotions.

The MLM system utilizes a multi-tiered sales force of independent distributors

none of them employees to sell products directly to the customers, and earn

commission at 2 levels:

The first level is in the form of the difference between the distributor’s cost &

selling prices i.e., 25% of mark up.

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The second is in the form of a proportion of the commissions earned by other

distributors whom she recruits on the company’s behalf.

As this calls for an ever expanding network to be formed. According to Inderjit

Sial, 35, Chairman, Oriflame international, “The margin on each product sold is

25% but the main income booster is really the number of people a distributor can

sponsor, thus netting the percentage income on group turnover”. Thus, a

distributor becomes truly successful only when she starts recruiting others.

6.5.3 Who is the Ideal customer for product using MLM system?

This system is distinct and thus targets a specific segment of the market where

reside its customers. The MLM targets members of he middle class Indian

families specially house wives who would be very interested in an opportunity

offering extra income. Though the companies in the country have all prices their

products in the premium slot: Oriflame’s and Avon’s cosmetic are both among

the most expensive produces in their genres. But, the real customers for KLM is

not one of the 6lac super rich Indian consumers, who are normally the target your

premium products. Instead the model relies on turning its distributors into

customers, the best customer is the distributors herself since she buys on whole

sale prices and gets he best deal. So the focus is on converting the distributors

into the consumers.

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6.5.4 For what Products is MLM and Ideal?

MLM being a Quick cost effective channel for distribution of products. If the

products are fast moving consumer goods targeted at niche markets such as

specialized cosmetic or premium fragrances it could offer a convenient

distribution network.

But the MLM model can just build a relationship with the customer. Unless the

transactions can deliver greater value than transaction can deliver grater value

than making purchases at retail outlets. So either a price discount, or the ability

to test the product in the comfort of the home. If a customer is getting

personalized service an a demonstration of the product t a time of her convenience

in her own home, why would she prefer to sweat it out in the marketplace?

MLM can score over the conventional system only if your product is a

Novelty. Or the customer has developed a close relationship with your brand.

MLM is best suited for products, which fall in the following bracket:

The products that are purchased neither extremely often nor extremely rarely, and

are neither too cheep, are suited for multi-level marketing.

Products priced too high or too low will not offer the kind of value that the

MLM buying experience offer. MLM works better for consumer non-durable

than for durable. Products at the highest consumption level, such as food, can’t

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be effectively sold at home. The ideal product are thus the house hold cleaners

and e.g. Medicare. Personal care products e.g. Oriflame & Avon.

High-value durables like TV on or air conditioners, buying which normally

involves comparing rival brands before making a choice. However Innovative

products where there are few brands to chose from can find customers through

forms of direct selling including of course MLM.

6.6 MLM’S BENEFITS

1. Distribution network grown continuously.

2. Companies can maintain high margins on their products. The cost of

marketing will never exceed 25 per cent of its direct selling price. After all,

the distributor’s primary commission is a mark up on this price with out the

company having to pay her anything. The income from registration fees will

softens its codes continuously.

3. Entering new markets is both quicker & easier. As there are new recruitment’s

and expansion of network he new markets are explored through new

distributors. This without any additional investment and effort on company’s

part except the improvement of services and delivery system.

4. Overheads are low since no infrastructure is necessary

5. Innovative products can be well-demonstrated New products with innovative

ideas and specialized features can gain special attention of the customer once

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demonstrated in the comfort of his home. The products, which are very

specific to customer, needs could be presented in a personalized

atmosphere to make. The consumer understands the importance of these

products.

6.7 MLM’ s DRAWBACKS

1. Sales forecasting is difficult leading to inventories. Unless the company builds

up a strong database of its distributors, their orders. Prospective distribution

and past & present high selling products it become virtually impossible to

avoid out off-stock situations. Other major problem is that probing into future

is difficult as market is very uncertain get dissatisfied even once. Winning

back the customer is almost impossible today.

2. Consumer relationship cannot be developed. The strong brand equity through

the system is difficult to be built. The absence of advertising will limit brand

awareness to only these customers whom distributors actually call. The prices

and discounts being arbitrarily extended by the sales team to meet their

volume targets may disturb the value equation of the brand.,

3. Distributors often become the largest customer. Top ranking distributors

usually buy most of the products themselves instead of expanding the

network. Thus the products are either consumed by the distributor herself, or

sold to other distributors. So, while company may be satisfied with volumes,

the drawback is that it may nit be growing to market

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4. The company will never be in touch with the real consumers of its products

hence the MLM distributors are its effective customers. Tracking customers

tastes. Checking their perceptions and monitoring their satisfaction level is

there fore impossible.

5. The company cannot control the sales team/s actions. The company Cannot

keep a vigil on the sales targets and proceeding of its sales force is as possible

in conventional system.

This concept is a success world-wide for customer care products, Household goods and

childcare and entertainment product. The top ten Multinational Markets in the World

are:

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COMPANY PRODUCTS

Amway Corporate Household goods, personal care &

nutritional products.

Avon Products Cosmetic, jewelry, home furnishing,

baby care products.

Brite Music Enterprises Children’s song books, cassettes,

records.

Discovery Toys Educational toys, books, games.

Encyclopaedia Britannica Educational publications.

Mary kay Cosmetics Cosmetics, skin-care products

Oriflame “Cosmetics, skin-care”

Time-Life Books Educational publications.

Tupperware home Food-storage containers, kitchenware,

and children’s toys.

The Hanover Shoe Inc. Shoes.

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7. SAMPLING

Sampling serves as the most important source of primary source of research for the

present project. To corroborate the views articulated by scholars and experts on

this subject, the samples have been designed to comprise a host of issues put

across through relevant set of questions highlighting various aspects of the subject

undertaken. For this purpose, one set of interviewee has been chosen as the

fundamental point of reference for sampling at consumer level. Accordingly

sample is presented here on the basis of one set of respondents interviewed.

The set of respondents chosen for interviews are from four Delhi-based busy

markets, namely (1) Sarojini Market, (2) Lajpat Nagar Market, (3) South Ext.

Market and Munirka Market.

SAMPLE: (CONSUMER LEVEL)

No. of people approached = 30

No. of respondents = 20

Sample size = 20

Response rate = 66.7%

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QUESTIONNAIRE

1. What do you think as about the customer service system or Oriflame?

Excellent Good Not so good

Working

Women

5 4 1

Housewives 5 4 1

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The above table interprets that out of 20 respondents, 10 are of the opinion that the

customer service system of oriflamme is excellent, 8 respondents opine as good,

whereas respondents are of the opinion that the system is not so good.

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2. How much do you think, Oriflame is quick responsive towards your

complaints?

To great extent To some extent It is satisfactory

Working women 6 2 2

Housewives 7 3 -

From this table the manifestation is that out of 20 respondents, 13 respondents find

it that Oriflame is quick responsive towards customers complaints to great expert;

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5 respondents think this as to some extant, while only 2 respondents thick it as

satisfactory.

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3. Do you know that Oriflame provides you its product through direct

marketing?

Yes No

Working Women 4 6

Housewives 3 7

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The above mentioned table shows that out of 20 respondents are aware of the fact

that Oriflame sells its products to the customer through direct marketing; while the

remaining 13 respondents are quite unaware about it.

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4. Do you find any specification in marketing of Oriflame in relation to other

companies in the sector?

Yes No

Working Women 8 2

Housewives 8 2

The above table shows that out of 20 respondents 16 respondents find it that

comparatively Oriflame reaches to the customer with specific marketing system;

where as only 4 remaining respondents do not have such finding.

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5. Do you know multi-level marketing?

Yes No

Working Women 4 6

Housewives 2 8

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The above table shows that out of 20 respondents, only 6 respondents are aware

about the company multi level marketing and it is nothing unusual or surprising

that 14 respondents do not know about the multi level marketing.

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6. In recent times have you found that there has been significant change in

the mechanism of Oriflame customer service?

Yes No Can’t say

Working

Women

4 4 2

Housewives 5 1 4

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From this table it becomes clear that out of 20 respondents, I have found that there

has been significant change in the mechanism of Oriflame customer service, while

5 respondents do not agree with this; where as, 6 respondents declined to comment

anything.

7. Do you agree that Oriflame while serving its products to customer

adopts the best system?

Yes No

Working Women 6 4

Housewives 7 3

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The above table shows that out of 20 respondents, 13 respondents agree that

Oriflame while serving its products to customers adopts the best system of

marketing while the remaining of respondents deny this.

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8. Do you have any advantage of Oriflame’s direct selling system?

Yes No Can’t say

Working

Women

4 3 3

Housewives 5 3 2

89

The above table interprets that out of 20 respondents, I respondents are of the view

the Oriflame’s direct selling system has been proved advantageous for them; while

6 respondents plainly deny this view; whereas the remaining 5 respondents

declined to say anything.

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7.1 FINDINGS AND ANALYSIS

Customers interviews very plainly expose the inside story of Oriflame’s marketing

system, changing with innovations on occasions. Though, Oriflame has still to

make a mark in India, it has shaken the Indian market through its experimentation

of direct marketing and multi-level marketing. The duration of eight years, since

its operation in India, Oriflame have had sufficient time to perform its best.

However, Oriflame is in news in Indian Corporate World due to its experiments in

marketing systems and following facts emerge through the findings:

Indian women customer (in cosmestic products) has little to do with how the

company runs with its marketing system as they still are conventional

regarding this.

It is, of course, that the new method of direct marketing to some extent has

paved the way for the direct contact between the company and the customers

which will help the company to know about the customers choice and

complaints directly.

Now, there is growing awareness among the Indian customers and particularly

Indian women customers, all about marketing system adopted by different

companies.

Direct-marketing is emerging as a effective tool of marketing in India as the

customers response towards this every positive and company like Oriflame

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may benefit a lot through this tool, where Oriflame is propounded in this

regard.

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8. RECOMMENDATIONS &

SUGGESTIONS

Based on my observations made during the training & detailed discussions with

the employees and also with the distributors by way of informal interviews,

following are my recommendation with respect to the marketing strategy of

Oriflame India Pvt. Ltd.

Related to sales and marketing.

The products have o be given the right image in the customer’s mind. A study

of what the customer wants from this product range, is to be done. This is

necessary because, Oriflame’s belief systems. How much value does the

customer give to the natural skin care products? This is to be found, then this

value is to be delivered through advertising and perception building.

Indians do value the nature’s extractions and natural formulations a lot. It is

thus; here Oriflame can find place in Customer’s mind. The concept of home

made recipes and face parts for improving and beautifying skin is age old in

India. it is till very alive in Indian society and minds. Oriflame products are all

natural preparations and this fact is to be emphatically propagated in the

market. Indians would definitely accept the pure and natural skin care products

that offer them same goodness of nature and plant extracts. Only thing been an

added advantage of easy and convenient use, smooth applicability, some

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saving process and socially respectable positive demonstration appeal. Thus

the ingredients used are to be ;highlighted which are similar to the once famous

in India since old ages. It will have a greater impact on Indian minds.

Highlight the ingredient and its positive features.

More emphasis should be given to the fact that products are meant for Indian

conditions. The concept looks westernized during the training sessions. It has to

be Indianised by making some points more prominent. The Indian skin is very

different from the European skin especially the skin colour this is due to the

presence of special pigments in relatively more active state than in western

conditions. The atmospheric pollution is much more in India than in western

countries. There the amount of dust and pollutants is lesser. Thus the main

problem in those countries in is the sunrays which harm the skin. Indian skin is

adopted towards this heat by presence of coloured pigments. Here, the skin has to

be protected against he pollution and harmful dust in air. The Oriflame products

have these protective qualities also but they are not emphasized. People have to be

made aware of this fact so that they start realizing the need for protecting their

skin against these odds.

The brand name has to be built in the market people still compare it with

Shahnaz being herbal. But Shahnaz products re very concentrated and

Oriflame products are very mild and harmless. Thus the name has to be built

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with respect to this. They need to aggressively advertise its products to build a

strong image in the mind of average customers.

The products are of a very superior quality and a customer becomes so use t9o

these that he does not like using any other afterwards this fact is to be

highlighted during sessions and by advertising also. By developing a new

punch line specifying this.

The distributor profile should be given encouraged to generate more

awareness and share their experiences existing brands in the market.

Distributors are not very confident of the sales once they take up

distributorship. They have to be motivated by illustrating successful

examples.

The out of stock situation should be avoided by keeping a minimum safety

stock. This problems will be soon settled with the manufacturing being started

at Noida soon.

There should be more Distribution centres for he distributors to have an easy

& quick availability of orders. The courier services are cousing a lot of

delays.

The top achievers should be monitored closely for their selling methods, if

found working against the norms of direct selling, should be handled

accordingly.

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One strategy to compensate for he lack of choice which is the strong point of

conventional system in needed. The customer has a lot of options to choose

from at the retail shop. The strategy can be to widen the product range: MLM

should try and sell several products simultaneously. Oriflame has already

brought is entire range of 60 products in India. there are plan to expand its

portfolio to over 300 in next 2 years. As a result , the wide ranges will be

available

Internal Analysis & Suggestions

There is a lot of time loss and disturbance in day to day functioning in the

customer service call due to queer handling. As the girls attend to query calls,

it disrupts their normal functioning or the job they were performing. This

causes delays and minor tasks are being postponed further. This hampers the

daily on the line processing.

Suggestion : There should be a separate query cell comprising of 2 operators.

They should be exclusively handling queries.

A grievance-handling cell should be performed, handled by 1 person, who

listens to problems or a suggestion box for letters should be kept.

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BIBLIOGRAPHY

BOOKS

Blackwell R. D., Miniard P.W. and Engel, J.F. (2001), Consumer Behavior, 9th

Edition, Vikas Publishing House, New Delhi.

Kotler, P. (2000), Marketing Management, Millennium Edition, Prentice Hall of

India, New Delhi.

Schiffman L.G. and Kaunk L.L. (2000), Consumer Behavior, 6th Edition,

Prentice-Hall of India Pvt. Ltd., New Delhi.

MAGAZINES

Women’s Era

Fashion World

Alive

Femina

Business World

Business Today

NEWSPAPERS

Times of India

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Poineer

Financial Express

Economic Times (Brand Equity)

SOURCES OF OTHER INFORMATION

Escorts Library

PHD House

FICC Library

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ANNEXURE

QUESTIONNAIRE : Customer Level

Name :

Age :

1. What do you think as about the customer service system or Oriflame?

Excellent Good Not so good

Working

Woman

Housewife

2. How much do you think, Oriflame is quick responsive towards your

complaints?

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To great extent To some extent It is satisfactory

Working woman

Housewife

3. Do you know that Oriflame provides you its product through direct

marketing?

Yes No

Working Woman

Housewife

100

5. Do you find any specification in marketing of Oriflame in relation to other

companies in the sector?

Yes No

Working Woman

Housewife

6. Do you know multi level marketing?

Yes No

Working Woman

Housewife

6. In recent times have you found that there has been significant change

in the mechanism of Oriflame customer service?

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Yes No Can’t say

Working

Woman

Housewife

7. Do you agree that Oriflame while serving its products to customer

adopts the best system?

Yes No

Working Woman 6 4

Housewife 7 3

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8. Do you have any advantage of Oriflame’s direct selling system?

Yes No Can’t say

Working

Woman

Housewife

Thank you

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