business models using word of mouth publicity

Word of Mouth

Used and Abused – Where the Consumer/Investor may be a Victim or/and a Perpetrator

Points covered

Understanding the fine differences between different types of operations using Word of mouth - Single level and MLM compensation plans

Common features in various operations using the word of mouth publicity

What is direct Selling ?

Identifying un viable operations

Way ahead

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Some popular Economic crimes exposed in India

Stamp paper – Rs.32000 crores Satyam – Rs.7200 ( as per Additional Director CBI ) National Spot Exchange – Rs.5600 crores Travel Ventures International /TVI Express (deploying MLM

compensation plan) – Rs.6000 crores Saradha Group( using single level compensation plan – agent

model as insurance ) – official figure not known – Under Investigation – Possiblity of more than Rs.3000 crore

Speak Asia (deploying the MLM compensation plan) – Rs.2460 crores

Ketan Parekh Securities – Rs. 1,250 crores Aryarup / A.T.C.R (deploying the MLM compensation plan) –

Rs.1200 crores Stock Guru India (deploying the MLM compensation plan)– Rs.800

crores KBC Multi Trade ( deploying the MLM compensation plan) –

more than Rs. 200 crore

These scams make up for the tip of the iceberg while some have not got exposure in the media and more are waiting to be exposed .


Scam India turnover in calendar year 2013

About Rs. 11,100 Crores*

* As per the data of WOM operations ( deploying the MLM compensation plans) available with Strategy India http://www.strategyindia.com/blog/scam-alerts/


New operations starting in this domain per week in India

25-30 *

* As per the data available with Strategy India of various operations deploying the MLM compensation plans


Some Commonly used terms among all types of WOM operations

Direct sellers/ Distributors/Agents/Affiliates or Similar

Compensation plan – Single level(SL) and Multi level(MLM)

Incentives/ Commissions

Events –Trainings / Business opportunity meetings

Products/Services

Website and Online/Offline software

Crypto currency – Virtual currency

Customers/Investors

Rewards/Awards

Foreign tours


Single level Structure


Important Points :• The agents are also be known as distributors/ associates/ direct sellers• The agents may be employed by the company ( salary and incentives) or may be working with the company for commissions only•This types of structure is also preferred by un viable operations to keep their activities under the radar • the cost of acquisition of customer/ investor may be tuned anywhere in the range of 5-70% •This type of structure is more common in India

Multi level Structure


Important Points:• The agents are also be known as distributors/ associates/ direct sellers• All the agents work on commissions earned on sale by self and their teams• Despite of the structure being multilevel may use single level compensation plan to incentivise the agents ( where the agent earns on basis of sales done by him and his personally introduced agents only) •This type of structure is preferred to increase distribution network fast• They commonly deploy the multilevel marketing compensation plans to incentivize the network of agents

Genuine one ?


Under UV light ?


Genuine ?


Guidelines by the Reserve Bank of India


What if ?Guidelines for WOM operations are notified by the Central Government which would help people differentiate between the Genuine and the Fake


•Save millions of people from getting Scammed • Save the country from corruption • Save thousand of man hours of the law enforcement agencies • Reduce the circulation of Black Money • Reduce the chances of money being siphoned off the country

Different (WOM) operations deploying the Single level (SL) & Multi level (MLM) Compensation plans

1) Viable operations – Product/Services – Direct Selling

2) Un Viable operations– Intentional Scams – Naked Pyramids promote commitments of returns on investments

3) Un Viable operations– Un Intentional Scams

4) Un Viable operations– Un Marketable Product/ Services - Product/Service based Pyramids

5) Un viable operations– Product/Services highly priced – Offer Returns on Investments

6) Un viable operations - Help/Donation plans – Offer ROI


1) Viable Operations

PromoteProduct/Services

Products promoted have established market value and therefore purchased by people not related to the company

Direct seller/s earn their commissions only when the products or services are purchased for consumption or for retail to others.

The amount committed and therefore distributed in the compensation plan per product sale is fixed and is generally lesser than 40% of the commissionable value of the product

Performance based payouts which are fair & reasonable and not skewed.

Focus on sales of products/services and therefore have good amount of product trainings

Cost of entry is quite low Offer satisfaction guarantee on products Have an exit option


2) Un Viable operations

Intentional Scams

Commonly known as Ponzi Schemes ( Naked – where only commitments of returns are given)

Claim to generate money from sources like Deposits / Investments - in / for / in form of- Stocks, Shares/I.P.O, Debentures, Gifts / Help / Assistance / Support / Donations, Currency, Preferential shares, Forex Trading, Plantations, Farming, Infrastructure projects, Resorts, Trading in commodities, Crowd Funding , Birds (Poultry, Emu, Quail, etc), Livestock (Rabbit, Goat, Sheep, Cow, Buffalo, etc), Media and Real Estate, Currency ,etc

Buy in to earn - to click, to give surveys, to watch advertisements, to receive SMS and to receive emails and to invest in advertising medium, etc .

Compensate their distributors on investments bought in against commitments.

Start with money circulation and then move on to generate their own virtual currency to survive longer


They are unviable because they commit payout which soon exceeds the amount of investment they manage to collect .

They are well connected and organized

The real promoters operate from the background and have access to other scamsters and their resources

Maintain real time intelligence on corrupt political leaders and government officials who are used to stall Complaints/investigations

Have database and access to brokers and advocates

Operate 2-3 sites simultaneously

They have consultants who help them design the compensation plans , prepare software and set up offices with bank accounts abroad



Un Intentional Scams

Initiated by novices( First timers)

Copy the business model of the scam without understanding the viability

Generally operate in open as directors of the company

20% close down in first 3 months

Maximum graduate to become full time-intentional scammers to pay off earlier committed amount to investors or sell the database of investors to other companies to make money



Un Marketable Product / Services

Known as pyramids (product/services based) Claim to be like other direct selling companies People enrolled at the beginning earn the most People buy in the opportunity to earn and not the

products/services( which are unmarketable or not of any use for them)

Products promoted generally are online courses , e-learning packages , e-zines , quiz packages , online marketing tools , web space , Bid coupons/Vouchers , Discount coupons/vouchers , Holiday vouchers, Time shares, etc. or any other high priced low value tangible products.

Start up cost range can be anywhere between INR 100 – INR 15,000 Focus on recruitment of new members only because no retail

viability Start generating virtual currency once their income is lower

than the amount committed as per the MLM compensation plan


5) Un viable operations

Product/Services highly priced & Offer Returns on Investments

Commonly known as Investment/Growth plan companies

Advanced types of Ponzi schemes

Products/ Services are offered at over inflated cost to discourage people from asking of deliveries

Higher ROI is offered to people not opting for products

Products and Services are shown to conceal intention therefore escape scrutiny

Start generating virtual currency to sustain which makes if difficult to gauge size of the scam


6) Unviable business models

Help/Donation plans - Offer ROI

Newest type of Ponzi’s to avoid PCMC(B)Act 1978

No company exists

Money changes hands among the agents directly

Promoters offer ROI on various amounts invested

The promoters short change investors by sending their account details to collect maximum investments

Promoters claim to be victims once the show ends


Direct Selling

Type 1) Viable operations promoting Product/Services

Type of retail model – like the Traditional brick and mortar , ecommerce , etc with added features where consumers have the opportunity of buying the products at a discount and selling it to others.

“Marketing and Retailing of products/services to people in places other than fixed retail locations”

Individuals join the direct selling company to consume the products at a discount or to earn by retailing the products/services to the people they know .

They also have the opportunity to earn when the products/services get retailed for consumption by the people in their team .


Common misconceptions about Direct Selling

Its an un viable business model – Money rotation /Money circulation

More the levels more the payout and therefore un viable

Person who joins earliest earns the most – easy money

Products/Services are purchased by Agents/ Direct sellers only and not people outside the network

All operations using single level / multi level marketing compensation plans are direct selling operations

Products are overpriced

All operations deploying the MLM compensation plans are the only scams robbing our countrymen


Interesting facts about Direct Selling

Promotes Self employment , Skill development and Entrepreneurship

Ensures performance based payouts which are fair & reasonable and not skewed.

Does not require people to migrate to other areas and therefore gives a chance to work from home without putting stress on life and finances.

Creates markets for new product concepts (as personal guidance on usage and benefits from known person instills greater confidence in products rather than off the shelf purchases)

Gives fair opportunity for people from all walks of life to have a chance to learn to earn a decent income without investing a fortune.


Identify

Type 2),3),4) 5) & 6)

No genuine/marketable product or service. Exercise caution if there is no underlying product or service being sold to others, or if what is being sold is speculative or appears inappropriately priced.

Promises of high returns in a short time period. Be leery of pitches for exponential returns and "get rich quick" claims. High returns and fast cash may suggest that commissions are being paid out of money from new recruits rather than revenue generated by product sales.

Easy money or passive income. Be wary if you are offered compensation in exchange for little work such as making payments, recruiting others, reading SMS/Emails and placing advertisements.

No demonstrated revenue from retail sales. Buy-in required. The goal of a direct selling program is to sell

products/services. Be careful if you are required to pay a buy-in to participate in the program, even if the buy-in is a nominal one-time or recurring fee (e.g., INR 100 or INR 100/month).

Complex commission structure. Be concerned unless commissions are based on products or services that the direct sellers sell to people outside the program.

Emphasis on recruiting. If a program primarily focuses on recruiting others to join the program for a fee, it is likely a pyramid scheme. Be sceptical if you will receive more compensation for recruiting others than for product sales.

Early bird rewards . Be extra cautious if earlier you join , the more you earn is buzz word


Scam Alerts updated weekly - http://www.strategyindia.com/blog/scam-alerts/

Report scam - http://www.strategyindia.com/blog/report-a-scam/ www.strategyindia.com 26

business models using word of mouth publicity

Business

mlm compensation plan

viable operations way

new operations

different wom operations

data of wom operations

different types of operations

crores satyam rs

single level structure