mba project on direct selling(appco group)
TRANSCRIPT
A Project Report
On
DIRECT SELLING -THE HUMAN COMMERCIAL
A Project Report submitted towards the partial fulfillment of
requirement for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
The Indian Institute of Financial Planning
NAAC approved, Jhandewalan extension, New Delhi-110055
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DECLARATIONDECLARATIONDECLARATIONDECLARATION
I, Harshal, student of MBA here by declared that the
research report entitled “DIRECT SELLING -THE
HUMAN COMMERCIAL” is completed and submitted
under the guidance of Lect. Mr. Gaurav Gill is my
original work. The imperial finding in this report is
based on the data collected by me. I have submitted
this project report to “The Indian Institute of Financial
Planning” or any other University for the purpose of
compliance of any requirement of any examination or
degree.
DATE: HARSHAL
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ACKNOWLEDGEMENTACKNOWLEDGEMENTACKNOWLEDGEMENTACKNOWLEDGEMENT
Achievement is finding out what you would be then doing, what you have
to do. The higher the summit, the harder is the climb. The goal was fixed
and we began with a determined resolved and put in ceaseless sustained
hard work. Greater challenge, greater was our effort to overcome it.
This project work, which is my first step in the field of professionalization,
has been successfully accomplished only because of my timely support of
well-wishers. I would like to pay my sincere regards and thanks to those,
who directed me at every step in my project work.
I would also like to thank the faculty members and the staff members of
“The Indian Institute of Financial Planning” for their kind support and
help during the project.
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CONTENTSCONTENTSCONTENTSCONTENTS
1 Declaration
2
2 Acknowledgement
3
3 Contents
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4 Thesis Synopsis 6
5 Introduction 10
6 Industry Overview
Global Direct Sale Industry
Prevalent models in the direct selling industry
Direct Sale vs Chit Fund vs Ponzi Scheme
Evaluation of Direct Sale in India
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17
19
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7 Company Overview
Introduction of Appco Group
What Appco do…
Why the ‘Human CommercialTM’ works
Direct Sales Techniques
Industry Regulation
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43
54
63
8 The Indian direct selling opportunity: 2025
65
9 Analysis and Interpretation
77
10 Recommendation and way forward 83
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11 Conclusion 88
12 Annexure
89
13 Biblography
100
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THESIS SYNOPSIS
Details of the Student
Name: - Harshal
Batch: - MBA- 6 (2013-2015)
Roll No.: 13295295
Specialization: - Finance and Marketing
Phone No: - 8860243125
Email id: - [email protected]
Desired Area of Research
Industrial research- Direct Selling-The Human Commercial (Appco Group India)
Title of the Thesis –“Appco Group India”
“Direct Selling -The Human Commercial (Appco Group India)”
Objectives
The overall goal of the report is to understand in greater detail how the direct selling
industry operates.
The specific objectives of the report are to:
• Conduct an 'industry analysis' of the door-to-door sales industry;
• Explore why suppliers use the door-to-door sales channel;
• Explore why only certain products and services are sold door-to-door;
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• Consider which consumer segments are more likely to be targeted by door-to-
door traders than others;
• Explore the industry structure and size; and
• Consider the marketing and sales techniques used in the industry.
Problem Definition /Hypothesis
The direct selling industry, which grew by around 12 per cent in the country last fiscal, is
likely to finish 2013-14 with a flat growth, mainly on the back of regulatory hurdles and
general slowdown in demand. The industry turnover in 2012-13 was Rs 7,164 crore. The
direct selling industry had grown from Rs 6,385 crore in 2011-12 to Rs 7,164 crore in
2012-13
Hence, the Indian direct selling industry continues utmost importance and therefore to
track the overall growth, my area of research would revolve around the direct selling
industry with Appco Group India being the major focus by analyzing the strategies
adopted by the company to beat the competition & acquire sustainability.
Scope of Thesis work
• The research work is limited within the time frame of two months.
• The project would be limited to the extent of material received from the company.
• Primary research would be conducted through convenience quota sampling.
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Research Methodology
In undertaking the research for this report, relied on two main sources of information:
• Secondary sources: including published reports on direct selling and direct
markreting, reports and statistics on industries that use direct selling and direct
marketing, company brochures and web-sites; and
• Primary sources: including interviews with one company (traders,i.e.Tata Sky)
undertaking direct selling (either in-house or through third parties), working in one
company providing outsourced direct marketing services(Appco Group India),
and 15 individuals who are currently or have recently worked in door-to-door sales.
These interviews were conducted in New Delhi, 01/01/2015 and 15/02/2012.
Organisations and individuals who contributed to the report are listed in
appendices 1 and 2.
Data Analysis
For analysis the Quantitative techniques will be used as per the data availability.
The tools used for analyzing data are rating method; graphs, pie charts etc. Questionnaire
is distributed to the individual respondents (Appco Group’s employees) and special care
has been taken to make him/her feel comfortable so that, he/she could answer all the
questions. This method is followed to get unbiased answers.
The data collected from the customer are transcript to the worksheet in the form of tally
bars and analyzed by statistical tools by drawing tables and graphs, inferences were
drawn on a marketing concept and conversation. Based on the marketing concepts
findings of the research were driven and recommendations are made.
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Justification for choosing a particular research proposal
The reason for choosing this topic is the future scope and the robust growth that has been
witnessed in the direct selling industry despite the hurdle of unclear Legislative Reforms
and so many scrutinies. In the coming years the direct selling industry would continue to
grow, at an annual average rate of about 20 per cent. Keeping the current trend it will
continue to aim high despite regulatory or economic hurdles and as per the report the
Industry will grow approximately at 20 per cent year-on-year & thus I find it to be a viable
& interesting option to explore as this would help me in my future endeavors as well.
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Introduction In the Internet age, people may shop at the click of a button. Yet, no matter how much we
integrate technology in our lives, we still will spend part of our days—and part of our
shopping and business experiences—interacting with people in the physical world. As
long as the personal dimension remains in our shopping and our work, there will also be
an opportunities for marketers to step outside their buildings to interact with their
customers in person.
Direct sales is a channel that has long been used by traders to sell goods and
services to consumers and business customers. As its name implies, the practice
typically involves a salesperson moving from door-to-door and knocking uninvited, then
attempting to sell a product or service at the doorstep or in the home. A variant of this
practice involves a consumer being solicited by means such as an unsolicited telephone
call to agree to an in-home sales presentation. There is wide-spread concern that door-
to-door marketing approaches are associated with higher levels of consumer
detriment than typical purchasing decisions. This is because of the particular
characteristics commonly associated with this marketing approach - for example, its
unsolicited nature; the high-pressure tactics that may be employed by some sales
people and the potential targeting of more vulnerable consumer groups. Consumer
detriment can be both financial and non-financial. For example, it can arise when
consumers have purchased goods or services that do not meet their needs, their wants
or their budget.
There is also arguably a greater risk of consumer detriment when the goods or services
on offer require special technical understanding, include complex contract terms and
conditions and long-term or ongoing financial commitment.
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Summary Of Research Finding
Direct selling is essentially the marketing of products and services directly to
consumers in a person-to-person manner, away from permanent retail locations.
Direct selling is a dynamic and rapidly expanding channel of distribution for the marketing
of products and services. While there is no universal definition of direct selling, different
countries, associations and individuals have defined the sector differently. It can be
broadly understood as the ‘selling of goods and services to the consumers away from a
fixed retail outlet, generally in their homes, workplace, etc., through explanation and
demonstration of the product by direct sellers’. Direct sales generally benefit from the
explanation and demonstration of products made by an independent direct salesperson
to the consumer. Being a specialised channel of distribution, which is neither wholesale
nor retail, it covers both business-to-business and business-to-consumers
aspects.Despite its differences, in many ways, direct selling is similar to traditional
consumer goods retail. In both cases:
• the distributors/direct sellers, can earn a commission, when the sale of the product
takes place.
• earning of sales commission may be based on one’s own sales as well as on the
cumulative sales of the group built by the seller, similar to commissions in traditional sales
environments.
Direct Selling Vs Direct Marketing
Direct selling and direct marketing are often confused to be the same thing and are taken
as interchangeable terms.Both terms are actually very different from each other and a
clear understanding of the difference will help direct selling maintain its own identity.
The crucial difference between both the methods hinge on the mode of publicity that a
firm uses to generate awareness in the market. While Direct Marketing uses one or more
advertising mediums, Direct Selling relies on direct engagement with the purchaser to
generate a specific response or call to action that can be measured.
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Direct Marketing is a type of advertising in which companies communicate directly to the
customers through formats like online advertisements, direct mail, text messaging and
telemarketing. Direct Selling on the other hand involves marketing and demonstration of
a product or service directly to the customer usually through a personal
contact/relationship with the salesperson.
Person to Person Selling is the dominant form of selling witnessed in the
direct selling market.
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History and evolution of direct selling
The modern direct selling industry can be considered to have pioneered in the USA, with
the establishment of Avon in 1886. With the success of this model,involving lower sales,
and distributions costs and greater direct interaction with the consumer, the portfolio of
products swelled to include cosmetics, personal care, household goods, accessories and
other products, over time. The movement was supported by the engagement of women
as direct sellers, who considered this opportunity as a means of empowerment and self-
reliance. The introduction of the multi-level marketing compensation plans (MLM plans)
opened another chapter in the evolution of direct selling. Introduced in the mid-twentieth
century, the plan for the first time enabled consumers to benefit from the success by
providing them the option to become a direct selling partner of the business. MLM plans
became widely accepted and a large number of companies adopted the same including
global majors like; Avon, Tupperware and Amway.
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Globally direct selling is currently a USD 167 billion market
and employs around 90 million people worldwide.
• USA is the largest direct selling market in the world, followed by Japan and China.
USA
• USA is the largest direct selling market in the world and has grown at a CAGR of
5 per cent to reach USD31.6 billion in 2012 from USD28.6 billion in 2010.
• The direct selling industry in the USA engages about 16 million people as direct
sellers
• The industry comprises of almost 1500 companies including global leaders like
Avon, Amway, Tupperware and Mary Kay, many of which are headquartered in
U.S.
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JAPAN
• Japan is the second largest direct selling market in the world.
• Japan Consumers Cooperative Union is the largest player in the direct selling
market followed by Amway Japan Ltd. and Miki Corp.
• Single level marketing is the most prevalent direct selling model in Japan;
however, for consumer health care multi level marketing is most commonly used.
CHINA
• China’s direct selling market size is just behind Japan. It has grown at a CAGR of
22 per cent to reach USD19.9 billion in 2012
from USD13.35 billion in 2010
• Amway (China) Co. Ltd., Infitus (China) Co Ltd., and Mary Kay Cosmetics Co. are
currently leading the direct selling market in China.
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Global Direct Selling Market Size
Direct selling is a USD167 billion industry globally. While the industry grew at a low rate
of 5.4 per cent in 2012, over 2011 (growth rate of 19.7 per cent), due to global economic
slowdown, the long term growth prospects of the industry remain robust.
Number of Direct sellers globally
The direct selling industry tends to benefit from in-person contact for the demonstration
and sale of products, and therefore provides business entrepreneurship opportunities for
a large number of people. The opportunities in the industry has more than doubled over
the last 11 years (2001-2012), and the number of direct sellers have increased to 89.7
million direct sellers in 2012 from 43.8 million direct sellers in 2001.
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Single-level and multi-level marketing are prevalent
models in the direct selling industry.
Operating Model
Single-level marketing rewards the sellers for their personal sales activity. They cannot
sponsor any other distributorship or sales personnel. Income comes only in the form of
commission, or bonus, or retail markup, i.e., they receive payments through the sales
they make . A direct seller buys products from the parent company and sells them directly
to his or her customers. Home-based business people have been pursuing single level
marketing for years. Single-level marketing is suited for those sale people whose focus
lie on the product and service.
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Multi-level marketing (MLM)
In the MLM compensation plan, each direct seller recruited can potentially recruit new
distributors and create a down line of direct and indirect distributors/sellers. Distributors
purchase products to sell to the consumers. They receive commissions and bonuses on
the sales made by them and the sales made by their downline direct sellers and retail
markups.
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Direct selling is different from chit fund and
ponzi schemes.
Globally, the direct selling industry has undergone substantial changes since the 1970’s.
Around that time, there was a proliferation of multiple new direct selling companies and
one-to-one marketing became a common marketing technique. Unfortunately, the rise in
legitimate MLM compensation plans was accompanied by a surge in pyramid schemes
that played off the popularity of MLM plans or network sales, and paid more attention to
recruiting than selling of the actual goods.
What is striking about these schemes is that while they are very old forms of fraud,
modern technology vastly multiplied their potential for harming citizens across the globe.
The internet in particular offers pyramid builders a multi-lane highway to world-wide
recruits in virtually no time. Further, globalisation coupled with newly emerging market
economies provided a new outlet for pyramiding.
Pyramid Schemes
Pyramid schemes, prevalent in multiple forms, promise consumers/investors large profits
based primarily on recruiting others to join their program, not based on profits from any
real investment or real sale of goods. Three major signs that a product is being used to
disguise pyramid schemes are:
a. Large joining fee
b. Compensation paid for recruiting without regard to end sales (‘headhunting fee’)
c. No right of return, buy-back or cooling off period offered.
Chit Fund schemes
With no underlying product and based on more or less the same lines as a Ponzi scheme,
a chit fund is a kind of savings scheme under which a person enters into an agreement
with a specified group of persons that every one of them shall subscribe a certain sum of
money by way of periodical instalments over a definite period, and that each subscriber
shall, in his turn, as determined by lot or by auction or by tender or in such a manner as
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may be specified in a chit agreement, be entitled to the prize amount. Though often
misused by promoters, chit fund schemes are not always fraudulent and may be
conducted by organised financial institutions within the letter of law.
Ponzi schemes
Popularly known as ‘Peter-to-Paul’ schemes, a Ponzi scheme is centered around
continuous recruiting and the promoter generally has no product to sell and pays no
commission to investors who recruit new members. Instead, the promoter collects
payments from a stream of people, promising all the same high rate of return on a short-
term investment with no real investment opportunity.
’
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Evaluation of Direct Selling in India
In India, the industry came into existence in early 1980s, However, it really took off in
early 1990s soon after the country opened up to the global market.The industry witnessed
major growth post liberalisation with many global players entering the Indian market.
Appco Group was one of the first major global direct selling companies to enter India in
the year 1996. Which was followed by companies like Avon, Oriflame and Tupperware in
1996. Around the same time Modicare was one the first few Indian companies to adopt
this channel of distribution.
The direct selling market in India is a INR 72 billion market today and is dominated by the
organised players contributing ~95 per cent to the market. The market has grown to
become a key channel for distribution of goods and services in the country, specially for
health and wellness products, cosmetics, consumer durables, water purifiers and vacuum
cleaners. However, it is still undeveloped as compared to global peers and the variety of
brands and products available in the country are lower than those in other economies.
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Direct selling market in India has grown at a CAGR of 21 per cent over
the last 5 years from INR33 billion in 2008-09 to INR 72 Bn in 2012-13.
� South India is the largest market for direct selling followed by the northern region which
has witnessed a high y-o-y growth rate of 33 per cent.
Health and Wellness is the biggest category capturing 47 per cent share in the direct
selling market followed by wellness products and household goods.
Marketing strategies have increased consumer awareness about hygiene and cleanliness
in urban and rural areas which has led to increase in demand for Homecare and Home
improvement products. With a market size of INR7.4 billion, this category had an 11 per
cent share in the total direct selling revenue in 2012-13.
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Product categories
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Benefits of the Direct Selling Channel
� Self-employment opportunities and women empowerment:
The size of the Indian direct selling community has more than doubled between 2009-10
and 2012-13. The industry has seen an increase of almost 2.6 million distributors from
about 3.2 million in 2009-10 to 5.8 in 2012-13. The industry offers self employment
opportunities to a large number of people, specially women. Direct selling gives women
the flexibility to manage their time and balance their work and personal lives. The industry
also offers women financial independence and the improved ability to take care of their
families. The industry in FY13 provided self-employment to nearly 60 per cent (3.4 million)
female distributors which increased 1.5 times from 2.2 million in FY10.
Also many companies work towards the empowerment of women. In 2008 Avon India in
association with Avon foundation started the Breast Cancer Crusade to increase
awareness of the disease in the country.
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� Increase in product reach to Tier II, III & rural areas:
� Door-to-door sales are regarded as the most effective channel for customer
acquisition, particularly in the energy sector. In particular, they allow a new
entrant retailer to build up a critical mass of customers in a relatively short period.
� Door-to-door sales enable particular groups of customers to be targeted unlike
other sales and marketing approaches which are more blanket in their coverage.
This enables the trader to focus on potentially more valuable customers or customers
who may be more likely to make a sale. This targeting is generally down to the
suburb or area level – for operational reasons, traders reported that cherry-
picking of selected households in a particular street is unlikely to be viable, although
some sales agents reported that targeting of more vulnerable customers does occur.
� Door-to-door sales require relatively low investment when compared to other
sales channels, and hence they are appropriate for new companies with relatively
limited marketing budgets. Since sales are often outsourced and the service
provider paid
on a commission-only basis, there are limited set-up costs for establishing a door-
to-door sales team;
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� Some traders believe that door-to-door sales result in consumers who are generally
interested in the service finally making a decision to purchase; in other words
it triggers a final purchase decision and shortens the customer acquisition time;
� Other potential sales channels have been restricted by legislation. In particular,
the outbound telemarketing channel has been significantly restricted by the
introduction of the Do Not Call Register;
� Making consumers aware of potentially more appropriate offers for their particular
circumstances, such as lower cost of product availability(although the sales agent
will only introduce offers from direct company);
� Offering a more convenient way for consumers to acquire products and services that
they are interested in; and
� Offering opportunities to customers to purchase products or services that they could
not otherwise access through other channels, for example rural or remote customers
who may not have access to channels such as the internet or kiosks.
During research interviews, some traders also pointed out that improvements in door-
to-door sales processes, in particular compliance management, have improved the
typical quality of door-to-door sales and therefore made it more viable as a channel.
Whilst previously many sales made through the door-to-door channel were perceived
by some traders as low quality, traders consider that improvements such as the practice
of making verification calls by a third-party to confirm a sale made at the door, have
improved the quality of sales generated through the channel.
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Disadvantages of the Direct Selling Channel
Traders using door-to-door sales also recognise potential disadvantages of the channel:
� Door-to-door sales can create reputational issues for traders using the
channel. Many householders can be annoyed by unsolicited door knocking,
and consumer perception issues are also created when sales people engage
in conduct that consumers may allege to be misleading, deceptive, or pressure
selling tactics.
� Traders using the door-to-door channel are often impacted negatively by these
issues, regardless of the professionalism of their own operations; It can be difficult
to achieve consistency in the customer experience of door-to-door sales. This is due
to recruitment and remuneration issues in the sales industry, including the
temporary nature of many sales people and the remuneration structure which may
drive a strong focus on making sales, and the fact that traders appear to prefer to
outsource the door-to-door selling functions; and
� Customer acquisition costs (i.e. the direct costs to acquire a single customer, mainly
commission payments to agents) can be higher through the door-to-door channel
than other approaches, although traders generally believe that the greater
effectiveness of the door-to-door channel outweighs this disadvantage.
Overall, traders using the door-to-door channel, anticipation is that the perceived
advantages of this channel and in particular its effectiveness will continue to drive usage.
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Direct selling companies have contributed in improving
quality of life in multiple ways. is one of the
largest such contributors.
Is a part of the Cobra Group of Companies . From humble beginnings in
Sydney, Austral ia, Appco Group has expanded across the globe and
become one of the world's leading face-to-face sales and marketing
companies, operating in 28 countries across five continents.
Appco Group sel ls products and services on behalf of blue-chip companies
and acquires long-term donors for wel l -known chari t ies, via i ts door-to-door
sales method, the Human Commercial™.
Since launching in India in 1998, Appco Group India has establ ished i tsel f
as a leading player in customer acquisi t ion for more than 15 years. We take
pride in helping to add value to our cl ients’ bottom l ine by securing new
customers, or raising funds for their vi tal causes.
We have a pan-India presence with independent marketing off ices in more
than 16 ci t ies across India and an ever-expanding network of expert sales
professionals who meet thousands of new customers every day bui lding
relationships with customers on behalf of our cl ients.
We believe responsible face-to-face marketing creates a connection with
consumers, del ivers value to cl ients, and supports smal l businesses and
entrepreneurs.
The industry leader in qual i ty face-to-face marketing. Every day, across the
world, we speak to more than one mi l l ion people, which helps us to create
a connection with our cl ients’ target markets and secure hundreds of
thousands of new customers for them every year.
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What Appco do
❯❯❯❯ Face-to-face marketing
❯❯❯❯ Direct sales of products and services
❯❯❯❯ Customer acquisition
❯❯❯❯ Complete fundraising solutions
Face-to-face marketing
We have developed a comprehensive results-driven sales campaign framework that is
proven time and time again to be the most cost-effective channel in the marketing mix.
Our teams of professional field representatives receive ongoing support and product
coaching. They also have regular contact with our clients, ensuring they are always at the
heart of the businesses and charities they represent
Direct sales of products and services
Appco Group India provides a range of services on behalf of blue-chip companies and
we take pride in the fact that we generate millions every year in revenue for them. Our
service allows businesses to speak directly to potential customers at their homes, their
places of work, in store and at private sites and public venues. And our performance-
based model means they only pay for the results we deliver.
Customer acquisition
We specialise in customer acquisition across major industry sectors and, with more than
2,000 field representatives in 16 cities, we are one of the largest and most successful
sales and marketing organisations in India today.
Complete fundraising solutions
Face-to-face donor acquisition is just one part of our fundraising offer. Appco Group’s
fundraising solutions bring together a range of services that can fulfill our clients’ needs
at every stage of their fundraising and donor-acquisition journey.
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What it means to ‘Be Something More’ at Appco Group
Appco Group Founder and Chairman Chris Niarchos explains the story and
personal meaning behind Appco’s ‘Be Something More’ motto.
‘Be Something More’ is not only part of our company, but it is also something that is a
major part of my life and it is incredibly special for me.
When I was a young lad at home – about eight years old – my brother and I wanted
posters on our bedroom walls, but my mum said, “No. It’s my house, no posters, you’ve
got to keep your room looking immaculate.”
Then one day she came home and she said, “I’ve got a poster for you.” And the poster
she gave to both of us had the phrase ‘Be Something More’ on it. It was on my bedroom
wall and on my brother’s bedroom wall until both of us left home.
This is even more significant to me now because I lost both my parents in the last 18
months. Both of them were in their late 80s and they had a great life and ‘Be Something
More’ was something they taught and showed me.
To them, it didn’t matter who you were, or what your line of work was. It didn’t matter if
you wanted to be a doctor or solicitor, an engineer, a painter, or a musician. All that
mattered was that you strived to ‘Be Something More’; to do something for your
community, to do something for yourself and be more than a person who goes through
life just going through the motions.
I decided to make ‘Be Something More’ the catchphrase for the whole company because
I think it does completely personify what we do and it reflects what so many people in our
company around the world do. It is also now part of what we describe as The Cobra
Foundation.
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The Cobra Foundation is something we started many years ago to support great causes
around the world. Some of those great causes have included, building schools in the
Philippines, and supporting orphanages in Laos and projects for Aboriginal communities
in northern Australia. We’ve also helped the victims of the devastating fires in Victoria in
Australia a couple of years ago, as well as the flood victims in the UK earlier this year –
and we’re always on the look-out for great causes to support to truly demonstrate my
parents’ mantra – and the Appco Group motto – to ‘Be Something More’.
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Clients (Worldwide)
Charities
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Energy efficiency
Financial services
Home delivery
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Sports
Telecommunications
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Clients (India) Banking
Charities
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DTH (direct to home)
Insurance
Telecom
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Appco Group Board of Directors
Chris Niarchos
Chairman and Founder
Mike Blane
Managing Director, Appco Group International
Paul Sanderson
Global Chief Executive Officer, Appco Group and the Cobra Group of
Companies
Richard Davison
Chief Financial Officer and Deputy Chairman of the Cobra Group
Vice presidents Tony Fernandez
Vice President, Appco Group India, Country Head, India and USA
Sai Prakash Kuckian
Vice President, Appco Group
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Intelligence is at the heart of face-to-face marketing
Appco Group Managing Director Mike Blane gets under the skin of face-to-face
marketing.
In today’s competitive world, companies and fundraising organisations are continually
looking for more efficient and effective ways to acquire customers or donors.
Since the early 90s, Appco Group has been the innovator and world leader in this field,
partnering up with organisations across a wide variety of industries.
From the outside, our business can look crazy and unfamiliar. It is, however, an incredibly
intelligent way of marketing that can target particular customer groups and bring in
amazing results.
Charity fundraising
We started face-to-face donor recruitment for charities over 15 years ago in the UK and
pioneered door-step donor recruitment.
The charities we represented in those early years are probably amazed at how successful
the concept has become. Twenty-six countries later and Appco Group Support is the
biggest division in the Group, raising millions of pounds and dollars for charitable
organisations all over the world.
Every charity has a pre-allocated fundraising budget and they use this money to attract
donors. Traditional marketing methods via TV, radio, newspapers and magazines don’t
offer a guaranteed return on investment. It is, however, the face-to-face method which
has become one of the most effective routes to market.
One of our longest-standing charity partners has told us that face-to-face gives them a
500% return over a five to seven year period, which is incredible, especially when they
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said that if the money had been kept in the bank, the return would probably be less than
20%.
Sporting success with lottery campaigns
After huge success in Australia we added another form of supporting charities to our
mix by creating lottery programs to raise funds and awareness of good causes.
This has been done with charities, sporting organisations and now with premiership
football clubs. The effect has been nothing short of amazing.
Head of Lotteries at Everton FC Darrell Turton said: “Appco Group Sports … has
delivered and are delivering extensive above-target results and first-class sales support,
working seamlessly with our in-house crew. I can’t recommend them enough: great
service, great results.”
Promoting energy efficiency
Our Home Efficiency division can tell a similar story. Since 2006, people have been able
to get free or discounted loft and cavity wall insulation – a great idea in principle, the
only problem being that people didn’t know if they or their home qualified. This is where
we have been so effective.
By going door-to-door conducting surveys at people’s homes, we have been able to help
them save millions on their energy bills by having their homes insulated. This has also
contributed in a major way to helping the UK hit its targets on reduced carbon emissions.
Once again, we have shown that by engaging customers and having intelligent
conversations on their doorsteps we can create enormous benefits for consumers, energy
providers, installers and the economy. As the Solar division continues to roll out in 2014,
results have been equally impressive.
Fresh produce to your door
Our newest UK division is Home Delivery. As the modern family struggles with time,
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convenience has become incredibly important. The concept is simple. Take everyday
items that consumers can buy in supermarkets or on high streets and get those items
delivered to the door.
The campaign launched in 2013 with an organic farm specialising in the delivery of fruit
and vegetables. It has been hugely successful for both our client and their customers.
Clients have commented: “We have all been very impressed with the volume and quality
of customers acquired by the Field Representatives.
“Likewise, Appco has worked extensively to understand our business and incorporate our
working into their system. All this has resulted in one of our most successful drives to
acquire new customers.”
Plans for the year ahead
All of the divisions above are continuing to innovate and expand in 2014, with new and
existing clients. Add this to the launch of the entertainment cards and voucher
programs, the future looks very bright across the UK.
Whatever the industry, our concept is genius in its simplicity: bring together a great
customer and a great client. It’s what advertising and marketing is all about and nobody
does it quite like us.
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Why professional face-to-face marketing works
Appco Group CEO Paul Sanderson on the benefits of face-to-face marketing and
delivering value to customers and clients.
I met a fellow industry professional recently who had what he called an ‘aversion to face-
to-face selling’.
I found it very interesting that his view of the face-to-face channel was so defensive.
His worry was the potential damage that could be done to his brand if an incident were to
occur, or the person in question chose to mis-sell or mis-represent the brand.
While I respect these concerns – and understand where they come from – we certainly
had a lively debate!
Operating responsibly
A truly professional sales and marketing agency will have a zero-tolerance approach to
poor behaviour and mis-selling.
However, you can never guarantee an incident-free sales and marketing campaign – or,
for that matter, after-sales service – when people are dealing with people.
Appco Group has delivered literally millions of customers and billions of dollars in value
for its clients over the last 25 years. One of the key differentiators that keeps it at the top
of the industry – and by some distance – is its approach to quality, compliance and
professional standards.
Appco has introduced a range of industry initiatives that are being copied all around the
world on a daily basis.
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For example, our Action Response System promotes a zero-tolerance approach to poor
behaviour and mis-selling and is a fast, efficient and transparent way of ensuring any field
issues are dealt with immediately and decisively.
Putting complaints in perspective
When you consider that Appco’s complaint rate amounts to less than 0.1% of the
interactions we have, we make the equation a pretty compelling one.
Rather than focusing on the very small negative, I prefer to be bowled over by the 99.99%
positive interactions that a well-trained professional sales force has on potential and
existing customers.
So, executed in the right way with a professional approach and a focus on quality, the
face-to-face channel is the most cost-effective marketing method. It has proven time and
time again that it achieves the best ROI for companies who use a multi-channel customer
acquisition strategy.
I believe that the face-to-face channel has always been, and will always be, the most
effective way to engage a prospective customer, deliver a great human commercial and
close a sale. The genesis of what can be a long, loyal and profitable customer
relationship.
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Why the ‘Human CommercialTM’ works
A much-talked-about Harvard study concluded that 50% of all marketing spend was a
waste of money. The problem is, they couldn’t work out which 50%.
In one way, I agree with the statement. Have you ever asked a TV commercial a
question? (Actually, you probably have yelled at the TV, but you’re unlikely to have had
much response.)
And how much does anyone direct-mail shot stand out among the average 24,000 that
surge through our letter boxes each year?
While we’re on the subject, what is the true impact of the continuous stream of emails,
texts and social media we’re exposed to? Pop-ups, spam, random texts, automated voice
calls – we are literally bombarded with sales messages all day every day (and night), and
that is before we get home and put the box on.
The oldest and most successful way to engage new customers and service existing ones
is through people dealing with people.
Delivering value to customers and clients
The waters have been muddied by the information technology age, which has seen the
emergence of a plethora of new channels including the ‘dreaded’ call centre, email, web
and anti-social media (sorry).
But the right face-to-face campaign delivered by a professional agency wins out time and
time again in terms of ROI and the ongoing performance of new customers.
Again, Appco has been proving its face-to-face model for over 25 years and has delivered
millions of performing customers worth billions of dollars to its clients.
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Although the cost per acquisition will never compare to a pay-per-click or direct-mail
campaign, the key differentiator is that Appco’s face-to-face channel and business model
only kicks in if a customer turns up and starts performing.
In other words, we do not ask to be paid for a customer acquisition unless the customer
is ‘performing’.
A professional team that delivers a warm, friendly and interactive sales experience,
without the headache of hiring, training and managing a large sales force – what better
way to engage new customers and begin a profitable relationship with them, while only
paying for the customers who are committed and active?
It’s not a bad way to maximise some of that 50% you are ‘wasting’ on marketing.
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Direct sales: what separates us from the rest?
Appco Group Asia Executive Director James Greaves explains what makes direct
sales teams stand out from the crowd…
Sales is one of those unusual occupations that is very broad in description and creates
lots of diverse reactions when people are asked about it.
Truth be told, most of you reading this will have had some initial negative reaction to
sales. For most people, it is because they have come into contact with a salesperson who
may have been too pushy or rude, which is all too common.
So when I describe what separates us from the rest, it comes down to our direct sales
teams’ behaviour during a very small snippet of time: the last 10 seconds of a
conversation with a customer who has said “no”.
The word “no” is something a salesperson will deal with more than most people. But it is
our team’s ability to deal with it pleasantly, professionally and with an unexpected
enthusiastic gratitude that separates us from all the other companies that occupy this
space.
Thanking people for their time regardless of whether they say “yes” or “no”, and waving
them off with a pleasantry – such as “enjoy your day/lunch” or “have a safe trip home” –
is something that most people do not expect and nearly always receive graciously.
Our passion for providing exceptional customer service and satisfaction is embedded in
our core values and is at the centre of everything we do. It means we are trusted by the
biggest non-profit organisations and commercial companies across Asia and around the
world.
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Direct sales and marketing during the economic downturn
In November, Perveen Virdee, Appco Group UK Chief Executive Officer, Europe and
North America, spoke at an event hosted by chartered accountants and business
advisers Duncan & Toplis.
Perveen discussed the grassroots approach Appco Group UK adopted to achieve growth
during the economic downturn. Here, she summarises her presentation…
Since 1988, Appco Group has established itself as the industry leader in quality face-to-
face marketing. The service we offer delivers choice to consumers and value to clients.
Our business is also an engine of growth for the economy, supporting start-ups that, in
turn, provide flexible, accessible self-employment opportunities. And it’s this support
function that was the focus of my presentation – in particular, how we helped to guide our
network of independent businesses through the very difficult global recession.
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Local partnerships build mutual success
Appco Group has a strong, symbiotic relationship with its local businesses and we work
on the basis of mutual success.
Although the marketing companies we partner with are independent entities, we strike the
balance between delivering client campaigns and expectations, and allowing the
marketing companies’ entrepreneurial spirit to flourish.
It’s important to offer guidance on regulatory factors, but we aim to give them as much
flexibility as possible so they have the optimum conditions to thrive.
Direct sales and marketing on the frontline
As with the wider UK economy, our network experienced many challenges between 2008
and 2010, primarily where our marketing companies were concerned. Our approach was
to first take a step back to assess the situation as objectively as possible.
We asked ourselves a lot of questions. What isn’t working for us? What market conditions
are affecting us? What’s controllable and what isn’t? What could we do better and what
does the data show us?
Armed with the answers to these questions, our plan was to help our network to create
success at a local, grassroots level. Our attitude was – and always has been – that if they
succeeded, Appco would ultimately succeed alongside them.
It was important to adopt a multi-level – almost peer-to-peer – approach to engage people
at all levels around the changes. A top-down edict would never work in our decentralised
business. This approach also allowed us to work more closely with individual teams and
answer their specific questions and concerns.
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Appco encourages independent businesses
We reviewed all of our advice and financial guidelines with the marketing companies, and
looked at how we could help them assess their own businesses. We didn’t want to tell
them what to do; instead, we wanted to position ourselves as a mentor and help them
manage the necessary changes themselves.
We also set up an in-house ‘test’ team, which allowed us to pilot product changes so we
could fully and accurately measure and monitor their impact before they were rolled out.
This enabled to tackle certain market conditions and get ahead of the curve on them.
It also meant we had a solid working knowledge of the process and could explain it – and
the benefits – to our marketing network. Essentially, we were only suggesting solutions
we were confident would have a positive effect.
Informed Appco executives are critical
We’re always looking for new opportunities to build on existing success and we recognise
the importance of getting out from behind the desk to see where it all happens.
Most members of our senior team have previously been involved in the business on the
frontline, so they know what it takes to run a successful marketing company and a
successful sales campaign.
This helps enormously – not just in challenging times, but also on a day-to-day basis. As
an executive team, we have collectively seen most obstacles and issues from all sides
and we can empathise with our marketing companies.
It also means our initiatives and advice are not ‘off the shelf’ or ‘the latest techniques’.
Our solutions and approaches are borne out of an innate understanding of the business,
reached through consultation with our partners and completely tailor-made for our needs.
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As an ever-expanding organisation, we are naturally always looking ahead. But we have
learned from experience that it’s also vital to take the time to reflect on and review what
we’ve done in the past so that we can move forward even more efficiently and effectively.
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Accolades
Appco India provides emergency aid to thousands of Kashmir flood victims
Appco Group India’s Charity division has helped secure more than US$45,000 in
donations in a month from 10 September 2014 for the flood victims in Jammu and
Kashmir.
Face-to-face fundraisers working with Appco Group India and Save the Children have
signed up over 800 regular-giving donors while raising awareness of the cause in
Mumbai, Delhi, Chennai, Coimbatore and Hyderabad.
The donations raised will help Save the Children provide emergency relief for the victims
of the Jammu and Kashmir floods, which devastated the region, claiming more than 250
lives.
Appco Group India helps double Tata Sky's customer database
Appco Group India’s Entertainment division has significantly increased its sales for
client Tata Sky, almost doubling the monthly number of customers signing up for the
client’s services.
Since January 2014, the number of sales representatives working with Appco Group India
has also increased from 100 to 220, reflecting the dramatic rise in sales.
Dhananjay Uppoor, National Head, and Tata Sky said: “Since January 2014, we have
witnessed almost a 50% increase in customer acquisitions across 10 locations in India,
which is a huge jump on all fronts.
"We are confident that we will double the customers acquired by December 2014 with
Appco’s help. The quality of customers signed up to our services has been excellent.”
Sales representatives promote the different services Tata Sky has to offer and they have
also been raising awareness for a new karaoke service, which has a library of Bollywood
tracks.
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Appco India secures thousands of new donors for children’s charity CRY
Appco Group India is working with charity Child Rights and You (CRY) to protect the basic
human rights of underprivileged children across India.
Fundraisers working with Appco Group India have signed up more than 60,000 donors
between 2013 and 2014 for the client.
The support from Appco-recruited donors means CRY has reached out to thousands of
children and addressed a number of child rights issues, which include health, malnutrition,
education, child labour and abuse.
Appco’s partnership with the charity over the past 12 years, has helped CRY extend its
work to 11 cities across India.
“Appco has, over the years, not only raised substantial funds for us but has also helped
us to bring in more and more donors to participate in the CRY movement in India,” said
Puja Marwaha, CEO, and CRY.
Anita Sharad, Director of Resource Mobilisation at CRY added: “We have experienced
the partnership grow from strength to strength.
“As a result, CRY has been able to strengthen its focus on the different issues that deprive
children of their rights – child labour, access to education, provision of health facilities and
protection from abuse and exploitation – and therefore achieve our common goal of a
happy and healthy childhood for India’s children.”
Appco praised for seven years of success with Help Age India
Appco Group India’s seven-year relationship with Help Age India has helped millions of
elderly people get the care they need.
Fundraisers working with Appco Group India have secured millions of regular-giving
donors from across the country.
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The donations will support close to 1.5 million elderly people and have helped fund a
number of cataract operations.
Mathew Cherian, CEO of Help Age praised the fundraisers’ hard work. He said: “Appco
has very generously been communicating the message of Help Age to thousands of
people across the country.
“We value the relationship and hope it will allow us to help more and more elderly people.”
Help Age India also picked up the NGO Leadership & Excellence Award at the Global
CSR Excellence and Leadership Awards in February to commemorate World CSR Day.
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Why don’t agencies guarantee results?
Appco Group CEO Paul Sanderson discusses putting your money where your
mouth is…
Before I joined The Cobra Group (and its subsidiary Appco Group), I was working for a
major financial services group in Australia and found myself gob-smacked when trying to
award a $20 million annual account to an advertising agency.
I put an innocent and very relevant question to an unsuspecting creative director who was
in full pitch mode: “Will you share the risk?”
Based on the $5 million his agency was asking us to invest in the above-the-line TV
advertising campaign, I asked if he was prepared to back his campaign and share the
risk, based on results.
I was even prepared to offer a premium if the campaign achieved more sales than the
agency was promising.
This particular creative director literally got up and walked out mid presentation – and we
never heard from the agency again.
What I love about the face-to-face channel and the business model that Appco uses
worldwide is that we put our performance and earnings where our mouth is.
If we don’t sell and deliver a performing customer then we don’t ask our clients to pay.
Our model also makes the Appco channel the highest-performing distribution channel in
the marketing mix.
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Door-to-Door Sales Agents and Sales Techniques
It estimates that around 3,400 individuals were engaged at any one time as door-to-door
sales agents in India on average in 2013-14. This number is both cyclical and seasonal,
with the number engaged higher in spring and summer due to better weather
conditions for outdoor work.
Using the average of 3,400 agents engaged per day, and assuming an average calling
rate of 100 homes or B2B per day per agent, then approximately 238,000 homes or B2B
are called on per day by agents, representing 2.8% of residents or B2B in India.
Sales approaches range from the highly unstructured to the very structured. Sales
agents reported the use of both legitimate and illegitimate sales techniques when
selling door-to-door.
Examples of a structured sales approach include:
� Extensive sales training and ongoing support;
� Regular updating to training;
� Support during sales and coaching to further improve;
� Central administration and hub as a daily start point (may include daily training on
sales etc before going out in the field);
� Organised transport to a specific targeted area/suburb including specific streets
highlighted for the worker to knock;
� Some background / demographic information on the area provided to their sales
teams;
� Clear identification / uniforms; and
� Acronyms or other devices to help remember key selling techniques.
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Sales pitches used at the door by agents typically involve:
� Introduction of self and representative company (in the form of ID – which may also
include company uniform or shirt);
3W’s:
W: Who are you ?
W: Where are you from?
W: Why are u there?
� Short Story:To build impulse,paint picture,
An anecdote or story to connect with the customer alluding to a possible benefit to
them (or hook to ensure continued attention);
Specific sales techniques employed e.g. G.I.F.T.S.
G – Greed (Deal, what u save)
I – Indifference (To make someone special)
F- Fear of Loss (Limited are available)
T- Tone of Voice (Show confidence level)
S - Sheep Factor
� Presentation:Talk about the product, its offer, its benefit, its features,its
pricing,unique point of selling.
Administration and paperwork (may include verification call);
� Closing of sale; and
Moving on to the next residence or potential customer to repeat this pattern.
While all the above one must be following SEE for positive closure of the deal.
S:Smile – it creates a healthy environment.
E: Enthusiasm – it gains excitement.
E: Eye to eye contact – it shows honesty and confidence.
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Alternatively, a number of pretexts are sometimes used at the door-step. These included
sales agents pretending to have lost their dog before making their sales pitch,
exaggerating the benefits of the deal they were offering, slandering the competition,
altering or removing parts of their product/service disclosure statements, committing
identity theft or employing certain language and ambiguous statements to fool or
pressure the customer. This is supported by information from energy ombudsmen,
where misleading and deceptive conduct often accounts for the highest number of
marketing cases reported to ombudsmen.
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How to be a great student in the face-to-face
marketing industry
Emine Suleyman, owner of Devour Enterprise Ltd – contracted to Appco Group
UK for professional face-to-face marketing – shares her top 10 tips on how to
succeed in the industry.
1. Be like a sponge – soak up as much information as you possibly can from colleagues
you admire and those who have succeeded in the face-to-face sales industry.
2. Ask lots of questions – it’s important to do this to fuel your learning.
3. Set your own goals – talk to people in your team about what goals you’d like to set and
be confident when discussing your own objectives. The more clarity you have around
your goals, the more likely they will be put into action. Be committed to seeing your goals
through to the end.
4. Don’t talk negatively about people in your office – it won’t help you reach your goal,
it’s not positive and it promotes the wrong culture in your office/team. Be inspiring to your
people and talk about positive, motivating topics.
5. The three Es – be energetic, really enthusiastic and eager to learn.
6. Don’t give people a reason to dislike you – you’re never going to click with everyone
you meet, but nothing good can come from not getting on with someone at work. Be
forgiving of people and have a kind, well-mannered approach, no matter what the
situation.
7. Be in control of your finances – you need to know your numbers so you can manage
your income and progress to building your own business.
8. Don’t wait to be shown what to do – show people what you are about and what you
can do as it will demonstrate to others that you are confident and eager to progress.
9. Have great communication skills – you need to be able to talk confidently about the
product or organisation you’re representing and connect with the people you speak to.
You will only get better with practice and time.
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10. Always look to improve – the more you discover, the more you realise there’s even
more to discover! Everyone can teach you something. Always be willing to grow and learn.
How to coach others while managing your time effectively
Appco Group Vice President Ali Mir shares his tips on how to balance your time
management with coaching others.
When coaching others, it can be challenging fine-tuning the right balance between your
own performance and mentoring others, but once you know how, it’s actually easier than
you think.
The two main challenges are meeting people’s individual needs – as everyone is different
– and managing your own personal time effectively.
You need to manage your own time, to learn how to constantly ‘set the pace’, while
offering your time to others, so that they can ‘set the pace’ too.
You also have to lead by example and become unbelievable at sales. This is what will
give you the confidence to coach others.
Learn from others
One way you can do this is by watching other people who are excelling in the business
and emulating what they are doing to succeed. You need to understand the product you
are selling and learn about the different sales techniques – the more you know, the
better you will be able to coach people. Make sure you can handle different types of
territories, and that you can quickly identify the different personality types you might
come across when raising funds or selling.
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Look for high performers
Constantly look for people in your team who are high performers so you can build their
confidence. You need to keep empowering people. This applies to every level in
business. Coaching people comes down to confidence in yourself and in others.
When you are coaching others you need to have good people skills as team members
should enjoy spending time with you. When you are taking people into the field, it’s really
important to have fun.
Keep it simple
Remember simplicity is often best – don’t overcomplicate things when you are showing
others what you do. A simpler approach helps people feel more confident about doing
something themselves.
And above all, learn how to keep your composure when under pressure as you will be
coaching all types of people. You need to manage your enthusiasm, learn to keep calm
and enjoy what you are doing.
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Workforce Characteristics
� There is a diverse range of individuals working in door-to-door sales – although
there are some patterns with regard to personality types, nationalities and age.
� The most common type of individuals engaged in the door-to-door industry is those
who are young
� Additionally, obtaining a position in door-to-door sales is relatively easy when
compared to other part-time positions, particularly for the commission-only
engagements.
� The second most common type of individuals in the door-to-door workforce are those
either in between jobs or who are having difficulty in regaining employment in
their industry following retrenchment, or workers seeking to return to the workforce
with part time working arrangements (such as mothers of young children). They are
often attracted by the flexibility and potential income and that ‘no experience is
necessary,’ is often advertised for these roles.
� In some cases certain personality types are attracted to door-to-door sales – and it is
often these individuals that treat this industry as a career, rather than a filler
job to earn money whilst finding the ‘right’ job for them in their chosen career.
� Indeed, some service providers who have field teams may actively recruit new
employees with imagery and metaphors around sports based performance,
competition and team efforts. They may mention in advertisements that this is
a career for those with sporting abilities and competitiveness.
� Some agents reported that they are specifically attracted to the industry through these
types of advertisements.
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Motivations for Working in Door-to-Door Sales
The basic motivations reported by respondents for working in a door-to-door sales role
are:
• Money – either for living and survival or to become relatively well-off;
• Skills and experience – to become more self-confident, to experience
Australian society (immigrant workers), learn to talk to people and interact with
strangers, meet challenges and personal development programs;
• No specialist skills required – unlike other roles advertised, door-to-door jobs
often are advertised with a particular emphasis on ‘no experience necessary’ or
‘all training provided’; and
• Passion for the product – whether beauty products or fitness classes, selling
these products or services door-to-door may feel like a natural progression
to earn extra income from something they believe in or enjoy.
• Being part of a (competitive) team;
• Working outside (away from an office);
• Career progression for high achievers;
• On-going training (for some companies);
• Discounts on products or services sold;
• Being coached or mentored by ‘dynamic’ sales leaders;
• Exposure to marketing and sales techniques;
• Breaking through personal challenges such as shyness with strangers; and
• A desire to immerse oneself in a new community.
After the initial period, most individuals can be categorised into three groups:
� ‘Stayers’ – decide to stay either because they are motivated by challenges and
do not want to give up, or because they are gifted at
sales and have good results (in turn providing them with positive rewards);
� ‘Perseverers’ – who stay solely for financial reasons, but only for the short term until
they find another position, or, until they cannot endure the role any longer; and
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� ‘Leavers’ – decide that it is not suited to them / their personality / the way they like to
work. Or promises are not met, they have not earned any income after weeks on the
job, or they dislike/question their employers work practices and/or ethics.
There are other challenges involved in a door-to-door role besides the expected
targets to meet, overwhelming number of rejections, and pressure to sell. Some of these
include:
� A sense of compromised security for females – especially over the winter months
when it gets dark early (although being female may have the benefit of seeming non-
threatening to customers);
� Security risks in general for all workers when entering a stranger’s property or in
working in areas that are unfamiliar to them. The risk may be from the resident
or other factors such as dogs or working in a suburb that has a higher than
average crime rate;
� Working in challenging environments, e.g. heavy rain or extremely hot temperatures -
all of which impact an already physically taxing role of many hours walking. On top of
this, there are no rules set as far as hours worked and required breaks in between as
in other industries;
� There is a proportion of customers who pull out at a later date after agreeing to a sale
with the door-to-door seller in which case commission is not paid;
� Working in areas where no one is home. Many houses are empty in the daytime due
to residents working and so there may be lots of effort for little return.
� Additionally, getting to speak to these residents is challenging as some may not
get home from work until after the door-to-door sales
cut off hour (e.g. 7pm). If these customers are home earlier, they may be cooking
dinner or tending to children and do not wish to spend time with a door to door
salesperson;
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Industry Regulation
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Structure of the Direct Sales Industry
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The Indian direct selling opportunity: 2025
Driven by increasing share of middle income households and potential of
increasing penetration, the direct selling market in India has the potential to reach
INR 645 billion by 2025.
Direct Selling Penetration - Global comparison
In China, the direct selling industry has flourished 2006 onwards and has grown
significantly over the past years.Currently, China’s industry penetration stands at twice
that of India at 0.8 per cent.Other Asian markets like Indonesia, Japan and South Korea
have much higher direct selling penetration levels. Malaysia has the maximum direct
selling penetration in Asia with 4.3 per cent.India’s direct selling penetration is the lowest
among comparable economies at ~0.4 per cent of the retail sales. Given its
underpenetration in global comparison, it has a significant potential to growth going
forward.
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Growth in Consumer Markets
The overall industry growth in the key categories of direct selling such as health and
wellness, cosmetics & personal care, household goods, and others can fuel direct selling
growth.Most of these categories, which are key contributors to the direct selling industry
are projected to grow at 10-15 per cent.
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Growth Drivers / Key Trends
Increasing Personal Disposable Income
Driven by robust GDP growth, the Indian household income is likely to triple by 2025,
from INR 115,000 currently to INR 320,000 (approx.)Due to rise in employment rate,
disposable incomes has also increased resulting in improving the sales of the goods and
services across the direct selling industry.
Urbanisation and Lifestyle Changes
• In 2011, about 28 per cent of India’s population resided in urban areas which is expected
to see an increase and reach to 33 per cent in 2021 (1.5 times the growth of overall
population).
• Urbanisation is expected to have a positive impact on the lifestyles of people as they
will likely have more exposure to better quality products and services.
• Also along with rapid urbanisation, by 2021 a higher share of the population is expected
to shift towards the workable age group. Convenience and improvement of lifestyle should
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trigger a demand for direct selling products specially packaged food, cosmetics and
household appliances.
Significant rise of women in urban work force
• According to India’s National Sample Survey, the proportion of working women in urban
areas increased from 11.9 per cent in 2001 to 15.4 per cent in 2011. • As a result of more
women being employed, there has been an increase in the disposable income leading
toincreased capacity to spend. This will help further aid the growth of the industry.
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Increasing reach of the direct selling industry
• Direct Selling companies are now expanding their reach and are trying to enter Tier 2
and Tier 3 cities and rural areas, providing the consumers with knowledge about different
products and services
• Maintaining good quality at affordable prices; demand for these products has increased
and has resulted in increase in the number of products sold through the direct selling
channel.
• Increased focus on the agricultural sector could boost rural incomes, and could provide
better growth prospects for direct selling companies going forward.
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Opportunity to be created by Direct Selling
companies along with Socio economic impact of
the industry by 2025.
Opportunity in 2025
The growth in the directs selling industry is expected to have cascading effect on the
following factors:
Self-employment opportunities
The growth of the direct selling industry will likely be driven by on-ground direct sellers.
Considering global benchmarks for the industry, the industry can potentially
engage~18million direct sellers by 2025.Increase in self-employment opportunities for the
female population.
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Increase in self-employment opportunities for the female population
The direct selling industry has traditionally had a higher participation from women.
Considering prevailing trends, by 2025, the industry can potentially engage over 10 million
women as direct sellers providing additional income opportunities to the households.
Employment generation
With an average of over 0.4 workers per INR 0.1 million of output generated, the industry
is expected to provide direct employment to 2.5 million people by 2025 through its
manufacturing operations.
Industry contribution towards Social responsibility
In August 2013, the Indian parliament passed the Indian Companies Act, 2013 (the “New
Act”), which replaced the Companies Act of 1956. The New Act has imposed compulsory
corporate social responsibility obligations (CSR) upon Indian companies and
foreigncompanies operating in India. Companies with a turnover of INR 1,000 crore or net
profit of INR 5 crore or more have to spend 2 per cent of their net profit for the preceding
three years on CSR. With the New Act in place the direct selling industry’s contribution
towards CSR is expected to magnify significantly. The industry is expected to contribute
over INR 300 million towards CSR activities by 2025 annually (considering that 50 per
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cent revenues will be generated by companies falling under the requirements of the
Act).Besides the mandatory requirement, many other direct selling companies contribute
significantly towards CSR.
Contribution to government Revenue
Considering Market Potential and future growth of the industry to USD 645 Billion in 2025,
the contribution to the government revenue is also expected to increase 9 folds to ~INR
90 Billion by 2025.
73
Regulatory Structure – Trading in India
The direct selling sector in India has a quasi- federal governance structure. The
Constitution of India has demarcated the areas of jurisdiction for the Central Government
(Union List), State Governments (State List) and joint administration for the central
government (concurrent list). According to Indian constitution, wholesale and retail trade
fall under the purview of state governments. Since direct selling, as defined in NIC 2008
classification, is a part of non-store retail format, it falls under state legislation. However,
this sector is also closely monitored by different ministries/ departments of the central
government. This Section outlines various regulations/ statues applicable to direct selling
businesses.
Laws governing Consumer protection
� Ministry of Consumer Affairs, Food and Public Distribution
� The Consumer Protection Act
� The Legal Metrology Act (‘LMA’)
� Food Safety and Standards Act,2006 (‘FSSA’)
� The Competition Law
74
Administrative laws
� Ministry of Corporate Affairs (‘MCA’)
� The Consumer Protection Act
� The Shops and Establishment Act
Taxation laws
� Ministry of Finance (‘MoF’)
� Indirect tax levies
Industry specific laws/ guidelines
� Misapplication of The Prize, Chits and Money Circulation Schemes (Banning Act),
1978 (‘PCMCS’)
� Guidelines at State Level
75
Challenges faced by the Industry
The direct selling industry, similar to the larger consumer industries faces issues of
counterfeits and general difficulty in doing business in India. However, our interaction with
the industry participants suggests that the biggest challenge that the industry faces today
is that of regulatory uncertainty and lack of legislative support in recognition of the rightful
industry.
Specific Industry Challenges
• Regulatory Uncertainty- The industry is adversely affected by lack of a proper legal
framework which is compromising the growth of the direct selling industry. There is no
systematic and standard policy on direct selling that is based on the constitutional
structure. As a result many authorities have booked direct selling companies for unlawful
activities as under the Prize, Chits and Money Circulation Schemes Act. The act, which
was enacted much before the advent of direct selling in India has an archaic
understanding of issues, and is unable to distinguish rightful direct selling businesses
from malicious money circulation schemes. Under the PCMCS Act customer complaints
are acted upon as criminal offense and gives investigating officers the power to arrest
and seize company assets along with arrest of many key individuals. This creates
negative image of the industry in the mind of participants and potential participants, who
as a result do not realise the benefits of the direct selling business.
Other Industry Challenges
• Counterfeit Products - Direct selling products should not be sold through retail stores.
However, it has been seen that, many retailers become direct sellers and start off loading
the products to the customers through retail outlets. This leakage of products through
traditional retail channels is contradictory to the very nature of direct selling and needs to
be adequately addressed. This channel also encourages the sale of counterfeit products
which affect the brand.
76
• Difficulty to set-up manufacturing facilities - Many large direct selling companies in
India are renowned MNCs. However, due to rigid labour laws and poor infrastructure,
many of these have found it difficult to set-up their own manufacturing facilities in India.
All states have different regulations and there is no centralised federal system, making
the process of getting clearances costly and time consuming.
• High Import Duties - Many ingredients for the industry products are imported. Higher
import duties add to the price of the product and as a result make them more expensive
for the final consumer adversely affecting the demand for such products as they are
available at lower prices in international markets.
77
SWOT Analysis
STRENGTH
Earning Potential
Minimal Investment
Personality Development
WEAKNESS
Lack of awareness in masses
OPPORTUNITIES
Gateway of Entrepreneurs
Promoting self employment
THREATS
Emergence of Pyramid & fraud Cos.
No legislation governing the industry
78
Data Analysis and Interpretation
The level that best represents employee overall job satisfaction:
AUTONOMY:
0
2
4
6
8
10
12
Chart Title
Strongly Satisfied Satisfied Somewhat Satisfied
Somewhat Dissatisfied Dissatisfied Strongly Dissatisfied
0
2
4
6
8
10
12
My position allow me to
make Independent
Decicion
I choose how to perform
my work
The majority of my
position requires routine
tasks
I am awarded for my
innovative approaches
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
79
CLIMATE/WORK CONDITIONS:
COMMUNICATION:
0
1
2
3
4
5
6
7
My work condition are
acceptable
I have adequate supplies
necessary to complete my
job
I have adequate employee
space (lockers, changing
rooms, lounge)
My work environment is
pleasant
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
0
2
4
6
8
10
12
I know what is expected of
me and my job
I have clear information
about how I am to do my
job
I feel comfortable with
what I am asked to do in
meeting my job
expectations
My supervisor and I
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
80
MEANINGFUL WORK:
SUPPORT/RELATIONSHIPS:
0
5
10
15
20
25
My employer values
my work
Generational
differences are
recognized,
respected and
celebrated
I receive feedback
that my work
contributes to the
overall success of the
company
I receive feedback
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
0
2
4
6
8
10
12
14
My supervisor takes
personal interest in
me
My supervisor listens
to me
My supervisor
"stands up" for me.
My supervisor
supports my
professional
development
I have a close friend
at work.
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
81
STRESS, WORK PRESSURE & BURNOUT:
Interpretation and Findings:
Strongly
Satisfied
Satisfied Somewhat
Satisfied
Somewhat
Dissatisfied
Dissatisfied Strongly
Dissatisfied
Autonomy 50% 25% 20% 5% 0 0
Climate/Work Condition 5% 50% 25% 20% 0 0
Communication 25% 50% 15% 10% 0 0
Performing Meaningful Work 10% 20% 45% 15% 5% 5%
Relationship(Supervisor/Colleague) 35% 15% 5% 5% 30% 10%
Stress/WORK Pressure & Burnout 0 5% 5% 10% 55% 25%
Support(Supervisor/Colleague) 40% 30% 20% 5% 5% 0
Work Schedule 10% 10% 5% 25% 20% 30%
� More than 50% of the respondents engage in the direct selling industry are because
of their freedom to work according to their flexibility and huge incentive in spite of
several back draw of direct selling. Motivation and huge perks plays a significant role
in continuing their jobs by their employers.
0
2
4
6
8
10
12
14
My workload is
manageable.
My position is
dominated by time
sensitive urgent tasks
My position involves
a high degree of
pressure
My work assignment
changes regularly
I have sufficient time
Chart Title
Strongly Agree Agree Somewhat Agree Somewhat Disagree Disagree Strongly Disagree
82
� More than 75% have responded positive for their working condition in offices. But as
a matter of fact they have to work their major time in different territory, i.e. field work.
And despite of harsh climate they work continuously without any leave.
� Targets are not there for employees in Appco Group but for their quick promotion they
have to achieve more than their goals. And they won’t receive any remuneration, if
there won’t be any sell. Above 90% have responded as there is extreme pressure and
work stress.
� There is no Work /Life Balance for these direct sale representative. More than 70%
have responded work schedule as too tight in initial stage and later they become
habitual of work load.
� No doubt Appco Group employees receive enormous training and support from their
seniors and business Head. About 90% employees have responded in somewhat
favour of that. And this all because of Indirect benefit employers getting of achieving
their Clients Sales.
83
Recommendation and way forward
Challenges due to current regulations
The current regulatory environment in India for direct selling companies is fraught with
multiple challenges. Most of these challenges are common across direct selling
companies, irrespective of product categories they deal in. A big challenge is that the
concept of direct selling and regulations relating to industry are not clear and operations
of direct selling companies are often mistaken for fraudulent pyramid and Ponzi schemes.
Regulatory uncertainty is impeding the growth of direct selling companies and that has
created formidable hardship for genuine players in this arena. This is despite the fact that,
in many cases, direct selling companies have won legal cases filed against them. In the
absence of clear regulatory framework, different states in India have taken sporadic
actions and there has been instances of top managerial personnel of a direct selling
company (in spite of appropriate approvals from regulatory authorities in India to set-up
business operations) being remanded to custody. Local authorities have stalled the
operations of these direct selling companies and caused irreparable damage to their
brand reputations.
Definitional Issues
The lack of definitional clarity is another major issue impacting the growth of the direct
selling industry. Contending that the absence of a universal definition of direct selling is a
primary reason for confusion, it has been argued that a better understanding of the
industry would require one to view it from three perspectives i.e. (1) Statistical; (2)
Operational; and (3) Legislative.
Central vs. State debate
No specific legislation for direct selling exists in India due to the Seventh Schedule of the
Indian constitution. Entry 33 in the Concurrent List talks about trade and commerce and
specifically mentions “the products of any industry where the control of such industry by
the Union is declared by Parliament by law to be expedient in the public interest, and
84
imported goods of the same kind as such products.” However, subject to this, trade and
commerce within the State is in the State list. This has led to artificial compartments
between FDI in wholesale and FDI in retail and FDI in multi-brand and FDI in single-brand.
Such compartmentalisation is likely impossible to enforce and is almost certain to be
violated, deliberately, or inadvertently.
The Prize and Chits Money Circulation (Banning) Act, 1978
The Act was legislated in 1978 to regulate and ban fraudulent pyramid and Ponzi
schemes prevailing in the country. However, during last the few years, some Indian
government authorities have, on a mistaken understanding of the direct selling model,
have taken the view that direct selling companies are akin to pyramid based financial and
money circulation schemes banned under the PCMCS Act, 1978.
The PCMCS Act, 1978, in its current form, is unable to distinguish direct selling
companies from pyramid or Ponzi schemes. Differences in interpretation regarding the
applicability of the PCMCS Act leads to business uncertainty in India, with an added risk
of harassment and business disruption.
85
Governments response - Actions taken so far
Over the years, many steps were undertaken by various State governments as well as at
the Central level to set-up an enabling policy for Direct Selling companies in India. These
have been highlighted below.
86
Possible solutions
- renewed sense of optimism abounds To provide a conducive and sustainable operating environment in India for the companies
operating in Direct Selling industry, a series of reforms are required ranging from
immediate short-term reforms in the nature of certain amendments in the existing
Acts/policies to long-term measures of enacting a specific governing legislation for the
sector. A separate policy framework for the direct selling industry can clear the blurred
lines between ethical industry players and impersonators and go a long way in regaining
consumer confidence. This change is imperative, especially, when the industry is in
double jeopardy at the moment – an erosion of faith and an identity crisis. We have
highlighted below some of the possible solutions that can be considered by the
Government/regulators in the coming future to benefit this industry.
87
� Amendment of the PCMCS Act
� Need to streamline Foreign Direct Investment (‘FDI’) Policy
� Need for a clear definition of Direct Selling
� Need for independent Governing Legislation
� Need for a Nodal ministry
88
Conclusion
A range of companies are involved in the industry acting either as traders who utilize the
direct selling channel, or service providers who act on their behalf. Many of these
companies are large, publicly-listed corporations, although many small, privately-owned
companies are also active in the industry.
The direct selling industry’s potential to reach a size of INR645 billion by 2025 driven by
growth in consumer markets and increase in the penetration of direct selling to globally
comparable levels may however be contingent on creating an enabling environment for
the industry, and mitigation of some of the challenges it is facing today. With the success
of the industry, which relies on individuals to accomplish sales, a number of fraudulent
businesses have also tried to emulate the form, but with malicious intentions and
outcomes. This has impacted the industry, which recognizes this as a significant
challenge to its growth. The industry has the potential to create a significant social and
economic impact in India especially in the area of women’s empowerment, skill
development, technology percolation and growth of the SME sector, besides promoting
self-employment and providing a viable means of alternative income. There is a need to
revisit existing laws and bring about regulatory clarity to build an environment of trust in
order to reap the multiple benefits that the industry has to offer.
89
Annexure 1
There are a lot of similarities between traditional consumer goods retail and direct selling
models:
• For both formats, distributors / direct sellers earn a commission when product sales
takes place
• Also, in both cases, earning of sales commission is based on sales volume of the
individual (and the group).
For retail format, the CFA, re-distribution stockist, and retail seller earn sales margins. In
case of direct selling under MLM plan, all different levels of direct sellers earn
commissions on sale of products.
However, despite the similarities above, traditional consumer goods retail and direct
selling models, are essentially different formats with different investment requirements
and sales philosophy.
90
Questionnaire
1. Select the level that best represents your overall job satisfaction for each item below:
Strongl
y
Satisfie
d
Satisfie
d
Somewh
at
Satisfied
Somewhat
Dissatisfie
d
Dissatisfie
d
Strongly
Dissatisfie
d
Autonomy
Climate/Work
Conditions
Communication
Performing
Meaningful Work
Relationships
(Supervisor/Colleagu
e)
Stress/Work
Pressure & Burnout
Support
(Supervisor/Colleagu
e)
Work Schedule
91
2. AUTONOMY:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
My position allows me to
make independent
decisions.
I choose how to perform
my work.
The majority of my position requires routine
tasks.
I am rewarded for
innovative approaches
to improve patient care
3. CLIMATE/WORK CONDITIONS:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
My work conditions are
acceptable.
I have adequate
supplies/equipment
necessary to complete
my job.
I have adequate
employee space (lockers, changing
rooms, lounge).
92
My work environment is
pleasant
4. Communication:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
I know what is expected
of me and my job.
I have clear information
about how I am to do my
job.
I feel comfortable with
what I am asked to do in
meeting my job
expectations.
My supervisor and I
5. MEANINGFUL WORK:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
My employer values my
work.
Generational differences
are recognized,
respected and
celebrated.
I receive feedback that
my work contributes to
the overall success of
the company.
93
I receive feedback
6. SUPPORT/RELATIONSHIPS:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
My supervisor takes
personal interest in me.
My supervisor listens to
me.
My supervisor "stands
up" for me.
My supervisor supports
my professional
development.
I have a close friend at
work.
7. STRESS, WORK PRESSURE & BURNOUT:
Strongly
Agree Agree
Somewhat
Agree
Somewhat
Disagree Disagree
Strongly
Disagree
My workload is
manageable.
My position is dominated
by time sensitive urgent
tasks.
My position involves a
high degree of pressure.
94
My work assignment
changes regularly.
I have sufficient time to
8. Please share comments pertaining this survey and/or factors that make your job satisfying (optional):
95
Cobra Group makes a mint while "self-employed" reps
get by on peanuts Some of India's best known charities are raising funds using "self-employed" workers,
often on way below the minimum wage.
That's thanks to the Appco Group, a door-to-door sales operation which has spread into
virtually every town in the India through a network of dozens of smaller franchise firms.
These offices send up to 1,500 "field representatives" onto the streets every day who,
despite working for the same boss day in, day- out, are all classified as self-employed.
It's mainly young people who are attracted by job ads for "ambitious", "outgoing" and
"motivated" types wanting to earn up to RS 30000 a month.
They end up earning 100% commission for persuading people to change DTH or data
card and donate to charities, including the CRY and the Help Age India.
If they're good at it, they become "leaders" training others, with the lure of becoming an
“owner" and opening their own franchise company.
Most never get that far.
One rep, Onkar, worked for the Conqueror, Appco Group India franchise in Working, for
eight days but quit after earning just RS 400.
Another told us he worked for four months in New Delhi, earning around RS 1200 for a
week. A third said he worked up to 10 hours a day in New Delhi for just £2000 a week.
"The wages were shocking," he claimed.
So why do it?
No doubt some earn good money and get promoted fast. Canadian boss Chris Niarchos
likes to say: "You control your own destiny."
96
So what's destiny like as an Appco owner? The boss of one office making up to £10,000
a week commission paid himself just £9,000 in a year before collapsing with stress.
Out of 582 franchise offices set up by Cobra's company formation agents RDA Co Secs
since 2001, 414 have shut down. So there's only one guaranteed winner in all this - Cobra.
Not matter how good or bad the rep, Cobra makes money.
Whether an owner succeeds or fails, Cobra or Appco Group owner wins.
Gaurav Yadav, 33, boasted at this year's Cobra rally: "The illegitimacy of this business I
started 5 years ago is now completely turned on its head... it's now seen as one of the
best ways to do it in a cost-effective way."
Cobra turned over £48m in the UK last year and is now expanding into the US, China,
Russia and Brazil.
But when Niarchos claims, "The pressures on us to deliver every day are exactly the
same as on you guys," he loses us.
The reps may be self-employed but Niarchos certainly isn't.
He got paid £735,000 plus cash into his pension last year.
It's clearly not fair, but does it stand up to scrutiny?
Cobra star Josephine Nyamhovsa took owner Steven Broadey to an Irish tribunal three
years ago when he sacked her after she raised £282,000 for charity, a record that year.
He argued there was no case as she was self-employed.
But the tribunal was having none of it.
It found Josephine had "virtually no discretion in how to carry out her work", had
compulsory training, couldn't work for competitors even after she left and couldn't hire her
own staff.
97
It ruled she was an employee and awarded her £41,000 for harassment and
discriminatory dismissal.
A Cobra spokeswoman said the group had created "thousands of jobs and opportunities"
in 20 years, followed all codes of practice and operated within the law.
That's why it needs changing.
98
Annexure 2
Forecast Methodology
Direct Selling Market Size Estimation
Methodology Adopted
99
Direct Sellers Estimation
Methodology Adopted
100
Bibliography
� “Direct Selling- A global industry empowering millions in India” - Report
by Kpmg, India
� “Direct Selling”- - Report by FICCI
� Philips Kotler “Marketing Management” 11th Edition, Eastern Economy
Edition
Website:
www.kpmg.com
www.ficci.com
www.appcogroupindia.in/
www.appcogroup.asia/
www.glassdoor.com/.../Appco-Group
https://www.facebook.com/futureindiadsi?ref=br_tf
http://www.financialexpress.com
http://www.google.com
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