Aloe Barbadensis Miller
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AloeVera ~ USA
Forever Living Products Distributor

 

Aloe Barbadensis Miller
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Copyright © 1999 -  Aloevera-USA. All Rights Reserved.

The purpose of this article is to discuss the mechanism and power of network marketing in providing an individual soundly based business opportunity for self employment. Part 1 provides an introduction to the concepts of network marketing with particular reference to Forever Living Products. Part 2 presents the Forever Living Products network marketing plan. Part 3 provides details of "passive income", "car plan", "profit share royalties" and the structure of advanced levels and benefits in the Forever Living Products network marketing plan. Part 4 presents the practical requirements of building a successful business in Forever Living Products: "The 4 Case Credit Strategy". Part 5 illustrates the Forever Living Products earning pathways to various income levels: Retailing, Team Building and Leadership. A table of contents is given below for each of the main discussion sections.

The implementation of the mechanism and the power of network marketing has been fully extended by FLP to the Internet in 2009. A global network marketing platform is now provided for FLP distributors to extend their business internationally. By introducing on-line shopping with drop shipping of aloevera based health and nutrition products, an FLP distributor distributor need only register in the corresponding country where on-line ALOE Stores are in operation to build worldwide sales and generate an international network team. The facilities and training information for building a global network are fully supported both by terrestrial marketing techniques and internet marketing methods. The internet dimension permits accelerated development of network teams, rapid progress up the FLP Marketing Plan, and increased distributor income with little increase in expenditure.

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Table of Contents

Part 1: Introduction to Concepts of Network Marketing

Overview of Network Marketing with Forever Living Products
Distribution mechanism in conventional marketing: Static structure
Distribution mechanism in network marketing: Dynamic structure
Positive feedback mechanism: Customers converted to distributors
Growth of distributor network: Geometrical progression
Recruitment Process in network marketing: model of positive feedback mechanisms
The Network Marketing Engine

Part 2: Forever Living Products Network Marketing Plan

Distributor Level Progression
Case Credits, Profits & Bonuses - Examples

Part 3: Passive Income & Advanced Levels in Forever Living Products Network Marketing Plan

Royalty Bonuses - Manager Levels
Passive Income
Company Cars - the Earned Car Scheme
International Travel & other Prizes

Part 4: Practical Requirements of Building a Successful Business in Forever Living Products:
The 4 Case Credit Strategy

Case Credits
4 CC Business
Personal
Retailing
Sponsoring
Tracking
Training

Part 5: Earning Pathways in Forever Living Products

Introduction
Retailing
Team Building
Leadership
Summary


Part 1: Introduction to Concepts of Network Marketing

OVERVIEW OF NETWORK MARKETING WITH FOREVER LIVING PRODUCTS

Rex Maughan, President and Founder of Forever Living Products, devised his network marketing plan over twenty years ago. His is recognised as one of the most generous Marketing Plans in today's network marketing arena. Perhaps because of this, FLP is the number 1 distributor of health, nutrition, skincare and beauty products in every country where it has been established long enough (see Why FLP is Number 1). During the mid to late 90s Network Marketing has come of age and now in 2009 is fully Internet compliant enabling global network marketing on-line.

So why does network marketing work so well? What is so special about this method of moving goods from the manufacturer to the customer? Why have network marketing companies in general, and FLP in particular, grown even faster during the recession than they did in the booming 80s? This is the reverse of the trend in conventional marketing enterprises, like retail shops and stores, and mail-order catalogues. Even huge franchises like MacDonalds are having difficulty finding new high-level locations: the major High Streets and Shopping Malls are finite entities, and the secondary areas will not generate the required turnover.

Perhaps it is because Network Marketing offers so many of the advantages of franchising, without the disadvantages, that it is enjoying such success. For example, as an independent distributor of Forever Living Products:

  • you are your own boss - nobody can make you redundant - yet you are part of a very large, very successful, very well-established company, with a billion-dollar worldwide turnover
  • you are running your own business - yet you are supported by your Sponsor into the business and the superb FLP Area Manager system
  • you have no initial outlay, there are no annual fees, and you will never need to hold stock - you buy products, as and when you need them, from your local Product Centre
  • you can work the hours you wish, at your own pace, to achieve your personal goals, and you will have very low overheads since you will almost certainly work from home
  • you have freedom to move location within the USA or to another country - your business continues to earn income for you - wherever you are
  • the Area Managers run regular free Personal Profit Sessions in your area - you can take along your guests to introduce them to FLP, and they will hear presentations by experienced top-level speakers on the business, the marketing plan, and the products
  • local training is available all over the USA to help you learn more about the products, and the concepts of network marketing and team-building
  • there is absolutely minimal paperwork - FLP does it all for you
  • you can only move UP in FLP - all positions in the Marketing Plan are permanent, so there are no penalties for taking a month or two away from your work
  • you are never required to pay your team member's bonuses - bonus checks are sent out by FLP, directly to each individual distributor, on the 15th of every month - without fail
  • bonus payments are based upon the Suggested Retail Value of all products purchased at wholesale price during the previous
    month
  • invoices are logged daily, so if you achieve a higher level in the Marketing Plan in mid-month, your higher bonus will be applied immediately to all subsequent invoices
  • distributors below you in your team can never pass you by to reach a higher level - you will automatically be moved up to the same level

In short, you are empowered to develop your business to your specific requirements
and thus achieve the financial and personal goals you set.


THE CONCEPTS OF NETWORK MARKETING

Marketing in general is the provision of goods or services to meet consumer needs. For a product-driven company, marketing may be more closely defined as the process whose primary objective is to distrubute the maxium volume of product from the manufacturer to the consumer. Assuming no limitations in manufacture of product and a limitless reservoir of consumers, the effectiveness of the marketing process is determined by the distribution mechanism. The general marketing process is illustrated as follows:

Conventional Marketing Process

In the conventional marketing process, the distribution mechanism consists of four major elements each of which has its own particular structure: advertising, sales force, wholesale and retail operations. The general structure of the distribution mechanism in conventional marketing is static - each of the elements is connected in line and each element is designated a fixed set of tasks. The static structure of the distribution mechanism is independent of the customer.

In contrast, the distribution mechanism in network marketing consists of a single major element: the individual independent distributor. The independent distributor performs all the functions required to sell and distribute the product to the customer. Each independent distributor is linked to other distributors through a dynamic hierarchical non-linear network which grows by geometrical progression. The details and functionality of this dynamic network are described below. Moreover, the process of generating new customers provides a natural path for developing the distributor network. Each new customer represents potentially a new distributor source. Thus a positive feedback loop is established which naturally expands the distributor network. The dynamic structure of the distributor mechanism in network marketing is therefore dependent on the consumer element. This is shown in the following diagram:

Positive Feedback Relationship

The extent of the positive feedback relationship is determined by the particular company. For Forever Living Products, which is product-led, this consumer-dependent relationship is strong.

The dynamic hierarchical network is characterised by geometrical progression. For example, a distributor signs on two new customers as distributors and they in turn each sign on two further distributors and so on. In this simple growth progression, by the fifth generation, the total number of distributors in the network has reached 31. This sum is easily calculated from the formula:

Geometrical Progression

where S is the total number of distributors in the network reached by the n th generation and R is the ratio between terms. In this example R = 2, n = 5 and  S = 31. If each distributor signed up 5 instead of just 2, then R = 5, n = 5 and the total number of distributors is S = 781. This represents a dramatic increase for just 3 additional people per distributor and demonstrates the power of geometric progression. It is clear that the network grows rapidly and that in practice the network is more complex since: each distributor at each generation may sign on more or less than the number given in these examples, some distributors may cease to operate and the network generation may extend well beyond the 5th generation. A simple more realistic 4th generation distributor network may look like this:

4th Generation Distributor Network

The 1st generation shown in the diagram as the white circles is defined as the frontline in network marketing parlance and represents those distributors directly signed up under YOU. The 2nd generation level shown as the cyan circles and the 3rd generation level shown as purple circles constitute the remainder of the downline. The specific advantages of the network marketing mechanism are as follows:

  • Each distributor builds his or her team network using the principle of duplication of training methods at every level of the network. In the case of Forever Living Products, integrity is essential in the duplication process. Within the broad pattern of the duplication process there is a modicum of room for individual implementation.

  • Each distributor uses the products and is convinced of their efficacy.

  • Direct contact by word of mouth provides the most powerful proven method of advertising. Sharing experiences with personal contacts, friends and family provides the cornerstone of most distributor networks.

  • A personal bonus scheme is applied on the personal volume of product sold. The personal bonus percentage increases as the distributor rises up the ladder. An additional group volume bonus scheme is applied depending on the performance of the network belonging to the distributor and varying bonus levels applied within the given network. It is the group volume bonus that provides an additional positive feedback mechanism which drives the incentive of each distributor to continue expanding their network.

Forever Living Products' bonus schemes are generous compared to those of other network marketing companies. The particular marketing plan operated by Forever Living Products is discussed in Part 2.

The recruitment process consists of two essential ongoing activities: building and expanding the network team of individual independent distributors as well as building and expanding the consumer customer base. The understanding of the relationship between these two activities is critical to the development of a sound network business. The relationship is illustrated in the following diagram:

Recruitment Process Time Lines

 

For optimum recruitment performance both the building and expansion of the customer base and the independent distributor network are essential and should be developed in parallel. Moreover, in addition to recruiting directly for new distributors, the consumer base further provides a built in positve feedback mechanism for the growth of new independent network distributors as previously discussed above. As suggested in the current diagram, a natural pathway exists between retail and wholesale customers. When total retail sales to a given customer reaches a specified value, the customer may then be offered the opportunity to purchase at the wholesale rate, market the products at the suggested retail rate and join the network team. Thus, the conversion from retail customers to wholesale customers represent a strong possibility to create additional new independent distributors - this is the wholesale positive feedback loop. Of course there will be a fraction of retail customers who recognise directly the advantages of becoming an independent distributor and join the network team straight away - this is the retail positive feedback loop. The success of the recruitment process is determined by two primary growth lines: the independent distributor growth time line TD, and the customer growth time line TC. These growth time lines are indicators of the growth rate of new distributors and customers respectively. The customer growth time line TC is further subdivided into a retail growth time TR and a wholesale growth time TW.

What emerges from the above discussion is a concept of a network marketing engine. This engine is defined by the dynamic hierarchical distributor network which utilises positive feedback mechanisms in the recruitment process to convert customers into distributors. The dedicated application of the principle of duplication ensures that the growth of the dynamic hierarchical distributor network progresses approximately at a geometric rate. What drives the network marketing engine is the incentives provided by the particular marketing plan. In the case of Forever Living Products, this marketing plan is generous and well formulated (See Part 2 below). Independent distributors not only receive a personal volume bonus on sales which is related to their position in the marketing plan, but more importantly, an individual distributor receives a group volume bonus which is dependent on the total sales of the independent distributor's downline as well as his/her position in the marketing plan. It is this latter group volume bonus which accounts for impressive earnings. The network marketing engine in the case of Forever Living Products is not just a concept, but a fully developed working reality.

For further reference we direct you to these excellent texts:
"The Fundamentals of Network Marketing" by Edward Ludbrook, 1998. Published by Ludbrook Research International, P O Box 4815, London England SW6 4YF. ISBN 1-899949-04-6.
"Boom Business of the 90's" by Francis Hitching, 1994. Published by User Friendly Textbooks, Swalcliffe Manor, Swalcliffe, Banbury, Oxfordshire England OX15 5EH

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Part 2: Forever Living Products Network Marketing Plan

FLP Marketing Plan by AloeVera-USA

 

The Forever Living Products (FLP) Network Marketing Plan, shown graphically above, is an excellent plan: it aims to reward distributors generously at every level of the business. There is no fee to sign up as an FLP Distributor, there are no annual fees to pay and it is not necessary to hold stock. Everyone in the Distributor Level progression from Assistant Supervisor to Manager buys their FLP products at the same wholesale price. The additional monthly Personal Volume Bonus varies from 5% to 18% depending on Distributor Level position along the progression starting from Assistant Supervisor and is calculated on the Suggested Retail Prices of all purchases each month. Hence the total profit on purchases will vary from 35% at the Assistant Supervisor level to 48% at the Manager level. In addition, as the network team grows, a Group Volume Bonus(Team-Leading Bonus) is applied according to the Distributor Level in the team. It is this Group Volume Bonus that provides the drive power of the marketing network engine. The colour coded graph above displays the basic structure and mechanism of the marketing plan up to Manager Level [Advanced Manager Levels are discussed in Part 3 of this article]. The following discussion illustrates the Distributor Level progression as a function of Case Credits over a period and the corresponding Personal Volume Bonus(PVB) and Group Volume Bonus(GVB).

DISTRIBUTOR LEVEL PROGRESSION

Independent Distributor: You join the company as an Independent Distributor by signing the single-page Application Form, which is countersigned by your Sponsor into the FLP business. You receive your unique FLP identity number and you buy products from your Sponsor at the Suggested Retail price.

Assistant Supervisor: To go from Independent Distributor to Assistant Supervisor you must purchase products to the value of Case Credits (see explanation of Case Credits - CCs below). You might buy the Touch of Forever Combo Box, or two of the Mini-Combos (either option will immediately qualify you), or loose products over a period of time. At this point you receive the Authorisation to Purchase (ATP) at the wholesale. Thereafter you will receive a monthly Bonus check direct from FLP representing 5% Personal Volume Bonus on the Suggested Retail Prices of all purchases in the previous month.

Supervisor: You reach Supervisor level when you and the members of your team purchase products totalling 25 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 8% and you receive an additional Group Volume Bonus (Team Leading Bonus) of 3% on all products purchased by your Assistant Supervisor team members. If someone in your team becomes a Supervisor, you cease earning the Group Volume Bonus on their team until you progress to Assistant Manager level.

Assistant Manager: To rise from Supervisor to Assistant Manager you and the members of your team purchase products totalling 75 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 13% and you receive additional Group Volume Bonus(Team-Leading Bonus) of 5% on all products purchased by frontline Supervisors in your team, and 8% on frontline Assistant Supervisors.

Manager: To make Manager you and the members of your team purchase products totalling 120 CCs over any two-month period. At this level the Personal Volume Bonus on all the products you purchase is 18% and you receive additional Group Volume Bonus (Team-Leading Bonus) of 5% on all purchases by frontline Assistant Managers in your team, 10% on frontline Supervisors, and 13% on frontline Assistant Supervisors.

It is clear that the Group Volume Bonus kicks in at the Supervisor level and that higher levels along the Distributor Level progression accrue an increasing Group Volume Bonus from levels below. The Group Volume Bonus is the positive feedback mechanism which provides the incentive to maintain, develop and expand the downline network.

CASE CREDITS, PROFITS & BONUSES - Examples

Case Credits:  The international currency unit used by FLP for calculating Distributor turnover and bonuses is the Case Credit. Every product in the FLP range has an assigned Case Credit value which is related to the monetary value of each item. In the USA, the wholesale value of 1 Case Credit = $ 125 excluding sales taxes. The suggested retail value of 1 Case Credit = $ 178.57. The purchase of 1 Case Credit value of product at the wholesale price thus corresponds to a 30% discount on the suggested retail price.

Profits and Bonuses:  Your Bonus check is based on the suggested retail value of all purchases you personally make in a month and the total retail value of purchases made by your network group. Your Total Profit consists of three components: the Baseline Profit (BP) which is defined as the difference in value between all suggested retail and wholesale purchases; your Personal Volume Bonus (PVB) percentage contribution and your Group Volume Bonus (GVB) percentage contribution. Both the Personal Volume Bonus and Group Volume Bonus contributions are calculated on the sales tax exclusive suggested retail value of purchases. Your total profit is the sum these three components:

  1. Baseline Profit BP = [ R - W ] = 30%R where R and W are the total sales tax inclusive suggested Retail and Wholesale value of purchases you make respectively, and 30% is the standard discount level whichever position you are in the Marketing Plan.
  2. Personal Volume Bonus PVB = X%[R/1.Z] where X% is the personal volume bonus percentage which varies on distributor level over the range {5%, 8%, 13%, 18%} and Z is the decimal equivalent of the percent sales tax, for example, Z = 0.10 for a 10% sales tax.
  3. Group Volume Bonus GVB = Y%[R*/1.Z] where Y% is the network team or group volume bonus percentage which varies as a function of distributor level over the range {3%, 8%, 13%} and R* is the total sales tax inclusive suggested Retail value of all purchases made by everyone in your network team below your distributor level.

Consequently,

Total Profit = 30%R + X%[R/1.Z] + Y%[R*/1.Z]

The following practical example illustrates the contribution of each of the components in generating the total profit. For simplicity, we assume the case in which the percentage sales tax is zero. This means that Z = 0, both R and R* exclude sales tax, and the formula for the total profit becomes:

Total Profit = 30%R + X%[R] + Y%[R*]

This simplified formula is used in the following calculations.

Personal Volume Bonus: Say you spend $1050 wholesale on products; their suggested retail value [R] = $1500, so a Baseline Profit (BP) of $450 is earned whichever position you are in the Marketing Plan. However, your Personal Volume Bonus (PVB) will vary with your marketing plan position and the corresponding value of the personal volume bonus percentage X%. The profit obtained from the Baseline Profit andPersonal Volume Bonus is as follows:

Distributor Level BP=30%R PVB=X%[R]($1500) Profit
Assistant Supervisor $450 5%*[R]=$75 $525
Supervisor $450 8%*[R]=$120 $570
Assistant Manager $450 13%*[R]=$195 $645
Manager $450 18%*[R]=$270 $720

Group Volume Bonus: Of course, from Supervisor onward you will be making additional Group Volume Bonus (GVB) based upon the suggested retail value of purchases by everyone in your network team below your Distributor Level. Let us further assume that the total retail sales of all the frontline Assistant Supervisors in your team is $2000. So, [R*] = $2000 (Front line distributors are those distributors directly signed up under you). The profit obtained from the Personal Volume Bonus, the Group Volume Bonus and Baseline Profit terms are given below. This is how it will affect your profits if your Distributor Level is Supervisor or higher:

Distributor Level BP=30%R PVB=X%[R]($1500) GVB=Y%[R*]($2000) Profit
Supervisor $450 8%*[R]=$120 3%[R*]=$60 $630
Assistant Manager $450 13%*[R]=$195 8%[R*]=$160 $805
Manager $450 18%*[R]=$270 13%[R*]=$260 $980

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Part 3: Passive Income & Advanced Levels in Forever Living Products Network Marketing Plan

Royalty Bonuses - Manager Levels: There are 7 Manager Levels: Manager, Senior Manager (2 frontline Manager businesses in your downline team), Soaring Manager (5 frontline Managers), Sapphire Manager (9 frontline Managers), Diamond-Sapphire Manager (17 frontline Managers), Diamond Manager (25 frontline Managers), and Double-Diamond Manager (50 frontline Managers).

You earn Bonuses on the first three generations of Manager in your business: these are calculated as a percentage of the total turnover in each of the Manager Business Units. So you earn on your own immediate frontline Managers (1st generation), then on their frontline Managers (2nd generation), and on frontline Managers below them (3rd generation). The first six levels are shown below:

Advanced Manager Levels

Passive Income: As you work with your Team, helping them to become Managers in the business, you start to access Royalty Bonuses. FLP pays these additional bonuses on three generations of your Manager business at a starting level of 6% on your 1st generation Managers, 3% on the 2nd generation, and 2% on the 3rd generation. As you develop more and more Manager-businesses, this will rise to a maximum of 9%, 6% and 5% Royalty Bonuses respectively for a Diamond Manager. This passive monthly income will continue throughout your lifetime, and can be willed on to anyone 18 years of age or over who is qualified to be a Distributor.

The 7th Manager Level - Double Diamond Manager is reached when the distributor develops 50 recognised 1st generation sponsored managers. At this level the requirement to turn over 4CCs per month is waived thereafter.

Company Cars - the Earned Car Scheme: FLP will provide 36 monthly payments of $300 (Level 1), $450 (Level 2), or $600 (Level 3) if you - with your Team - hit specific turnover targets in 3 consecutive months. At the end of the 36 months the car is yours to keep permanently. In fact, after three years most people will have requalified, so FLP will pay for another new car, frequently at a higher level than the first. At any time during the 36 months, if you achieve the appropriate higher level turnover over three consecutive months, you will bw moved up immediately to the next earning level.

International Travel & other Prizes: FLP runs incentives throughout each year where the Distributors reaching specific turnover targets will be rewarded with fully paid trips to the various national and international rallies - including flights, first-class hotel accomodation, and even spending money. Other incentives open to all Distributors attract prizes such as weekend trips to exotic locations, or valuable items such as computer systems.

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Part 4: Practical Requirements of Building a Successful Business in Forever Living Products: The 4 Case Credit Strategy

CASE CREDITS The international currency unit used by FLP for calculating Distributor turnover and bonuses is the Case Credit. In the USA the relationship between the monetary value of each product is exact: at wholesale 1 Case Credit is $125 excluding sales tax. The corresponding suggested retail sales tax exclusive value of 1 Case Credit = $178.57. The purchase of 1 Case Credit value of product at the wholesale price thus corresponds to a 30% discount on the suggested retail price.

When you turn over 4 CCs each month in your business, this will be worth roughly $714 at suggested retail and $500 at wholesale. This means you will have made around $214 gross profit on the monthly sales and you will receive a bonus check of just under $36 (based on the suggested retail price excluding sales tax - at the 5% bonus level of an Assistant Supervisor). That amounts to just over $250 total profit on an outlay of $500.

4 CC BUSINESS It is vital for every new Distributor to aim for a 4 CC business: (1) to generate the essential turnover that drives money around the system and creates our bonus checks, (2) to lay the foundation for team-building and moving up the FLP ladder, and (3) to progress up the FLP marketing plan levels in order to qualify for increased team-building bonuses on their downline.

A good proportion of this turnover should come from Customer Sales - as well as products for your own use, and the sponsoring of new distributors. Note: the 4 CCs must all be in your name - this is your personal turnover each month.

PERSONAL USE You need to use and experience the benefits of FLP products so that you can verify the quality of the products and share your enthusiam for them with prospective customers. If you start by purchasing the Mini Combo Paks, you will have all the most popular items in the range to use and share with family and friends. Aim for 1 CCs per month from personal use.

RETAILING A customer base of 20 or more is recommended for the development of a sound networking business. You are aiming for customer loyalty - people who re-order every month or so without prompting. Inevitably some customers will only buy occasionally, and some will drop out completely (they may even join your team!) - so keep on looking for new customers. It is essential to have a sound follow-up system: if you look after your customers well, they will come back to you over and over again. Set a time frame to achieve 20 customers - three months, perhaps. These customers should generate 1 or 2 of your required 4 CCs total. Be ready around week 3 of the month to boost the CCs by additional sales through, for example, Aloe Awareness evenings, fundraising activities, a table at local events. Aim for 2 to 3 CCs from personal Retailing and own use.

SPONSORING Try to Sponsor at least 1 new person a month into your team. Ideally, they will buy a Combo Pak from you to get their business off to a flying start - worth 2 CCs to you. If they cannot afford the outlay of a Combo Pak and need to retail their way into the business, you will aim to do three Product Launches with them in the first month or two. This should easily give them the 2 CCs they need to qualify for Authorisation to Purchase at the wholesale price. With the help of your Sponsor, you will start coaching them from Day 1 to do what you have done - achieve 4 CCs per month personal volume and Sponsor a new person each month. Aim at least for 1 to 2 CCs per month from Sponsoring.

TRACKING You need to keep a running total of your CCs to ensure you are achieving at least 4 CCs personal volume every month. Train your team to track their own total CCs and to send you the pink copies of their orders promptly so you can to keep track of your team CC total. Your Sponsor wil be working with you from day 1 to plan your business and to help you with team-building and retailing so you can achieve your goals.

Keep in mind that the achievement of new position levels in the marketing plan is based upon total CCs over a 2-month period (Base month & Qualifying month). So, when tracking CCs, carry forward the total from the previous month. Careful tracking is needed to ensure you reach the correct 2-month total CCs for success in achieving the next level in the marketing plan. Keep coaching your team members to do the same. Remember, you can use the second qualifying month for one position in the marketing plan as the base month for the next.

TRAINING You need to check out the local training available in your area, organised by your General Managers and their team. Also, your Sponsor will provide you and your budding network team with regular training sessions at agreed intervals.

This is a vital role in successful network marketing: the Sponsor takes responsibility for helping new Distributors identify their goals, gives guidance in planning their strategy for achieving these, and ongoing support and training. The aim of the Sponsor is to help the Distributor develop their team and move up through the FLP marketing plan together. For most people, this is the most enjoyable and rewarding aspect of a career in network marketing.

FLP has a number of excellent training videos and audiotapes that cover both the business side and information on the products. These are also available from the local FLP Office or Business Center.

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Part 5: Earning Pathways in Forever Living Products:

FLP Earning Pathways

INTRODUCTION

The FLP Earning Pathways graph represents an example of the annual income achievable as a function of time for three distinct pathways: Retailing, Team Building and Leadership. The curves shown in this example demonstrate the time-dependent relationship of the different earning pathways. In reality a "family" of curves would be generated, shifting significantly along the time axis, since some distributors take the fast track, develop large teams quickly, and achieve substantial income growth in their first year or two, while others may be satisfied with moderate income growth over several years. It is helpful for distributors to be able to estimate their expected income over any specific period, according to their position on the Marketing Plan, and the size and "shape" of their team (the number of downline distributors they have at each level in the Marketing Plan).

In the following discussion of the three earning pathways we have chosen examples which give some idea of the earning capacities of the different pathways. We make use of the simplified sales tax exclusive general formula for the total profit:

Total Profit = 30%R + X%[R] + Y%[R*]

where R is the sales tax exclusive suggested Retail value of personal turnover and X% is the corresponding personal bonus percentage; R* is the sales tax exclusive suggested Retail value of the network team turnover and Y% is the average network team bonus percentage. Bonus percentages are always calculated on the suggested Retail turnover value minus the sales tax component. As is evident in the formula, the total profit consists of three contributions: the 1st component, 30%R, gives the baseline personal profit on sales; the 2nd component, X%[R], gives the personal volume bonus and the 3rd component, Y%[R*], gives the approximate group volume bonus or "network team" bonus. This formula for total profit is now employed to estimate the annual income of a distributor on different earning pathways over a given period in time.

Note that when a distributor turns over 4 CCs every month for 12 months (in line with the 4 CC strategy), this amounts to a sales tax exclusive suggested Retail turnover value of about $8571 per annum (R = 4 x 12 x 178.57 = $8571.36). The suggested retail sales tax exclusive value of 1 CC is taken as $178.57.

RETAILING

When a distributor chooses to concentrate solely on retailing products, and to work on a very part-time basis of around 6 or 7 hours per week, then it is clear that earnings will grow to a point which is self-limiting: there is insufficient time for further sales to be made. If it is assumed that the distributor is at Assistant Supervisor level in the marketing plan and averages 4 CCs per month, then:

X% = 5%, R = $8571, Y% = 0, R* = 0

and the Total Profit per annum given by the formula yields an income of $3,000 per annum.

This level of additional disposable income approaches a practical maximum of about $5,000 per annum, yet may be extremely useful for an individual - making it possible for them to take a family holiday, for example, or to buy a second car. It is difficult to achieve the next level of Supervisor or beyond by retailing alone (though, of course, there are exceptions to this rule).

TEAM BUILDING

When distributors decide to start building their own networks by recruiting like-minded people to work with them in their business, they can generate significantly larger incomes. They will be earning group volume bonuses or "team-leading bonuses" on their downline distributors, whilst maintaining their retail customer base. It is vital for everyone at Supervisor level and above to ensure they personally turn over at least 4 CCs of product every month, in order to earn bonuses on turnover produced by their network downline distributors. To precisely calculate the value of the group volume team bonus in a given network downline, it is necessary to know how many active distributors are at each level (Assistant Supervisor, Supervisor and Assistant Manager) and what is the exact case credit turnover for each distributor in the downline. This information is routinely provided by FLP on a computer printout accompanying the bonus check payment to the distributor. However, without resorting to mountains of data, we can gain a realistic estimate of the group volume team bonus by introducing the idea of the average network team bonus percentage Y% which may be applied to simply structured downline networks. By defining Y% in the following mathematical formula, it is possible to calculate an average bonus percentage for any simply structured team, up to and including manager level in the marketing plan:

Y% = [PasNas + PsNs + PamNam] / [Nas + Ns + Nam]

Here Pas, Ps, Pam are the group volume or "team" Percentage bonuses that a team leading distributor may receive from his network downline distributors at assistant supervisor (Pas), supervisor (Ps) and assistant manager (Pam) levels respectively (these will vary in value according to the particular level of the team leading distributor in the marketing plan) and Nas, Ns, Nam are the Number of distributors in the network downline who have reached the network marketing plan level of assistant supervisor (Nas), supervisor (Ns) and assistant manager (Nam) respectively. The following two worked examples highlight the relationship between the extent and structure of the network team and provide an approximate and realistic estimate of the overall contribution of the network team turnover to the total annual income.

Group Volume " Network Team" Percentage Bonuses

Marketing Plan Level Pas Ps Pam
Manager Level 13% 10% 5%
Assistant Manager Level 8% 5%  
Supervisor Level 3%    

Example 1: Let us assume that the team leading distributor has achieved assistant manager level in the marketing plan, so that their personal volume bonus percentage X% = 13%, and that this distributor averages 4 CC's per month so that the total personal suggested retail turnover R = $8,571 per annum. In this example, the downline team is assumed to consist of 15 active distributors of which 13 are frontline assistant supervisors and 2 are frontline supervisors. Referring to the table gives the corresponding percentages in the formula for Y%. Hence, the data to calculate Y% are:

Pas = 8%, Nas = 13; Ps = 5%, Ns = 2; Pam = 0, Nam = 0

Substituting these values into the formula:

Y% = [PasNas + PsNs + PamNam] / [Nas + Ns + Nam]

gives the following result:

Y% = [(8 x 13) + (5 x 2)] / [2 + 13] = 7.6%

So with this specific extent and structure of the downline, the average group volume team bonus Y% comes out to 7.6%. Now if the combined network downline produces an average of 45 CC's per month, then the corresponding sales tax exclusive suggested retail turnover by the network is roughly $96,428 per annum (R* = 45 x 12 x 178.57 = $96427.80). The assistant manager's annual income can then easily be calculated from the formula for total profit:

Total Profit = 30%R + X%[R] + Y%[R*]

Substituting these values gives:

Total Profit = 30% x 8571 + 13% x 8571 + 7.6% x 96428 = $11014

The total profit per annum given by the formula for this team leading assistant manager is $11,014. The contribution of the network downline to the total profit is $7,328.53 or which is over 66% of the total profit. This demonstrates the significance of team building. This level of annual earning may serve as a secondary income.

Example 2: Let us next assume that the team leading distributor has developed his network team further and as a result has now achieved manager level in the marketing plan. This means that the personal volume bonus percentage X% is now 18%. Also, to earn bonuses from the downline network, this team leading distributor continues to average a personal turnover of 4 CC's per month so that R = $8,571 per annum. In this example, the downline team is assumed to have grown to 20 active distributors of which 15 are frontline assistant supervisors, 3 are frontline supervisors and 2 are frontline assistant managers.

Referring to the table above gives the team bonus percentage data required to calculate Y% :

Pas = 13%, Nas = 15; Ps = 10%, Ns = 3; Pam = 5%, Nam = 2

With this particular extent and structure of the downline, Y% comes out to 11.75%.

Now, assuming the combined network downline produces an average of 55 CC's per month, then the corresponding sales tax exclusive suggested retail turnover by the network is roughly $117856 per annum (R* = 55 x 12 x 178.57 = $117,856.20). The manager's annual income can then be easily calculated from the formula for total profit and comes to roughly $18,049. The percent contribution from the network downline to the total profit is just under 77%. This level of annual income may serve as a modest primary income, or perhaps as a robust secondary income stream.

In this example, a distributor has gone from assistant manager to manager level, and in so doing has increased his active network from 15 to 20 distributors, and has developed the downline significantly. The corresponding annual income has increased from $11,014 to $18,049. The primary contribution to the annual income at this level is clearly the team building component.

However, having achieved manager status, the distributor has completed the basic team-building process - the critical developmental stage on the path to Leadership and passive income, if that is the way he wishes to proceed.

LEADERSHIP

As indicated in the graph above, the Leadership process may begin at any time from 1 to 5 years: a year or two to make Manager, then one to three years to develop Manager businesses in the downline team. The exact time will vary according to the time and energy the individual distributor can invest in the business and their leadership abilities. Leadership Bonuses are earned when a Manager in the business works with individuals in the team and helps them to reach Manager status: at this point the downline Manager business becomes a discrete entity and Leadership Bonuses come into play. As more downline distributors are brought up to Manager status, each one becomes an independent business unit, and graded Royalty Bonuses are payable on the total turnover of each unit as the distributor moves up through the senior Manager levels.

Each Manager business may be expected to generate an income of around $2000 to $3000 per month for the Senior Manager - so a single Manager business unit, plus the remaining downline turnover, should generate bonuses of about $30,000 per annum. A more mature team with two downline Manager units will commonly produce an annual income in excess of $50,000. As the team continues to grow, and more independent Manager business units are developed, then the Royalty Bonuses will grow also: there are many FLP distributors earning in excess of $100,000 per annum. It is clear that the leadership growth curve as shown in the graph illustrates a very steep rise and thus provides an earning pathway which generates a handsome primary annual income. Thus Leadership and Manager-development is the path to a passive income, which will grow as the team continues to grow. As long as the Manager remains active (turning over at least 4 CCs every month), then the bonus payments will be made - whether or not there is any effort being made to develop the team further.

Other benefits that may be earned at this level include the luxury car scheme, international travel and profit-sharing. These will depend upon reaching specific group turnover levels within a defined 12-month period, and may additionally require certain other targets to be met.

SUMMARY

The Retailing pathway alone may provide a supplementary annual income ranging from about $3,000 to $5,000 (on a very part-time basis) but tends to be limited in income growth potential.

The Team building pathway offers a modest primary income, or a robust secondary income stream, and a continuous modest growth potential. Team building may typically provide an annual income in the range of $5,000 to $23,000 or thereabouts.

The Leadership earning pathway provides a handsome primary income ranging from around $30,000 to $50,000 plus per year, but which is virtually unlimited in its growth potential. The Royalty Bonuses paid on downline Manager businesses produce a passive income which continue throughout the lifetime of the distributor. The business may be passed on to a family member (provided they are 18 years of age or older and maintain their active distributor status) upon the distributor's death. As long as the family member maintains a 4CC turnover per month, he or she will continue to receive the inherited royalty bonuses.

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