Network marketing organizations: Compensation plans, retail network growth, and profitability

Anne T. Coughlan*, Kent Grayson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

Abstract

Network marketing organizations, or NMOs, are retail selling channels that use independent distributors not only to buy and resell product at retail, but also to recruit new distributors into a growing network over time. Commissions and markups on personal sales volumes, and net commissions on the personal sales volumes of downlines, are the methods of compensation commonly used to motivate NMO distributors. In this paper, we develop, analyze, and calibrate a dynamic decision model of the growth of a retail NMO. Descriptive and prescriptive insights show how compensation and other model parameters affect distributor motivation, sales, and network growth and profitability.

Original languageEnglish (US)
Pages (from-to)401-426
Number of pages26
JournalInternational Journal of Research in Marketing
Volume15
Issue number5
DOIs
StatePublished - Dec 1998

Keywords

  • Compensation plans
  • Decision support models
  • Direct selling
  • Network marketing organizations

ASJC Scopus subject areas

  • Marketing

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