WSEAS Transactions on Mathematics
Print ISSN: 1109-2769, E-ISSN: 2224-2880
Volume 11, 2012
Distribution of the Maximum Costs of Products in Direct Selling
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Abstract: Direct selling companies do not reveal the cost of their products and typically design complex rules for their employees regarding commission. Therefore, determining how much an employee offers to other multilevel above employees is difficult. This study selects one direct selling company to investigate the rules of commission. However, knowing the product costs may assist us in selecting an appropriate choice from among the numerous direct selling companies. Statistical knowledge is used to develop a binomial-geometric model for the complicated commission rules. Using this model, the probability distribution is proved and the mean and standard deviation percentages of cost are found for all employees according to the employee proportions in all stages of the two examples. Employees in lower stages must pay more commission to multilevel above employees, particularly in companies with few top employees. Obtaining sufficient employees to earn commission from the low-cost direct selling product is challenging. Therefore, employees should individually judge whether the direct selling products are worth purchasing and selling.
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Keywords: Applied probability, Binomial-geometric distribution, Direct selling, Upgrading and commission rules, Proportion of commission, Distribution of maximum product cost