Nowadays lots of people experience that their current income is not sufficient to fulfil their dreams like a car, a flat, going for holidays or a house. Maybe you belong to those who expect more from live than working 40 hours a week and solely for the ideas of other people or organisations. But what could we ‘do’ to achieve our greatest dreams? Of course you could work slightly longer every week – working even more? Or you could put some money aside – but which money? This book is supposed to present another way to build up some-thing alongside your normal job. But how should that work and does it really pay off? As an alternative for your second job this book presents a special concept in its qualitative and structural as well as quantitative and financial aspects. The author successfully works with this concept since several years. He explains the principles of a business system that grows constantly and puts people in the position to gain A SECOND INCOME – from the start alongside their job to a new livelihood. Let’s put an existing and successful model into practice – together with an experienced expert. Eike Clausius
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Presentation of distribution channels
Distribution channels in qualitative comparison
Criteria-related comparison of distribution channels
People-related comparison of distribution channels
The challenge of self-employment
The success comes from ‘doing’
Distribution channels in quantitative comparison
The potential of the duplication
Income generation in Referral Marketing– the ‚tree-metaphor’
Earnings-related comparison of distribution channels
Functioning of Referral Marketing
The basics – Every beginning is hard?
‚The power of the Third Person‘
The Petrol Station Example
The development of the system – Duplication
A qualitative view on Referral Marketing
The generation of income in Referral Marketing– The truck metaphor
Graphical examples of the Duplication – qualitative view
Consideration of the 1-Duplication – per month
Consideration of the 1-Duplication – per level
A quantitative view on Referral Marketing
Income opportunities after six months of 1-Duplication
Return on Investment – mathematical consideration
Step by step to your Second Income
Referral Marketing as learning process
About the author
Prof. Dr. Eike Clausius
I would like to thank the people who have bought this book, because they’ve decided to put themselves in the focus to achieve an even better quality of life.
My appreciation goes to all the business people who offered me good insights behind the scenes of the ‘Second Income’. Thank you, also for the positive references and the requests for expansions that I realized with this version of the book that has been extended by several chapters.
Furthermore I would like to extend my most special thanks to Petra Grundke and Kevin Reuther for their excellent cooperation and also to my wife Evelyn to whom I dedicate this book.
“If you help others to achieve what they want,
you will achieve everything on earth.”
Zig Ziglar (Failla, 2002, S. 35)
During the last decades a lot of things have changed in terms of economics – especially in technologically highly advanced countries such as the USA, Japan and the European countries including Germany. The employment situation will adapt to the ongoing globalisation and dynamic markets. Looking for a permanent employer as it was taught to our children does not work anymore today. The working environment has fundamentally changed.
Maybe you have already experienced that you work and work, but thereby feel controlled and steered. As an employee, you realise that your lifetime is determined by your company’s work cycle, and that you exchange lifetime for money. As an entrepreneur – especially in small and medium sized businesses – you might also get the feeling of being other-directed, for example by your responsibility towards your employees and their individual health and life situation. You invest all of your lifetime in your business and realise that there is less and less time for family, friends and for yourself?
“If your business depends on you,
you don’t own a business – you have a job.
And it’s the worst job in the world
because you’re working for a lunatic!”
Michael E. Gerber
In this case, the ‘madness’ is about someone who believed in something that was not real. A real entrepreneur is free. He takes responsibility, but his business is not depending on him. He rather works on his company than for his company. Especially the often-described ‘freelancers’ who are free to work all the time, cannot escape the so-called trap of the ‘rat race’. Their lives are often determined by their work. You might sometimes get the feeling that this thing you suspect to be the ‘career ladder’ is nothing more than this ‘rat race’ from the inside. Would you be interested in a chance to improve that situation? The following is intended to describe a method to help you do so.
Let us take a look at the possibilities of improving the above-described situation. Imagine you could get to know something where you…
don’t need any capital investment,
can freely choose your workplace,
are in the centre of your life,
can become independent – step by step,
get paid adequately,
can build up a global team,
can achieve an inheritable financial income,
can build up a pension – independent from the statutory pension payments and without any payments.
Some might already know this concept, because it developed from the word-of-mouth-recommendation: You recommend a good movie or a good book, or you talk to someone about the quality of your car.
Also in the ‘ordinary economy’, some companies know that product recommendations might be rewarded with a onetime commission. Usually, these are financial or material bonuses, such as coffee makers or tools. But how many of those machines do you need? Besides, you are not involved in any follow-up business.
In the course of this publication, some of the following aspects will be mentioned:
How does such marketing of recommendations work?
How can recommendations be classified concerning the different distribution channels?
How can Referral Marketing be described in terms of its structure and financial aspects?
What are the perspectives of achieving a ‘SECOND INCOME’ with this kind of marketing?
Which personal freedom could you achieve – for you and for others – to live a self-determined life?
This book shall come up with an answer to these and many other questions.
“If you want to succeed
you should strike out on new paths
rather than travel the worn paths
of accepted success.”
John D. Rockefeller
The following figure underlines which classifications of distribution channels exist related to building a marketing concept based on recommendations (the concept of Referral Marketing).
Classification of distribution channels related to Referral Marketing
Relevant distribution channels are introduced and could be considered as a path towards Referral Marketing. However, other distribution channels as for example wholesale are neglected due to their minor relevance. Retail therefore presents the first distribution channel and can be subdivided into traditional retail and direct sales. According to this structure, a development towards Referral Marketing through direct sales and Network Marketing can be seen. Furthermore, franchising should be introduced as a further distribution channel that can be put into the context of this development. It combines aspects of (distribution-)networks with traditional retail.
In the traditional or classic retail sector goods are moved from a wholesaler via an intermediary and a retailer to the customer. The wholesalers often are either companies operating abroad and importing goods, or exporters who distribute goods. Intermediaries are usually located nationally and distribute goods to the retailers. The gross price – the price that is paid by the customer – is the net price increased by the VAT rate. This issue is introduced by the following figure ‘Structure of a customer price - retail’. The customer needs to pay for the production as well as for each distributor. This means that approximately 70% of the final price is determined by the distribution from wholesaler to intermediary and retailer!
The composition of a customer price – retail
Usually, the retailers have the highest risk. They need to pre-finance goods, pay rent for the stores, and additionally need to pay for things like gas, water, heating, salaries of employees, insurance and a huge number of social contributions. Thus, a lot of (life-)time is needed to plan all these activities properly.
Many retailers can surely understand this situation, because they often are under budgetary and/or time pressure. However, such investments might pay off and lead to a certain financial independence under the right circumstances.
In the franchise sector the producer or franchisor decides to market his goods (or services) with a properly tested business model. This can be described as system business or system gastronomy. The brand and the business concept are well known, but the ‘freelancer’ is bound by the instructions and the concept of the franchisor and therefore has no freedom of choice concerning the marketing of his goods.
The entrepreneur or franchisee has the opportunity to make decisions concerning human resources, regional advertisements, or renting property. Besides that, he is bound by the requirements of the franchise system. Any changes or new concepts need to be approved by the franchisor. The reliability of an existing and well operating concept, however, limits the freedom to take entrepreneurial decisions. The strength of this distribution channel is that goods of equal quality are presented in an equal way on the world market.
Franchisees pay a one-time entry fee, which can be an up to 7-digit Euro amount. This includes the business concept, all additional services of the franchisor including brand utilisation (Clausius & Schütz, 2014), product- and system-know-how as well as marketing. Furthermore, there usually is a revenue share of the franchisor.
Direct sales means that the producer decides to market his goods with sales partners (distributors). At the distribution channel of traditional direct sales, independent distributors (also called advisors) buy the producer’s goods to resell them to the customers who need to pay the gross price.
Usually, this business is about durable consumer goods requiring explanations (Clausius, 2014, S. 19) that can be used over several years such as industrial machines, cars or cameras. The producer delivers the goods to his trusted sales partners. They usually experience a local, regional or country specific territorial protection.
The composition of a customer price – direct sales
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