Dissertation on Multilevel Marketing- Help in Questionnaire and Literature Review
Project Report on Marketing Topics
Writing Tips on Research Proposal and Research Papers
This
paper addresses an important knowledge gap by noting not only why people join MLM
companies, but also why they continue to remain in such companies even after knowing
that they will not be making huge amounts of money or even be financially free.
The main premise of this study is that there will be different perceptions
between joining and remaining in an MLM company. The rest of the paper is
organized as follows: firstly a discussion of the relevant literature is
presented; then the methodology is presented; then the findings are revealed;
and finally a brief discussion is followed by the conclusions of the study,
where the limitations and areas for future research are discussed.
Literature Review
MLM - Multi-Level Marketing
A
firm practicing network marketing offers a rewards program that encourages its salespersons
to build their own sales teams and also be responsible for the promotion and
sale of the company’s products. As an incentive for the salespersons/distributors,
the organization pays a commission based on the sales of the distributor as
well as those of the people below him (Coughlan and Grayson, 1998; and Msweli
and Sargaent, 2001). Individual salespersons of an MLM company do not merely
earn from their own sales but also enjoy an overriding commission from the
sales of those recruited by him (Bloch, 1996). Salespersons will be rewarded
according to their performance and their contribution to the profitability of
the company (Biggart, 1990).
The
MLM industry has been hailed as the new wave of the 21st century in marketing (Poe,
1999). The people involved in this industry were called the new professionals (King
and Robinson, 2000). There is no end to the amount of literature that is being generated
almost daily in praise of the MLM business, by the MLM companies themselves, individual
distributors and MLM umbrella bodies with vested interests in the industry (Dykema,
1999). Although the MLM industry involves millions of salespersons globally and
is being looked at as the marketing system of the 21st century (Poe, 1999),
there are many skeptics and detractors who are adamant about MLM being flawed
and even morally wrong (Clements, 2001).
There
are many researchers who have come up strongly in support of MLM or the more
dignified label, network marketing, as the marketing system of the 21st century
(Poe, 1999; King and Robinson, 2000; Hedges, 2001; and Kiyosaki, 2004). MLM is
seen as the opportunity that provides passive or residual income that offers
the possibility of a high level of income, which is not attainable by those who
only enjoy linear income (Kiyosaki, 2004; Hedges, 2001). It is a business that
promises financial independence and personal freedom with the power of
leveraging, by focusing on the ability to earn residual income or passive
income rather than a linear income (Kiyosaki, 2004).
There
is an intensive effort to give MLM a credibility and dignity. The people
involved in MLM are depicted as a new and exciting breed of people (Poe, 1999).
The MLM industry sells an idea that appeals across the board to many, that one
is in a business (King and Robinson, 2000). The normal rhetoric includes “You
have personal independence, benefit personally but have a downline that works
for you and with you” or “You are indeed in business for yourself, but not by
yourself.” Distributors believe that the down line that they build is their
pipeline that will pump the money, 24 hours a day, 12 months a year, year after
year whether they continue to work or not (Hedges, 2001). MLM distributors are hooked
on the prospect of “working from home, wearing the most comfortable clothes in
their (your) closet, taking a break whenever they want to and still earning a
substantial income in a now respectable profession” (King and Robinson, 2000).
The
critics of MLM contend that MLM is an industry full of hype and unrealistic
goals
for
the majority of individuals involved, claiming that no more than 5%-7% make the
amount of money they expect (Fearer, 1999a). These critics quote specific cases
of high distributor dropouts, like Amway’s 50% annual dropout rate (Dykema,
1999). Others state that MLM, in general, contains a lot of pitfalls, and a lot
of companies take advantage of the people (Fearer, 1999b).
What
is even more damaging is the fact that many of the detractors and critics are people
who were once closely connected to and involved in MLM. They have been inside and
did not like or agree with what they saw (Fearer, 1999b and Dykema, 1999). The
very method of direct selling and the system of recruiting new distributors and
building a downline as practiced in MLM, is strongly criticized as being
socially and ethically unacceptable because it betrays friendship and personal
relationships. Their argument is that when an MLM distributor recruits a
friend, associate or relative, he or she does it out of the vested interest of
enjoying a commission from the efforts of the recruited downline. It is seen as
unacceptable behavior (Bloch, 1996).
Financial
independence, personal power and a life of luxury are the dreams offered by
most MLM companies, yet, these are seen by MLM’s critics as nothing more than a
myth, because most people never achieve it (Felps, 1998). A major criticism was
that, it is a system in which people below you must fail, for the scheme to
survive (Fearer,1999b). Others liken MLMs to a cult, where distributors edify
their uplines and seek their advice on matters like the vehicle they should
drive and even the clothes they should wear (Felps, 1998). The most significant
downside of MLM is its deliberate strategy to tell only what it wishes to tell
its distributors and the extraordinary hype associated with the minority of
achievers as well as the promise of great financial and material gain (Poe, 1999).
Perhaps the cruelest aspect of MLM lies in its persistence to sell hope and
dreams that have little chance of being realized for the majority of its
millions of distributors.
Perception
Perception
is psychologically linked to the pattern of expectations and plays an important
role in determining whether distributors decide to leave or stay in the MLM
industry (Lovelock et al., 2002). The C-A-B paradigm explains the cognitive
processes that affect the way consumers behave. Many consumer researchers have
borrowed and extended this basic theory and added more factors (Hanna and
Wozniak, 2001). The C-A-B model expresses the interrelationship of these
components. Cognition is defined as the mental process of interpretation and
integration and the thoughts and meanings they produce (Peter and Olson, 1996).
Cognitive is claimed to be the perceptual component of attitude as well
(Blythe, 1997).
Affect
is a basic mode of psychological response that involves a general positive or negative
feeling (Peter and Olson, 1996). In other words, affective component is the consumer’s
emotions or feelings about a particular product or brand (Schiffman and Kanuk, 1999).
This general inclination or liking may simply develop without cognitive
information or it may also result after several evaluations on the particular
product (Hawkins et al., 1998). Behavioral, known as conation (Blythe, 1997),
is the consumer’s tendency to respond in a certain manner towards an object or
activity. Behavioral intention is an expression of the favorable or unfavorable
feelings formed earlier (Hanna and Wozniak, 2001). Cognitive is not necessarily
the likelihood or tendency that the consumer will undertake a specific action.
It may include the actual behavior itself (Schiffman and Kanuk, 1999).
The
above three components are claimed to be interrelated. Both affective and cognitive
systems respond independently to stimuli and each of the systems can respond to
the output of the other system. Affective responses can be referred to as emotions,
feelings, moods and evaluations. On the other hand, cognitive responses include
knowledge, meanings and beliefs. Interpretation from both affective and
cognitive systems will then determine the decision made (Peter and Olson,
1996). It is obvious that many join the MLM industry because of their positive
perception towards MLM that influences their intention and therefore their
subsequent deliberate behavior, which is to participate in the MLM industry.
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