Download participation in network marketing companies: the

IN NETWORK MARKETING COMPANIES: THE
PARTICIPATION
FACTORS THAT INFLUENCE THE PART-TIME
MOTIVATIONAL
DISTRIBUTORS IN KUCHING, SARAWAK.
NG GEK KEUN
This project is submitted in partial fulfillment
the requirements
of
for the degree of Bachelor of Economics and Business Honours
(Marketing Program)
Faculty of Economics and Business
UNIVERSITI
MALAYSIA SARAWAK
2004
ABSTRACT
PARTICIPATION
IN NETWORK
MOTIVATIONAL
FACTORS
DISTRIBUTORS
MARKETING
THE PART-TIME
INFLUENCE
THAT
IN KUCHING,
THE
COMPANIES:
SARAWAK.
By
Ng Gek Keun
The main aim of this study is to determine whether there are significant relationships
between the respondents'
of becoming
decision making
and the four motivational
factors
distributors
in network
(financial
satisfaction,
marketing
companies
flexibility,
job satisfaction and social satisfaction). Besides, it intends to determine
the differences
differences
demographic
between the distributors'
and the four motivational
factors (gender and age)
factors as well as the relationships
them. The scope of this study is limited
to the active part-time
among
distributors
of
in
Sarawak.
Kuching,
A
direct
do
licensed
to
selling
network marketing companies
from
female)
128
the
total
(142
270
selected
were
total of
and
male
respondents
population
motivational
had
linear
that
the
The
5370.
of
shown
all
of
regression
results
of
factors
are having
significant
relationships
with
the respondents'
decision making of becoming distributors. There are significant differences between
differences
gender
factors while
and the motivational
for age differences,
financial satisfaction shows no significant differences with the motivational
ANOVA
One-way
when
only
factors
had
Correlation
Pearson
Results
shown
of
out.
was carried
that all of the four motivational
factors are having positive relationships
between
factor
in
influencing
dominant
is
the
Overall,
the
most
social
satisfaction
each other.
decision making of respondents while financial satisfaction is the least dominant one.
iv
ABSTRAK
DALAM
PENYERTAAN
ORGANISASI
MOTIVASI
FAKTOR-FAKTOR
SEPARUH
PENGEDAR
NETWORK
MARKETING:
PARA
YANG MEMPENGARUH
MASA DI KUCHING,
SARAWAK.
Oleh
Ng Gek Keun
Penyelidikan ini bertujuan mengkaji sama ada wujudnya perhubungan bermakna di
antara keputusan para pengedar untuk menyertai
marketing
organisasi network
kepuasan
dengan keempat-empat faktor motivasi (faktor kewangan, kefleksibelan,
di
ia
itu,
bertujuan
Selain
kepuasan
dan
antara
perbezaan
mengkaji
sosial).
pekerjaan
ketidaksamaan maklumat demografik responden (jantina dan umur) dengan semua
faktor motivasi
ini
kepada
kajian
Skop
terhad
serta perhubungan antara mereka.
berlesen
dalam
marketing
network
organisasi
pengedar separuh masa yang aktif
(142
270
Seramai
Sarawak.
di
Kuching,
langsung
jualan
orang
responden
membuat
lelaki dan 128 orang perempuan) telah dipilih daripada jumlah populasi 5370 orang.
Regression
bahawa
faktor
Keputusan
Linear
mempunyai
keputusan
Terdapat
dengan
bermakna
para
responden.
perhubungan
membuktikan
semua
motivasi
faktor
dengan
jantina
ketidaksamaan
di
ketara
responden
semua
antara
perbezaan
motivasi,
ketara
dengan
kewangan
kepuasan
hanya
tiada
perhubungan
manakala
ketidaksamaan
umur
responden
Keputusan Pearson Correlation
apabila
ujian
ANOVA
satu hala
menyatakan semua faktor motivasi
dijalankan.
mempunyai
kepuasan
keseluruhannya,
Secara
sosial adalah
perhubungan positif antara mereka.
faktor utama bagi responden, manakala kepuasan kewangan adalah faktor yang
paling tidak diutamakan.
V
ACKNOWLEDGEMENTS
First and foremost, I would like to convey my heartfelt thanks and gratitude
to Cik Siti Hasnah and Puan Norzaidawati
Zaidin, my supervisors, for their expert
in
the
this
throughout
year.
out
study
carrying
and
encouragement
advice, assistance
My sincere thank to all my friends and course mates, who have provided me
with
moral
support, encouragement,
guidance and assistance in my quest for
knowledge. In particular, I would like to thank Mr. Bong Kuet Foong, for his help,
Also,
I
during
this
the
would
study.
process of completing
comments and advices
like to thank all the respondents who have been very co-operative and candid in their
views during the administration of questionnaires.
Finally, my deepest thank to my family, for giving me the warmest supports
and advices in my life.
vi
TABLE
OF CONTENTS
Pages
LIST OF TABLES
xi
LIST OF FIGURES
xii
CHAPTER
1-9
1: INTRODUCTION
1.0 Introduction
I
1.1 Background of Research
I
1.2 Problem Statement
7
1.3 Objectives of Research
7
1.5 Scope of Research
8
1.6 Significant of Research
9
CHAPTER
2: LITERATURE
10-26
REVIEW
2.0 Introduction
10
2.1 Direct Selling
10
12
2.1.1 The Direct Selling Industry
14
2.2 Network Marketing as a Type of Direct Selling
16
2.2.1 The System of Network Marketing
2.2.1.1 Duplication and Multiplication
2.3 The Advantages of Network Marketing
in Network Marketing
17
18
2.3.1 Flexibility
18
2.3.2 Quality and Quantity of Information
19
2.4 The Concept of Motivation
20
2.4.1 Work Motivation
20
vii
2.4.1.1 Distributors'
Motivation
2.5 Model of the study
CHAPTER
21
25
3: METHODOLOGY
27-37
3.0 Introduction
27
3.1 Research Design
27
3.2 Population and Sample
27
3.2.1 Population
28
3.2.2 Sampling
28
3.3 Data Collection
30
3.4 Research Instrument
31
3.5 Pre-test
32
3.6 Data Analysis
33
3.6.1 Descriptive Statistics
33
3.6.2 Hypotheses Testing
34
3.6.2.1 Linear Regression
34
3.6.2.2 One Way Analysis of Variance (ANOVA)
34
3.6.2.3 Correlation coefficient
35
3.6.2.4 Factor Analysis
35
3.7 Research Hypotheses
35
3.8 Conclusion
37
CHAPTER 4: RESEARCH FINDINGS
38-55
4.0 Introduction
38
4.1 Frequency Distributions
38
viii
4.2 Descriptive Statistics: Measures of Central Tendencies
44
4.3 Findings
47
Relationships between respondents' decision making and the four
4.3.1
47
income
factor
factors
based
monthly
on current
motivational
Differences between demographic factors (gender and age)
4.3.2
differences and the four motivational
factors of respondents
factors
4.3.3
Relationships among the four motivational
4.3.4
The dominant factor among the four motivational
CHAPTER
50
53
factors
54
56-69
5: DISCUSSIONS
5.0 Introduction
56
5.1 Respondents' Demographic Profile
56
5.2 The Dominant Factor among the Four Motivational
5.3 Relationships Between the Four Motivational
Factors
Factors and Respondents'
57
59
Decision Making Based on Current Monthly Income Factor
Factor
5.4 Discussion on Each of the Motivational
60
5.4.1 Discussion on Financial Satisfaction
60
5.4.2 Discussion on Social Satisfaction
62
5.4.3 Discussion on Job Satisfaction
63
5.4.4 Discussion on Flexibility
65
5.5 Differences Between Demographic Factors (Gender and Age) and the Four
Motivational
66
Factors of Respondents
5.5.1 Differences Between Gender Differences and the Four Motivational
Factors of Respondents
ix
66
5.5.2 Differences Between Age Differences and the Four Motivational
67
Factors of Respondents
5.6 Relationships Among the Four Motivational
CHAPTER
6: CONCLUSION
Factors
AND RECOMMENDATIONS
68
70-75
6.0 Introduction
70
6.1 Conclusion
70
6.2 Recommendations
71
6.3 Recommendations for Future Research
74
of Research
74
6.3 Limitations
REFERENCES
APPENDIXES
Appendix A: Result of Reliability
Analysis
Appendix B: Result of Pre-test
Appendix C: Survey Questionnaire
X
LIST OF TABLES
Pages
direct sales
6
Table 1.1
Number of salespeople based on countries (Worldwide
data, 2003)
Table 4.1
Means and standard deviations of the total scores for the four
motivational factors among the respondents
44
Table 4.2
Means and standard deviations of the total scores for every
question
45
Table 4.3
Results of Regression Linear for determination of the relationship
between distributors' decision making and financial satisfaction
based on current monthly income factor
47
Table 4.4
Results of Regression Linear for determination of the relationship
between distributors' decision making and flexibility based on
48
factor
income
current monthly
Table 4.5
Results of Regression Linear for determination of the relationship
between distributors' decision making and job satisfaction based
factor
income
monthly
on current
48
Table 4.6
Results of Regression Linear for determination of the relationship
between distributors' decision making and social satisfaction
based on current monthly income factor
49
Table 4.7
Results of One-way ANOVA for differences between gender and
financial
differences
satisfaction among respondents
and
age
50
Table 4.8
Results of One-way ANOVA for differences between gender and
flexibility
differences
among respondents
and
age
51
Table 4.9
Results of One-way ANOVA for differences between gender and
job
differences
and
satisfaction among respondents
age
51
Table 4.10
Results of One-way ANOVA for differences between gender and
age differences and social satisfaction among respondents
52
Table 4.11
Results of Pearson Correlation for determination of relationships
among the four motivational factors
53
Table 4.12
Result of Factor Analysis for determination of the most dominant
factor among the four motivational factors
54
X1
LIST OF FIGURES
Pages
Figure 1.1
Statistic of American Business List
1
Figure 1.2
Estimated global sales force (2002)
4
Figure 1.3
Total distributors in Malaysia (August, 2003)
5
Figure 2.1
Model of the study
26
Figure 4.1
Distribution
of respondents based on gender
38
Figure 4.2
Distribution
of respondents based on age group
39
Figure 4.3
Distribution
of respondents based on marital status differences
40
Figure 4.4
Distribution of respondentsbased on highest education level
completed differences.
Figure 4.5
Distribution
of respondents based on occupation differences
41
Figure 4.6
Distribution
differences
of respondents based on types of company
42
Figure 4.7
Distribution of respondents based on current monthly income
differences.
42
Figure 4.8
Distribution of respondents based on current household monthly
income differences.
43
Figure 4.9
Component plot in rotated space
55
xii
40
Chapter
1: Introduction
1.0 Introduction
This chapter provides a general idea of this research. It discusses the research
background, brief history of network marketing, problem statements and objectives
of the research. Model of the study, research scope and significant
of research are
also discussed in the later part of this chapter.
1.1 Background of Research
Over the years, many have dreamed of being one's own boss, seeking financial
fact,
independence.
In
them
beauty
health,
freedom,
can
of
not
many
time
and
and
income
the
time,
dreams
great
earning
same
successfully and at
really achieve their
American's
Based
lifestyle.
the
of
statistic
on
and enjoy a relaxing
for 40 years, many
United States of America, by the age of 65 and after working
people will fall into the following
categories: -
Figure 1.1: Statistic of America
Business List
60%- ool
Business List in
ý
LEMMA
1
50%- .-I
40%- loll
3M
20%
10%
0%
r
ýI
ý
ii
Rich
Financial
Working
Independent
1
11
Passed away
In Debt
This statistic showed that only 4 out of 100 of them will
actually be financially
independent and only one will get rich after working for so many years. This means
that people have been trying to find the easiest way for them to really achieve
lifestyle.
enjoying
easy
and
successful
Nowadays, many have found that network marketing is a way to produce extra
incomes through
effort
part-time
business their full-time
have
them
made this part-time
of
and most
focus. In a study done by Kearney and Bandley (1991) stated
that everyone has only 168 hours in a week and these 168 hours are used up through
a rather similar pattern for each of us: living
hours
40
a
plus
earning
c
49 hours sleeping
home
dressing,
hours
at
21
and
working
commuting, personal pursuits
eating,
c
Therefore, most of us have about 20 to 30 hours left at the end of week. Some have
decided to take part of that left over time and use it to build network marketing
businesses because it can ultimately lessen their burden and increase their
satisfaction
for
is
is
It
all about.
a strategy
People may question what network marketing
selling
products
whereby
independent
draw
to
commissions
and
salesmen
Whilst Bauer and Miglautsch
salesmen are permitted
to recruit
from the sales of their recruits (Poe, 1999).
(1992) explained that network marketing as a type of
direct selling that usually performed by an independent distributor
representing the
differentiate
In
franchisor
to
order
service.
of
a
product
or
manufacturer or
the traditional
other
businesses, Kiyosaki
it from
(2001) positioned network marketing as a way
2
it
is
because
becoming
a revolutionary
rich
of
new way of sharing the wealth with
anyone who truly wants to acquire great wealth.
The development of the network marketing concept and its first use has been
credited to Nutrilite,
the mid
a United States of America based direct selling organization. In
1940s, the company was involved
in the production
it
had
developed
for
a very particular
which
supplements,
and sale of food
and unique method of
marketing. In network marketing, companies move their products through a group of
independent distributors who buy wholesale, sell retail and sponsor other people to
do the same. In turn, overrides can be earned on multi-levels
of people in the
organizations.
According
to American Direct Selling Association (DSA), approximately
one
in four Americans will give network marketing a try at some point in their lives and
it
but
those
try
ten
less
who
will
of
than one year,
percent
about
most will quit after
because
industry
to
direct
it.
The
word of
grow
continues
sales
make a career of
mouth and personal recommendations
informing
people about products.
are one of the most powerful
from
Apart
that, with
corporate
ways of
downsizing
increasingly
job
becomes
for
be
the
elusive.
security
to
search
a reality,
continuing
For those who have jobs, there has been an accelerating
1999 National
benefits and wages. Based on the DSA's
trend towards cutting
Sales Force Survey, the
direct
for
becoming
sales representative
a
most common reasons
are to increase
income, obtain high quality products and to receive products at discounted prices.
According to World Federation of Direct Selling Association', the estimated of
increasing
from
8.48
force
(figure
1.2)
has
been
million
continuing
global sales
Founded in 1978, is a non-governmental, voluntary organization globally representing the direct
selling industry as a federation of national Direct Selling Association.
3
people in 1988 to 43.84 million
in 2001. This shows that there are getting more and
more people joining in direct sales companies.
Figure 1.2: Estimated Global Sales Force (2002)
Estimated
Global
Sales
Force
1988-2001
In millions
(As of November 2002)
43:84
39,71
3aES
3s.Sa,
3U9
21.68
21
17.67
15 ý
10
1988 1989 1990 1991 1992 1993 1994 1996 1996 1997 1998 1999 2000 2001
Based on an International
Statistic of Worldwide
Direct Sales Data2 dated on 21 s`
August 2003 (refer to table 1.1), direct sales companies have been operating in 51
increased
has
been
from
43.84
The
total
the
salespeople
of
world.
all
over
countries
in
2003.
In
Malaysia
47.28
in
2001
to
alone, there are
million
people
million people
3 million
13%
of the total population
are
about
which
salespeople,
of Malaysia.
Currently, the total population of Malaysia is 24014.2 people3.
Z Source: http: //www. wfdsa. org/statistics/index. cfm? fuseaction=display_stats&number-1.
3 The World Gazetteer: Current population figures of cities, towns and places of all countries.
Population in [1000] for 2003. Source: http://www. world-gazetteer. com/home. htm.
4
Figure 1.3: Total Distributors
in Malaysia
(August, 2003)
There are many companies that were founded on the network
principle
marketing
and have continued to thrive using this marketing method. Most of them
are direct sales and insurance companies that operating locally and internationally.
According to the Ministry
of Domestic Trade and Consumers Affairs, as of January
2003, there are 402 companies licensed to do direct selling, of which 225 companies
are in multi-level
companies
marketing,
in a combination
125 in single-level marketing, 25 via the post and 27
of postal and single-level
Among them, the most popular mode is multi-level
marketing
marketing,
in Malaysia.
with most of them
health
dealing
in
herbal
supplements. Today, there are a few well
and
products
are
known network marketing companies that can be found in Malaysia such as Amway,
Nu Skin, Avon Cosmetics, Tupperware, Sunrider, Elken, CNI Enterprise, Cosway,
Omegatrend and so on. Thus, it is interesting to discover the true power behind
network marketing and the reasons why more and more people want to get involved
with it.
5
Table 1.1: Number of Salespeople Based on Countries
Sales Data, 2003)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
r
23
24
25
(Worldwide
Worldwide Direct Sales Data (August 21,2003)
Number of Salespeople
Countries
570,000
Argentina
650,000
Australia
11,946
Austria
15,077
Belgium
1,174,583
Brazil
891,469
Canada
205,000
Chile
310,000
Colombia
177,014
Czech Republic
75,000
Denmark
12,258
Estonia
52,720
Finland
300,000
France
337,000
Germany
80,000
Hong Kong
140,667
Hungary
806,000
India
4,765,353
Indonesia
260,000
Ital
2,000,000
Ja an
3,050,000
Korea
Mala sia
Mexico
Netherlands
3,000,000
1,820,000
38,000
New Zealand
97,000
26 Norway
68,000
27 Peru
28 Philippines
29 Poland
30 Portugal
31 Russia
32 Singapore
33 South Africa
34 Spain
35 Sweden
36 Switzerland
37 Taiwan
38 Thailand
39 Turkey
40 Ukraine
41 United Kingdom
42 United States
43 Uruguay
44 Venezuela
45 Others
TOTAL
136,000
2,000,000
510,000
44,595
1,146,573
255,000
400,000
109,000
100,000
8,543
3,200,000
3,800,000
210,260
281,715
501,000
13,000,000
31,171
502,000
253,214
47,276,158
6
Direct
Statement
1.2 Problem
Network
marketing offers its distributors many advantages and opportunities.
Anyone can get involved
little
done
it
be
it
time
or
as
much
with
can
and
with
commitment as one likes.
Generally, the problem is that the activity of recruiting
is
socially and psychologically
marketing schemes
people into network
in
to
people
most
unacceptable
it
brings
In
the
with
some
the society.
process of network marketing
other words,
highly
behavior
that
types
problematic
are
of
perceptions, situations, attitudes and
and doubtful
in terms of its nature of business which
involved
recruiting
or
is
happening
kind
day
This
day
to
of
scenarios
selling.
sponsoring new prospects and
in all kinds of direct sales or network marketing companies locally or even globally.
However, evidence have shown that there are still lots of people willingly
to become
distributors in network marketing companies, either in part-time or in full-time basis.
So, what are the motivating
marketing
in
influence
to
them
that
network
participate
reasons
distributors?
as
companies
Are the chosen motivational
factors really
having significant relationships with their decision making?
1.3 Objectives of the Research
To determine the significant relationships between the respondents' decision
factors
(financial
four
distributors
becoming
the
motivational
and
making of
based
flexibility,
job
on
satisfaction)
social
satisfaction and
satisfaction,
current monthly income factor.
7
To determine the differences of distributors'
ii.
the four motivational
gender and age differences and
factors.
iii.
To determine the relationships among the four motivational factors.
iv.
To verify the dominant factor among the four motivational factors.
1.5 Scope of Research
The scope of this research is to determine
influence the participation
Kuching
flexibility,
City.
of the distributors
in network marketing
companies in
factors (financial
In this research, four motivational
satisfaction,
job satisfaction and social satisfaction) will be tested whether there is
having significant relationships with the distributors'
Therefore,
Kuching
factors that
the motivational
decision making.
the subject of this research is the present distributors
area who are currently
participate
in any of the network
it
is
direct
do
licensed
multi-level
to
regardless
whether
selling,
companies
level marketing.
The examples are Amway,
Nu Skin, Elken,
Omegatrend, Avon Cosmetics, Sunrider, Nutrimetics,
CNI
within
marketing
or singleEnterprise,
Tupperware, Cosway and so
forth. Most of the products that they are dealing in are nutritional
supplement
from
household
Apart
hair
products.
and
care products
products, cosmetics, skin and
business
by
in
involved
building
their
they
own
networks
are also
selling activities,
distributors.
new
sponsoring
or
recruiting
Network marketing is a kind of business that can be built in either full-time or
is
basis.
In
targeted to
this
to
research
result,
order
obtain
more
accurate
part-time
those part time distributors only. This is because the intention of being part-time
distributors has significant differences from those who work in full-time. It is
8
undeniable that there are many kinds of part-time businesses offered in the market.
Somehow, those part-time distributors have decided to involve in network marketing
businesses. Hence, there must be some reasons behind it that motivate and influence
them to do so. However,
not all of them have the same motivational
factors.
Therefore, the result that is going to be obtained will be more obvious and precise in
determining the relationships between the variables. In addition, the most influential
motivational
factor can be identified as well.
1.6 Significant of Research
This study aims to present a clearer picture of why these financial satisfaction,
flexibility,
job satisfaction and social satisfaction are the influential
factors in inspiring
the part-time distributors
companies. Moreover,
each of the motivational
to participate
motivational
in network marketing
the weight that is given by those part-time
distributors
on
factors can be verified. It is crucial for network marketing
distributors to understand the real needs and motives why most people participate in
such businesses. By integrating these motivational
factors, it will be more essential
in finding a better way to convince new potential prospects to involve in network
marketing businesses.
Apart from that, it also intends to expose to those none network marketing
distributors
concerning
on the opportunities,
strengths and potential
of network
marketing. By this way, it helps to reduce those negative and doubtful perceptions as
well as attitudes and behaviors among the society on network marketing.
9
Chapter
2: Literature
Review
2.0 Introduction
This chapter presents some of the important concepts regarding the topic of
this research based on previous research studies. At the outset, the meaning of direct
industry,
direct
the concept of network marketing
selling
selling,
and its working
system are discussed. This then followed by the benefits and advantages of network
marketing. Finally, the motivation
factors that motivate or influence the distributors,
to participate in network marketing are discussed.
2.1 Direct Selling
First and foremost, it is important to seek out the difference between direct
in
direct
order to get a clearer and more precise understanding
marketing
selling and
on direct selling. According
to World
Federation of Direct
Selling Association
(2001), direct selling should not be confused with terms such as direct marketing or
distance selling, which may be described as an interactive system of marketing that
transaction
to
at
a
measurable
response
or
affect
media
advertising
more
or
uses one
database.
For
location,
this
example, some commonly
stored
on
a
activity
with
any
known types of direct marketing and distance selling techniques are telemarketing,
direct mail, and direct response. Besides, Kustin and Jones (1995) also claimed that
direct selling is differentiated
defined as a relational
from direct marketing, of which direct marketing is
process where products are sold directly
using direct mail, telemarketing
and direct response advertising
solicitation.
10
to the consumer
such as television
On the other hand, direct selling may best described as the marketing
of
in
face
in
face
directly
to
to
generally
manner,
a
consumers
products and services
their homes or the homes of others, at their workplace and other places away from
by
demonstration
locations,
through
or
personal
explanation
usually
permanent retail
1978). They added that direct selling
(WFDSA,
direct
independent
salesperson
an
important
provides
benefits to individuals
who desire an opportunity
to earn an
income and build a business of their own; to consumers who enjoy an alternative to
like;
department
the
stores
or
and to the consumer products
centers,
shopping
market. It offers an alternative to traditional
flexible
income
earning opportunity
whose responsibilities
employment
to supplement
for those who desire a
their household
income, or
full
for
do
or
part-time
regular
not allow
or circumstances
time employment.
Direct Selling is being considered as a vehicle for marketing to consumers or
(2002)
Wotruba
Stanworth
Brodie,
1996).
Wotruba,
buyers
(Peterson
and
and
end
defined that Direct Selling is a marketing method exhibiting substantial growth in
it
involves
because
is
so many
particularly noteworthy
sales revenues and
independent
Direct
contractors, not
are
usually
salespeople
salespersonparticipants.
direct
In
the
selling companies are
with
opportunities
company employees. addition,
open to
persons from
all
backgrounds, experience levels,
and personal
characteristics.
Peterson and Wotruba (1996) on the other hand defined direct selling as faceto-face selling away from a fixed retail location. Whilst Kustin and Jones (1995)
individual
direct
that
one-to-one sales presentations rather
selling
requires
explained
than indirect presentations. Additionally, Lee (1999) defined that direct selling is a
distribution system where products from a manufacturer or national distributor flow
11
directly
distinguishing
The
body
of sales people.
a
to the purchasers through
characteristic
of this method of marketing is that the seller arranges to meet the
buyer in order to create a sale instead of waiting for a buyer to come to him at a
shop.
Furthermore,
direct
selling
had been further
as to gain full
discussed
(1996),
Wotruba
Peterson
there
According
to
the
are
and
concept.
of
understanding
three perspectives
"strategic".
of direct
Operationally,
selling,
designated as "operational",
direct selling is a straightforward
"tactical"
personal selling activity
interpersonal
form
it
be
known
in
communication.
of
as
a
can
other word,
or
tactical perspective,
From a
direct selling can be considered as a way organizing
Strategically,
function.
the
selling
and
activities
channel or mode of distribution,
and
sales
direct selling can be viewed as a
in which it is a mean of gaining access to a market
doing
business.
of
or a way
Thus, it is comprehensible that direct selling is wholly differentiated from
direct marketing, in which it is a distribution method for product or service directly
fixed
business
from
through
a
contact
away
personal
to the end users or customers
location.
2.1.1 The Direct Selling Industry
It has been a shift in the nature of direct selling organizations.
involves the relative incidence of the two types of organization
identified
as multi-level
Peterson and Wotruba,
The shift
structures that are
2002;
Stanworth
Wotruba,
(Brodie,
level
and
and single
1996). They noted that in a multi-level
organization,
direct
become
direct
train
part of
and
other
salespeople
who
recruit,
supervise
salespeople
12
down
the recruiter's
line
and in return,
the recruiting
salesperson receives
her
his
down
line
the
own sales.
or
as
on
as
well
members
sales of
compensation on
the salespeople do not build their own
Whereas in a single level organization,
organizations
via recruiting
but rather, they focus their efforts on
and training,
selling and achieving compensation based on their own sales.
Moreover,
Butwin
(1997) claimed that there are two very different
direct selling companies: the direct sales companies and the multi-level
Direct sales companies are known as "seller-based",
types of
companies.
which means that they give
These
he
distributor
income
vehicles
to
the
at
retail.
a
sale
she
makes
or
when
more
usually
market
higher-ticket,
one-time-sale
or durable
items
such as durable
in
initial
inventory
in
invest
have
to
He
that
more
one
added
automotive products.
these direct sales companies because each individual unit of products costs more and
in addition,
income.
In
little
is
contrast, multi-level
there
or no residual
usually
companies usually offer reasonably priced products that people consume within a
month
or two
and then re-order.
The author highlighted
that in multi-level
is
is
lesser
because
involved
there
become
the
and
cost
companies, more people can
information,
For
income
promised.
residual
multi-level
networks are built by a lot of
bit.
little
is
doing
them
a
people where every one of
According to another researcher,Bloch (1996) stated that multi-level firms sell
but
distribution
and
retail
outlets,
system
their goods not through a conventional
For
friends,
individual
their
to
and
strangers.
acquaintances
through
people, selling
has
but
from
direct
for
is
that
sales
made,
one
sales
this, commission paid not only
he
by
or she recruits as well.
made
Furthermore, Pratt (2000) explained that a large network marketing
organization also known as network direct selling or multi-level
13
marketing
organization
in
which
it
organization uses individual
is a social
structure
through
which
a sponsoring
members or distributors to sell its products and services
face-to-face, as well as outside of a central business location.
In addition, according to the World Federation of Direct Selling Associations,
one crucial element of the direct selling industry is multi-level
over many
proven
compensating
direct
services directly
years to be a highly
successful
sellers for the marketing
and effective
and distribution
to consumers. Where as, multi-level
network marketing,
marketing and it has
method
of
of products and
marketing
also known as
in which it is one type of non-store retailing methods. (Kustin
and Jones, 1995).
2.2 Network Marketing As a Type of Direct Selling
Network marketing as a type of direct selling had been supported by a several
researchers with
network
definitions.
various
marketing
is a type of direct
independent distributor
service. According
Bauer and Miglautsch
selling
(1992) claimed that
that usually
performed
by an
franchisor
the
of a product or
or
manufacturer
representing
to Barrett (2000), network marketing is a form of direct sales in
by
in
homes,
their
distributors
independent
customer's
sell products, usually
which
telephone, or through the Internet. In theory, the distributors
can make money not
but
from
from
those of the people they recruit.
their
sales
also
own
only
Besides that, Walsh (1999) in his article titled "Multi-Level Marketing Skirts
Legal Lines" stated that the strength of multi-level marketing in a corporate
distribution
is
it
the
traditional
that
mechanism with all of
shortcuts
retail
perspective
its attendant support costs such as marketing, sales, inventory and distribution.
14