Significance of Relationship in Multilevel Marketing and its effect on Business Outcome

Abstract

The concept of Multilevel Marketing or network marketing is a method of product distribution. The products are moved through independent distributors. The distributors are given an opportunity to introduce other distributors to the business. Instead of incurring massive media advertising and sales promotion cost, the savings are passed on to distributor consumers. At the same time products are available to consumers at wholesale prices. However, effective recruiting is essential for the very existence of the majority of direct selling companies including multilevel marketing organisations since the survival of these organisations depend on the ability to make more and more new recruits to replace those who have discontinued. MLM distributors can have a relationship with both their upline sponsor and their downline recruits. They also often work cooperatively by holding common recruitment meetings and sales training sessions. Distributors of multilevel marketing companies foster a combination of friendship and instrumentality in developing networks. This paper describes the problems and sets out a research paradigm to investigate the influence of relationship in building network which is a prerequisite for the better performance of distributors in multilevel marketing in Kerala's environment. Multi Level Marketing (MLM) is gaining much attention in business circles recently. In order to eliminate the defects associated with the present system of marketing as regards to distribution channel, promotion and advertising; there is a need for a new strategy in marketing. Direct selling is an innovative version of the direct channel system. The concept of Multilevel Marketing or referral marketing is a method of product distribution. The products are moved through independent distributors. The distributors are given an opportunity to introduce other distributors to the business. Instead of incurring massive media advertising and sales promotion cost, the savings are passed on to distributor consumers. Distributors share the large revenue that normally goes to the middleman. At the same time products are available to consumers at wholesale prices. However, effective recruiting is very essential for the very existence of the majority of direct selling companies including multilevel marketing organisations because the survival of these organisations depend on the ability to make more and more new recruits to replace those who have discontinued. MLM distributors can have a relationship with both their ―upline‖ sponsor and their ―downline‖ recruits. They also often work cooperatively by holding common recruitment meetings and sales training sessions. Distributors of multilevel marketing companies foster a combination of friendship and instrumentality in developing networks. This paper describes the problems and sets out a research paradigm to investigate the influence of relationship in building network which is a prerequisite for the better performance of distributors in multilevel marketing in Kerala's environment. For the purpose of the study, relationships can be defined as those with the emotional attachment and/or intimacy existing among relatives and friends. By relatives here mean closely related persons like siblings, parents, in - laws, cousins, nieces and such others. By ‗friends' the researchers mean those persons who are dependable, trustworthy and loyal. All others, other than friends and relatives are grouped under the category of colleagues.