ThesisIt TyL PDF

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES- SAN PEDRO
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DISTRIBUTORS’ SATISFACTION TOWARDS MULTI-LEVEL MARKETING OF A
LEADING NETWORKING COMPANY IN SAN PEDRO LAGUNA
A research paper
Presented to the
Department of Marketing Management
Polytechnic University of the Philippines
San Pedro City, Laguna
In partial fulfillment of the Requirements of the Degree Bachelor of Science Major in

Marketing Management
By:
Pelayo, April Rose L.
Dela Cruz, Gian Paulo S.
Almodal, Leslie M.
Fule, Alfredo A.
October 2019
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CHAPTER 1
THE PROBLEM AND ITS SETTING
INTRODUCTION
Multi-level marketing (MLM) is also known as a direct selling or network marketing
in which products and services are sold by an agent or distributor to an individual
consumer even if they are in their own homes, office and other non-retail stores. The
distributors are rewarded for their efforts through incentive schemes offered by the
MLM companies. The company also pays them for recruiting other people as
distributors who then duplicates their work of how they are selling a products or
services to others (Coughlan ‘Grayson, 1998).
For you to be called as a distributor of a MLM company, an individual should or
required to purchase an initial start-up package. Distributors are not employees in this
company and thus, they are not receiving fixed income or salary and benefits. They
are completely independent and earn only from reward plan, if they succeed in
recruiting other people and even selling their products or services (Taylor, 2012).
When a recruiter recruits another distributor, then the new recruits become the down-
line while the recruiter becomes the up-line in the same network. Together, their
performance is measured of how the people will purchase their products and
recruitments that will generate the volume for their network. A distributor is paid
according to the products or services that people purchased as well as the group
volume contributed by their network (Keep & Nat, 2014).
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Since MLM companies need their existing distributors to recruit new distributors in
order to grow the business, ensuring their satisfaction is necessary to motivate them
to be successful. While there is a wide literature on employee satisfaction, studies on
independent agents such as distributors in MLM companies are very limited. Since
distributors are not salaried workers, the factors that affect their satisfaction are likely
to be different.
Multi-level Marketing or also known as Network Marketing or Networking today is a
170 billion pound industry with over 90 million people involved and tens of thousands
more getting involved each year. Network Marketing has become successful concept
which provides opportunities for the emergence of successful entrepreneurs. Multi-
level Marketing is the fastest sector of direct selling industry in the world during the
last six to nine years. Moreover, it is becoming more popular day by day due to the
minimum risk involved. The reason for the growth of multi-level marketing business is
simple; there are more people looking for opportunities to earn additional income to
supplement to their regular income. It enables customers to receive goods directly
from the manufacturer.
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BACKGROUND OF THE STUDY
The Frontrow Philippines has 31 branches now and has 5 international branches
which are in Asia, North and South America, Europe, Africa and Australia. Today,
thousands of people want to be part of the Frontrow family wherein they want to know
the right ways in earning money and recruiting other distributor. Due to a lot of people
who wants to be part of the Frontrow Philippines, the population of the distributor
changes every day because other people wants to be a distributor and the others are
just want to patronize there product with a discount.
In 2008, the two of the most-promising new-breeds of entrepreneurs spearheaded
the Frontrow Philippines which are Raymond ‘RS’ Francisco and Samuel Versoza.
Frontrow is a 100 percent Filipino owned corporation. It is dynamic and rapidly
expanding direct selling company in the health, beauty and wellness industry in the
Philippines today. It is the revolutionized scale model of the multi-level marketing
industry in the Philippines. It aims to open doors of equal opportunities to people with
interest in micro-business enterprise and bring world class product to the Filipino
consumers.
Since the boom of the vanity industry earlier this decade, more and more Filipinos,
both men and women are opening their options to beauty enhancements and
treatments making it a very lucrative playground for radical capitalists. Amidst the
current global recession, many individuals are turning into new options without
leaving their current employment. Individuals who want to try their hand in business
are venturing into direct-selling as the start of their voyage as entrepreneurs utilizing
their current network of contacts both in their community and the worldwide web. With
these trends, Frontrow has positioned itself in the forefront and is emerging as the
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new face of the multi-level marketing industry. As a young company, Frontrow has
already received recognition in the business sector because of its competency and
increasing membership of more than thousands of members all over the Philippines.
The combination of beauty, health, and wealth is the company’s formula in building an
empire consisting of young entrepreneurs. Empowered with potentials of self-growth
and the company’s future expansion, Frontrow’s members are open to transformation
and are committed to achieving financial freedom and success by nurturing a positive
attitude and enhanced self-image. In 2018, Frontrow was hailed “Best Global
Company” by the Asian network convention and expo. Frontrow’s secrets to success
are effective, high-quality and award-winning health and beauty products.
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THEORETICAL FRAMEWORK
Multi-Level Marketing came into existence and has spread all across the globe in
early 1890 which is an activity that anyone can take up at any time and will generates
income even if you are a housewife, executives, corporation, retired persons,
students as well as people from all walks of life can engage in this kind of business
while they are pursuing their dreams. Multi-level marketing is struggling of how they
will satisfy their distributor towards this kind of business. The distributor is a direct
seller or independent business proprietor who acts as a frontline sales force for MLM
companies. As they are not contractual employees, the company will not terminate
them even if they fail to achieve the envisioned target since they are responsible for
their own income or incentives (Kiyosaki, 2007).
Delgado (2000) developed a model on the impact of recruiting and training
practices on distributors’ satisfaction and success in network marketing. This model
on the impact of recruiting and training practices on distributors’ satisfaction and
success in network marketing are methods of diffusing business opportunity,
perceived quality of recruitment process, perceived quality of training program and
up-line involvement. These models can be able to help the distributor to grow the
network by using the word of mouth and sharing it to the prospect but before that
they must know that recruiting is one of the most important activities in MLM so that
they will be able to generate income immediately. In MLM industry, they must know
that it is a very dynamic business and a sensitive one to the changes and movement
in the market. Thus, distributors must be trained and equipped with right knowledge
and skills because it will help them to be more convincing to someone. They must be
skillful when they are dealing with the sales or marketing of the business opportunity
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and product services (Delgado, 2000). In the context of MLM industry, there is the up-
line and down-line in a network system where their two-way support is helping each
other to gain higher commission. Most of the time, the distributor hasn’t dealing with
the MLM company directly, rather, they’re always referring to the up-line for
guidelines in which the essential of the up-line is to help the down-line in order for
them to achieve the desire goal (Delgado, 2000).
Figure1. Model of the impact of recruiting and training practices on satisfaction and
success in network marketing’s distribution channel.
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CONCEPTUAL FRAMEWORK
The Conceptual Framework of the I.P.O of the Distributor Satisfaction toward
Multi-Level Marketing
INPUT PROCESS OUTPUT
1. Demographic 1. Questionnaire Distributor
Profile 2. Survey Satisfaction
2. Methods of 3. Statistical towards Multi-
Promoting the Treatment Level Marketing
Business 4. Data Gathering

Opportunity
3. The Process of
Recruiting People
4. Understanding the
Quality of the
Training Program
5. The Up-line
support
The figure above shows the proposed conceptual framework that will serves as
the foundation to study the process of satisfying the distributor towards Multi-level
marketing. In this figure, the output is the dependent variable which is the Distributor
Satisfaction towards Multi-level Marketing. The input is the independent variables
which are the demographic profile, methods of promoting the business opportunity,
the process of recruiting people, understanding the quality of the training program and
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the up-line support. The use of the framework is to identify the process of I.P.O which
is the solution of the proper way of satisfying your distributor towards Multi-level
marketing.
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STATEMENT OF THE PROBLEM
1. Distributor’s Profile
1.1 Age
1.2 Sex
1.3 Marital Status
1.4 Years as MLM Distributor
2. What are the influencing factors of MLM distributors comprising in terms of:
a. Methods of Promoting the Business Opportunity
b. The Process of Recruiting People
c. Understanding the Quality of the Training Program
d. The Up-line support
3. Is there a significant difference in the influencing factors of distributors when
grouped according to demographic profile?
Ho: there is no significant difference in the influencing factors of MLM distributor when
grouped according to demographic profile.
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OBJECTIVES OF THE STUDY
This study aims to attain the following objectives
1. To produce a research based on the data of determining the distributors
satisfaction towards multi-level marketing
2. To determine the influencing factors of satisfying a distributor.
3. To recommend a proper quality training program about the right process of
recruiting people as a distributor
4. To prove that the distributor satisfaction is one of the reason why a lot of
people wants to be part of this business.
SCOPE AND LIMITATIONS
This study was conducted to determine the distributors’ satisfaction towards multi-
level marketing and the survey will be conducted only in San Pedro City, Laguna
area. Due to the lack of time and resources, the study will be limited to 100
respondents or distributor of a Multi-level Marketing Company. The research that was
conducted was limited to the gathering of data and information through survey which
will be distributed to the distributor of Multi-level marketing.
SIGNIFANCE OF THE STUDY
This study focuses on determining the distributors’ satisfaction towards Multi-level
marketing of a leading networking in San Pedro City, Laguna. The result of the study
will be significant to the following;
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• Academe
This study will be significant to the academe as it would enrich its knowledge
on entrepreneurial marketing and encourage them to do further research on
the discipline.
• Government
They can raise awareness about scamming and providing a better and quality
training program for those who want to be part of the Multi-level marketing
• Future researchers
This can be their guide about how they will satisfy distributor and how they will
earn more and recruit a lot of distributor.
• Future distributor
This study would serve as a guide for those people who wants to be part of
this kind of business.
DEFINITIONS OF TERMS
Multi-level marketing (MLM) is also known as a direct selling or network marketing
in which products and services are sold by an agent or distributor to an individual
consumer even if they are in their own homes, office and other non-retail stores.
Distributor is an individual should or required to purchase an initial start-up package.
They are not employees in this company and thus, they are not receiving fixed
income/salary and benefits. They are completely independent and earn only from
reward plan and if they succeed in recruiting other people or even selling their
products or services.
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Up-line support is the one who recruits another distributor In the Multi-level
marketing in the same network.
Down-line support is the new distributor who recruited by the up-line in which their
performance will be measured of how the people will purchase their products.
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CHAPTER 2
REVIEW OF THE RELATED LITERATURES
ADVANTAGES OF MULTI-LEVEL MARKETING
According to Tran (2017), Multi-Level Marketing (MLM) is a strategy used by many
companies around the world where directing salesperson use to persuade the
existing distributors to recruit new distributors. Tran discusses the five biggest
advantages of multi-level marketing;
1). It is a low risk strategy that anyone can venture their business without concerning
about failure, unlike traditional versions whose are imposing high risk and even the
start-up cost is huge to start a business. Not everyone is a risk taker, most of us are
afraid to take risk in venturing a business such: losing of money, wasting of time, no
profit right-away, and or simply no clients or customer at all. MLM minimized the risks
of traditional versions and make the business possible to get started as soon as
possible.
2). It is a huge potential income, MLM Companies does not hold distributors, their
income is dependent to their performance, their skills and will is the only limit, unlike
regular jobs where they can only earn a fixed amount of salary.
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3). It is low operating cost, no need for investment, infrastructure, staff and etc. MLM
model makes possible to run a business cheaper compared to other business model.
4). It is attainable freedom, freedom or flexibility is one of the advantages of MLM. It
gives the distributors right from the financial aspect to job security and will not control
their schedule, they can work anytime, anywhere and even depending on their mood.
There is no risk of losing their jobs.
5). Portability, due to technological advancements and globalization, almost
everything can be obvious that multi-level marketing is a great choice to those who
seek for a low cost, low risk, huge potential income business.
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DISADVANTAGES THAT ANY DISTRIBUTOR CAN ENCOUNTER
Multi-Level Marketing is a great choice for everyone to start a business but it also
have its disadvantages to consider. According to Itimana (2017), the disadvantages of
MLM could be encountered by anyone who will participate in it. First of them is
Negative Stigma, it exist due to pyramid schemes and negative reviews from the
people who had experienced it. In reality, bad news spread faster than good news, so
in this field, distributors must avoid bad experiences. Second, as a distributor, they do
not own the business. The company may give them the chance to own their books of
business, but they do not own the company. Their name is not on it. They do not have
any control to the prices or within the product line. They have to run the business
within the guidelines set by the parent companies. Third, Old School Marketing,
though everybody could access the technology, this kind of strategy is more on face
to face interaction, it is due to the fact that building personal relationship is important.
They need to persuade or encourage people to join their line. The main goal of
existing distributor is not to sell products but to recruit new distributors. Fourth, most
people do not get rich through MLM; it is because their performance is the only capital
of their income. Also, once they stop so sudden or their time is not enough to fulfill
their task and if joining MLM Company is not their priority. Fifth, it takes time to grow;
this kind of business is not that easy way to make money. MLM is a great model for
marketing and easy to the business to venture, but it also has its long term process to
succeed. Sixth, there is a lot of rejection, most of the clients encountered by
distributors will tell them "no" when they start network marketing. Out of 100 clients 99
of them were taking the opportunity down, meaning only 1% is the rate that is getting
started after the first meeting of a distributor and a client. Seventh, there are many
network scams; it is one of the reasons why clients took the opportunity away. It is
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difficult to determine if the MLM Company is real or something is just a scam. That
negativity is not healthy for the MLM companies and will soon ruin the business
opportunity. Lastly, sponsors are not always good mentors. In this kind of marketing
model, when a new distributor is coming into the network marketing opportunity may
be a potential threat. Some are good at sales and are proceeding up the chain of
command with their down line, that sponsor who helped them in their line may no
longer want to be their mentor. Some do not bother their selves to have mentorship at
all; they think that they can do it by their own. This means, the success of their
business may hang on uncertainties that are outside of their control.
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THE DISTRIBUTOR OF MULTI-LEVEL MARKETING
Distributor or known as a direct seller or independent business owner is the
frontline sales force of a MLM company. These are not contractual employees but
they are actually selling and recruiting members in order for them to earn profits. They
may not achieve the envisioned target but the company would not easily terminate
them because they are the one who are responsible for their own income or
incentives (Kiyosoki,n.d.) Those distributors were paid with their efforts in selling the
product and recruit the down-line who then selling the products as they do (Coughlan
et al., 1998). Besides, it’s believed that a lot of distributors were already obsessed
with the products that offered by the MLM company before they signed up (Coughlan
2012). Distributors are perceived as entrepreneurs; they will own the business and
can work in a flexible operation mode (Kuntze, 2001). Year 2000, they found out that
distributors were normally from average education background and fairly high income.
They attract distributors on its low startup cost and flexible working hours. The
distributor satisfaction always refers to the willingness of the distributor to work in the
MLM Company.
MLM Company with rationale in forming implementing strategies may endure
extension of success in the industry (Chen et al., n.d.) According to Comer, Machleit
and Legace’s study (as cited in Msweli-Mbanga, 2001) the satisfaction of distributor is
determined by the seven aspects which are; distributor’s attitude towards the job, the
workmate, the supervisors, the company policy and support, remuneration and
customers. In a usual condition, when a distributor achieved the higher performance
in his/her network, they will actually give greater satisfaction to the respective
distributor. However, Msweli-Mbanga (2001) found out that the distributor who has
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accomplished good performance in his network has actually a lower satisfaction
because due to the pressure and the profit scheme that offered by the MLM
company. In a networking business, MLM Company must have balance
measurement in order for them to generate the sales and stimulates network growth
(Coughlan et al., 1998).
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NETWORK MARKETING
In network marketing, the recruiter assumes the role of a mentor, taking the new
recruit under their wing and teaching them the rudiments of the business: how they
operate the network marketing, how they will run the business, how they will sell it,
the product knowledge and use and the effective recruiting techniques. In the early
stages of a distributorship the relationship between recruiter and recruit is especially
close: the recruiter has a vested interest in the new recruit doing well as their stature
in the organization and their income increases as the size of their team increases. In
this period of new skill and knowledge acquisition the need for the support and
encouragement in this transition place, it shows support to significantly increase
satisfaction in a networking environment.
Network marketing involves selling products to people face to face in which other
business does not usually occur, such as in homes and workplaces (Berry 1997).
Network marketing companies are a special type of direct selling organization
because their agents can generate income in two ways which are; they can earn
commissions and profits by selling it directly to the people or customers, they can
manage and distribute and manage their own network of sales agent. Those who
undertake this second income-generating activity are often called sponsors who
develop a down-line of sales agents therefore; network marketing agents can have a
relationship with both their up-line sponsor and their down-line recruits.
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NETWORK MARKETING
The network marketing distribution channel has experienced a constant growth
during the last decades. 50 years ago, it started with the marketing of detergents and
cosmetics but today, the network marketing or also known as multilevel marketing
has all kinds of tangible goods as well as a variety of services (Delgado & Hector,
2006). Additionally, it incorporates a study of the up-line support, within the context of
this industry, on the satisfaction and success levels of the participants. The recruiting
phase is characterized by an aggressive "employee" (potential participant) search by
the "employer" (up-line), which concentrates around the recruiting of relatives and
acquaintances. The training program is handled by existing participants who, by virtue
of their experience in the current network marketing company assume the role of
trainer, in the same manner that the conventional employees perceive immediate
management and organizational support. MLM participants were affected by the
support they’re trying to convey from up-line. The results indicated that the recruiting
process had no effect on the satisfaction and success level of the participants.
However, they suggested that the success and the satisfaction level of the
participants were affected by the practices of recruiting of the network marketing
industry. Also, they suggested that the satisfaction and the success level of those
participants were affected by the training practices of the network marketing
distribution channel. It appears that the trainer’s lack of training doesn’t have a
negative effect on the trainees. Similarly, the level of management involvement was
found to be positively related to the level of satisfaction and success of the
participants.
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THE SUCCESS AND SATISFACTION OF AN INDIVIDUAL DISTRIBUTOR
In networking, distributor needs to maintain the relationship with both the
sponsored up-line and recruited down-line (Koroth & Sarada 2012). The success and
satisfaction of an individual distributor will come from the cooperation and
socialization from the members also within the network (Sparks & Schenk 2006).
Generally, while they’re having the individual coaching, the leader of the MLM
network will deliver some questions to the prospect and he/she will stimulate the
dream and the desire of the prospect as well as the associate or downlines (Miekina,
2012; Pratt, 2000). After that, they will substantiate the dream to the actual financial
dimensions; how much cost and effort to achieve the goal? Well, not all distributors
are qualified to be a recruiter. The respective recruiter must be trained in order to
recruit and convince the prospect (Delgado 2000). In Delgado studies (2000) the
process of interview and the quality of the interviewer are very crucial to determine a
successful recruitment taking place. Lawrynuik (2002) developed a conclusion. In his
study, he concluded that there are two important guides to develop the success and
high achievement of the distributor in the company. First, it’s necessary to give the
recruitment guideline to recruit quality associate. This guide will equip the leader to
outline the relevant question to the interviewee. For instance, the characteristics,
qualities or even the attributes associated with the performance in the industry.
Secondly, another imperative guide for ongoing training and mentoring support to the
leaders. It is to ensure that the leader will be able to guide the downline along the
path to achieve the desire goal. . According to Lan (2002), distributor might start to
recruit someone whom they do not know to relief their pressure (as cited in Koroth et
al., 2012). The research has concluded that distributor’s network is built on
relationship; distributor who has weak relationship will tend to have lesser down-line.
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The stronger ties of trust within the up-line and down-line, the stronger the
relationship (Chen et al., 1999). Therefore, distributor satisfaction relies on the quality
of communication and management skill of recruitment.
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MULTI-LEVEL MARKETING ARE USUALLY THE HIGHEST GETTING PAID
WORLDWIDE
MLM companies are usually the highest getting paid worldwide. Since MLM
companies are appealing to many, most of the business minded people want to run a
business like this. They considered joining MLM companies upon hearing the facts of
this business. According to Showbiz Cheat Sheet (2018), the top ten MLM company
around the world were; Tupperware, the oldest and very well-known MLM since 1950.
Last year there are 2.9 million Tupperware sales representative and gaining about
$2.26 billion. Next was the NU Skin, a MLM company that sells anti-aging products
and nutritional products. It was founded in 1984 in Utah and now earns about $2.28
billion annually. Then, Perfect, an Asian MLM company, like NU Skin they also sells
cosmetic products as well as, personal care, skin care, household, and wellness
products. They now earning $2.96 billion a year. Natural, a Brazillian company,
known for natural and sustainable beauty products. They are gaining $3.09 billion
from this year. Next, Mary Kay, one of the best known names in multi-level marketing.
Founded in 1963 and according to CBS, there were about 600,000 Mary Kay ladies in
the US. their annual revenue was $3.25 billion. Then, Infinitus, another Asian MLM,
they sells variety of health food and beauty products inspired by traditional Chinese
medicine. Now they are gaining $3.92 billion. Next, Vowerk with revenue of $4.19
billion, Vowerk is a German company that makes and sells cosmetic, household
products, carpets and floor coverings. Then the third MLM Company global, Herbalife,
a nutrition company, a giant MLM company with more than 2.3 million distributors.
Herbalife gains $4.40 billion in the year 2018. Everybody knows AVON, AVON is on
the second spot, gaining $5.7 billion. It was founded as the California Perfume
Company with more than 6 million people around the world currently sells the
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company's products. Amway on the first spot, it is the biggest multi-level marketing
company in the world, with nearly $9 billion yearly revenue. The biggest MLM
Company in world sells home, health, and beauty products.
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DISTRIBUTOR
Direct selling is a method of distributing consumer products directly to customers.
Instead of selling through shops, direct sales uses a marketing network of people
called a direct sales 'representative' or ‘distributor’ to find customers and move
products. Representatives are also known as Independent Business Owners,
Distributors, Consultants or Networkers. Direct Selling can be best described as the
marketing of products and services directly to consumers in a face to face manner,
generally in their homes or at their workplace and other places away from permanent
retail locations, usually through explanation or demonstration by an independent
direct salesperson.
A distributor, or direct seller or independent business owner is the face of a MLM
company. They are not contractual employee, but they are selling and recruiting new
member in order to gain more profits. If they are not achieving the envisioned target,
company would not terminate them because they are responsible for their own
compensation or incentives (Kiyosaki). Each distributor is being paid with his effort in
selling products and recruiting more members’ down-line who then selling the
products as he does (Coughlan et al., 1998).
Distributors is perceived as a business man/woman, they own the business and
working in flexible operation mode (Kuntze, 2001). Many people said that most of the
distributors are less educated, not sociable, high risk taker due to the current situation
is discouraging and they need way out of it. This must be the perception of regular
individual who do not understand the industry well. Kuntze (2001) study discussed the
statistic from USA in year 2000. Found that distributors were normally from average
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education background and fairly high income earner. The attraction of MLM is in its
low startup cost and flexible working hours.
Multilevel marketing is only a variation of the traditional marketing system. The
new system also aims at delivering goods to the satisfaction of customers. This view
is discussed in many literatures. In multilevel marketing system, sales peoples are
compensated not only for selling the products to retail; customers, but also MLM is a
business model in which an unlimited number of distributors can sell a company’s
products. Network marketing, which has been examined from various academic
perspectives (Biggart 1989; Brodie, Stanworth, and Wotruba 2002; Coughlan and
Grayson 1998; Frenzen and Davis 1990; Lan 2002; Pratt 2000), is the most prevalent
form of direct selling, and it generates more than $22 billion in annual U.S. sales
(Direct Selling Association 2005).
The distributor satisfaction always refers to the willingness of the distributors to
work in the MLM Company. Individual always seek for ways to maximize the optimum
benefit from his self-interest (Adagbon, 2007). Therefore, the constant satisfaction
over matter will further encourage the interaction prolongs the enjoyment. The
devotion to the organization and accomplishment are always substantiating the
turnover intention of distributor (Mswell et al, 2001). MLM company with rationale
informing and implementing strategies may endure extension is success in the
industry (Chen).
The term “network marketing” is used by practitioners (Berry 1997), and it appears
in academic articles (Coughlan and Grayson 1998; Jun et al.2006; Kong 2001; Pratt
2000) and trade publications (including in publication titles, such as the Network
Marketing Business Journal and The Network Marketing Times.com. Other labels are
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also common, including “multilevel marketing” (Clothier 1994). However, as one
reviewer rightly noted, these labels are sometimes viewed as having negative
connotations, leading some in the industry to prefer the more generic term “direct
selling,” an umbrella term that refers to both multilevel and single-level direct selling
organizations (Berry 1997).
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THE DISTRIBUTORS’ AWARENESS
A study conducted by P.T.Jose (2002) shows that distributor’s awareness is
nominal and there is significant difference in the level of awareness about MLM
among the various levels of performers. The study reveals that the variables such as
participation in up-line sponsored meeting, recommendation from warm circle,
minimum risk and high income and goodwill of the company constitute the vital group
of motivating variables for distributors. The study by Wotruba and Pribova (1996)
reports on a survey of 1571 households in the Czech and Slovak Republic concerning
their experience of buying from direct sales people, their demographic characteristics
and their attitudes as consumers towards direct selling. The results are also
compared with similar studies in US done by Harris (1977), Nowland (1982) and
Peterson, Albaum, Ridgway (1989). They found that the best potential buyers are
younger with higher level of education and income above average household size.
Women seem more amenable to direct selling than man; perhaps because of many of
the products sold by direct sellers have more direct appeal to women. Buyers do
attribute more advantages and fewer disadvantages to direct selling than do non
buyer in both Czech Slovak market and US the studies. But the relative strength of
various advantages differs between these two market situations. The Czech Slovak
consumers are less concerned than US consumers with the convenience and privacy
intrusion and more concerned with the ability to examine the products and difficulty in
returning them if not satisfactory. It is quite common to assume that earning extra
income is the primary reason people to join MLM Company, several studies done in
Britain and U.S concluded otherwise. According to these research findings, when
joining in MLM company, factors such as the like for the product, achieving short term
goals, being one’s own boss, enjoying discount price and winning prices from others
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were all cited as important factors (Berry 1997). In a similar study conducted on four
MLM companies in U.S, Wotruba and Pradeep (1992) found that people who were
motivated by factors such as social rewards, the sense of self satisfaction and
accomplishment and flexible working hours generally have higher productivity in their
sales performance and were less prone in quitting.
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THE ROLE OF THE RECRUITER
The role of the recruiter in direct selling is similar to that of a supervisor or sales
manager in a typical selling situation. In mainstream selling the sales manager
typically is responsible for the recruitment, training and development of the sales
team members and, in return, receives a salary plus a bonus that is dependent on the
level of sales or product volume achieved by the team. In direct selling, although the
role is of a more informal nature, the recruiter assumes the role of a mentor, taking
the new recruit under their wing and teaching them the rudiments of the business:
how direct selling operates; how to run the business; how to sell the product or
service (overcoming objections, closing sales); product knowledge and use, and
effective recruiting techniques. This latter is fundamental to the majority of direct
selling companies whereby the health of the organization is dependent on the ability
to continually inject new recruits to replace those who have left, or to build the
downline. The ruthless recruiting of new distributors in direct selling is an economic
imperative particularly in party-plan and multilevel organizations. In the early stages of
a distributorship the relationship between recruiter and recruit is especially close: the
recruiter has a vested interest in the new recruit doing well as their stature in the
organization and their income increases as the size of their ‘team’ increases. In this
period of new skill and knowledge acquisition the need for support is higher than at
later stages when confidence is increased, and the new recruit is initially heavily
dependent on the sponsor for support and encouragement in this transition phase.
This level of support has been shown to significantly increase satisfaction in a retail
environment. Distributors are direct selling agents who function as the frontline sales
force of a MLM Company. A MLM company is unable to terminate them even if they
fail to reach the envisioned target because they are not employees. Hence, it is
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crucial for MLM firms to understand the motivation for distributors to meet the
company objectives.
According to comer (1989) there are seven dimension of sales representatives’ job
satisfaction: the distributor attitude towards the job, workmate, supervisors, company,
policy and support, remuneration, and customers satisfied sales forces are less likely
to quit their jobs (Brown and Peterson, 1994). Given the high turnover rate within the
sales force (Keep and Nat, 2014) and associated cost related to recruiting and
developing talents, keeping people satisfied is crucial.
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ARISING RELATIONSHIPS IN NETWORK MARKETING
Relationship exploited in network marketing as distributors approach their friends
and relatives to join the business since they are also paid compensation for the sales
made by the people recruited by them. They found out that the distributors with less
than 2 years of experience would contact relatives more than friends while distributors
more than 2 years of experience would approach friends more than relatives.
(Mathews, Mananel, & Zacharias (2007).
Business organizations have long relied on direct marketing to target customers
without spending a lot of money on retail distribution. However the network
(multilevel) marketers have taken the direct model one step further, not only they do
the sales, but recruit and train new distributors independent sales persons who are
members in the network marketing company. This novel method was first popularized
by Amway in 1950’s. The big advantage in network marketing is the commission paid
not only for direct sales made by the salesperson, but also from the sales made by
the recruits by him. That is, if a distributor enrolls his friends and relatives, he gets a
commission not only from the products bought by friends and relatives purchase, but
also from the sales they make to their friends (Bloch, 1996). This wonderful
opportunity attracts perspective candidates to join network marketing companies.
Studies reiterate the fact that a 100 percent annual turnover rate among sales
personnel in certain network marketing company is not unusual (Peterson & Wotruba,
1996). One of the objectives of this study was an attempt to investigate consumer’s
perceptions towards multilevel marketing. There have been few specifics studies
pertaining to consumer perceptions of direct selling as non-store retailing activity. The
study hopes to add some information regarding network marketing as type of direct
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selling. A literature review revealed that there was no much research investigating
consumers’ perceptions of network marketing as type of direct selling. Two related
research studies concerned with direct selling were found. The first by Peterson
(1989) conducted an investigation of direct selling the USA to determine consumer
perception of this form of non-store retail purchase behavior. They researched how
consumers used direct selling to make purchases; they identified consumers’
perceptions of the advantages, disadvantages and risk in purchasing products from
direct sellers. From their survey, more than half of the 988 consumers who responded
had made at least one purchase of product from a direct selling salesperson in the
preceding year. They reported that convenience of shopping at home was an
advantage, although sales pressure by the salesperson was seen as disadvantage.
Peterson (1989) also found that risk of purchase was perceived to be greater through
direct selling than at a conventional retail store.
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THE OTHER STUDIES CONDUCTED CONCERNING THE FACTORS AFFECTING
MULTI-LEVEL MARKETING
A career prospect as distributors in MLM companies is a direct seller or
independent business proprietor who acts as the frontline sales force (Lee, Lau, &
Loi, 2016). Normally MLM companies will diffuse the right business opportunity as
individual career development to people in the recruitment process typically in the
financial freedom offered by MLM companies (Kiyosaki, 2007). All distributors must
be trained and equipped by knowledge and skill for better skillful and convincing of
sales performance (Delgado, 2000). Therefore, youngsters as like generation Y
required more training during their career life to gain knowledge and positive attitude
and behavior when they are in the direct selling industry.
According to Xardel (1993), Multilevel marketing (MLM) is a marketing strategy in
which the sales force is compensated not only for sales they personally generate, but
also for the sales of others they recruit, creating a down-line of distributors and
hierarchy of multiple levels of compensation.
There have been other studies conducted concerning the factors affecting multi-
level marketing agent’s satisfaction. However, the result of other previous studies
showed a broad explanation about the research topic. In this study, the researcher
intended to provide more specific results regarding the level of satisfaction among
multi-level marketing agents in Dagupan city. This study aspired to;
(1) Help the managers be aware of what factors encourage their agents to retain in
the company, each factor will be justified on its effect to the agent’s satisfaction,
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(2) Prove that multi-level marketing can be a legitimate source of income whether it
may be a part-time or full-time commitment in the field of business,
(3) Provide a better understanding of the nature of multi-level marketing companies
and make a proper distinction with the illegal activities associated with multi-level
marketing that’s threatening the public,
(4) Improve the understanding on the satisfaction of an agent in multi-level marketing
companies operating in Dagupan City.
The results of this study can be used by the MLM companies in improving their
recruiting method, training program or to what aspect they are inadequate. The
outcome of the study will help respondents to understand the differences in the level
of satisfaction among MLM companies’ agents. Results can also be used as
reference for future researches intending to study multi-level marketing companies’
agents’ satisfaction.
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SYNTHESIS OF REVIEW OF RELATED LITERATURE
According to Tran (2017), Multi-level marketing is a strategy used by many
companies around the world where directing salesperson use to persuade the
existing distributors to recruit new distributors. Tran discusses the five biggest
advantages of multi-level marketing which are; the low risk strategy it has a huge
potential income, it is low operating cost, it has attainable freedom and has portability
but according to Itimana )2017), it has disadvantages that any MLM participants will
encounter like negative stigma, bad news spread faster than good news so in short
distributor must avoid bad experience. Second disadvantage is that as a distributor,
they do not own the business but the Company may give them a chance to own the
books of business but not the Company itself. Third is, it is old marketing because
everybody in this world could access the technology but in this strategy it is a more on
face to face interaction but on the other hand of it, it is building personal relationship
which is more important as a distributor. Fourth is that most people do not get rich
through MLM because their performance is the only capital of their income or once
they stop so sudden. Fifth is that it takes time to grow in this kind of business. Sixth is
that there is a lot of rejections. Seventh, there are lots of network scams, it is one of
the reasons why clients took the opportunity away and lastly sponsors are not good
mentors some of the distributors do not bother their selves to have mentorship
because they think that they can do it on their own. Distributors are known as direct
seller and they are not contractual employees but they are selling and recruiting
member in order for them to earn profits. They may not achieve the envisioned target;
the company will still not terminate them easily because they are the one who are
responsible for their own income. Year 2000, they found out that distributors were
normally from average background and fairly high income. This must be the
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perception of regular individual who do not understand the industry well. Year 2001
Msweli-Mbanga found out that the distributor who has accomplished good
performance in his network has actually a lower satisfaction because due to the
pressure and the profit scheme that offered by the MLM Company. In a networking
business, MLM Company must have balance measurement in order for them
generate the sales and stimulates network growth (Coughlan et al., 1998). A study
conducted by P.T.Jose (2002) shows that distributor’s awareness is nominal and
there is significant difference in the level of awareness about MLM among the various
levels of performers. The study reveals that the variables such as participation in up-
line sponsored meeting, recommendation from warm circle, minimum risk and high
income and goodwill of the company constitute the vital group of motivating variables
for distributors A networking business or network marketing or networking today
involves selling products to the people face to face in other business does not usually
occur, such as in homes and workplace Berry (1997). The network marketing
distribution channel has experienced a constant growth during the last decades. 50
years ago, it started with the marketing of detergents and cosmetics but today, the
network marketing or also known as multilevel marketing has all kinds of tangible
goods as well as a variety of services (Delgado & Hector, 2006). In networking,
distributor needs to maintain the relationship with both sponsored up-line and
recruited down-line (Koroth & Sarada 2012). The success and satisfaction of an
individual distributor will come from the cooperation and socialization from the
members within the network (Sparks & Chenk 2006). Lawrynuik (2002) developed a
conclusion. In his study, he concluded that there are two important guides to develop
the success and high achievement of the distributor in the company. First, it’s
necessary to give the recruitment guideline to recruit quality associate. This guide will
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equip the leader to outline the relevant question to the interviewee. For instance, the
characteristics, qualities or even the attributes associated with the performance in the
industry. Secondly, another imperative guide for ongoing training and mentoring
support to the leaders. It is to ensure that the leader will be able to guide the downline
along the path to achieve the desire goal.
MLM companies are usually the highest getting paid worldwide. Since MLM
companies are appealing to many, most of the business minded people want to run a
business like this. They considered joining MLM companies upon hearing the facts of
this business. Relationship exploited in network marketing as distributors approach
their friends and relatives to join the business since they are also paid compensation
for the sales made by the people recruited by them. They found out that the
distributors with less than 2 years of experience would contact relatives more than
friends while distributors more than 2 years of experience would approach friends
more than relatives. (Mathews, Mananel, & Zacharias (2007). Business organizations
have long relied on direct marketing to target customers without spending a lot of
money on retail distribution. However the network (multilevel) marketers have taken
the direct model one step further, not only they do the sales, but recruit and train new
distributors independent sales persons who are members in the network marketing
company. This novel method was first popularized by Amway in 1950’s. the big
advantage in network marketing is the commission paid not only for direct sales made
by the salesperson, but also from the sales made by the recruits by him.
There have been other studies conducted concerning the factors affecting multi-
level marketing agent’s satisfaction. However, the result of other previous studies
showed a broad explanation about the research topic. In this study, the researcher
39
caCampus
intended to provide more specific results regarding the level of satisfaction among
multi-level marketing agents in Dagupan city. This study aspired to;
(1) Help the managers be aware of what factors encourage their agents to retain in
the company, each factor will be justified on its effect to the agent’s satisfaction,
2) Prove that multi-level marketing can be a legitimate source of income whether It
may be a part-time or full-time commitment in the field of business,
(3) Provide a better understanding of the nature of multi-level marketing companies
and make a proper distinction with the illegal activities associated with multi-level
marketing that’s threatening the public,
(4) Improve the understanding on the satisfaction of an agent in multi-level marketing
companies operating in Dagupan City.
The results of this study can be used by the MLM companies in improving their
recruiting method, training program or to what aspect they are inadequate. The
outcome of the study will help respondents to understand the differences in the level
of satisfaction among MLM companies’ agents. Results can also be used as
reference for future researches intending to study multi-level marketing Companies
agents’ satisfaction.
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CHAPTER 3
METHODOLOGY
The methodology of this chapter outlines by which the research was conducted
such as the collection, measurement and analysis of data relevant in determining the
distributors’ satisfaction towards multi-level marketing of leading networking in San
Pedro, Laguna which is the Frontrow.
RESEARCH DESIGN
The researcher used descriptive research method through quantitative and
qualitative approaches. It was defined by Calderon and Gonzales (2002) as
description and interpretation of what is. This research used quantitative and
qualitative approach in which data is collected via interviewing the distributor using
the survey questionnaire. This study used the normative survey approach in gathering
and collecting the data of the distributor of Front row from San Pedro City, Laguna.
These respondents determine the distributor satisfaction towards the MLM through
purpose sampling and the survey instrument used by the researchers was Likert
Scale for the data interpretation while related literatures were used to support the
results.
RESPONDENT OF THE STUDY
This research is based from the population of the distributor in Frontrow
Philippines San Pedro City, Laguna area through purposive sampling. The researcher
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will conduct a survey to 100 distributors of the said Multi-level marketing Company
from San Pedro City Laguna.
DATA COLLECTION
The researchers will use the primary data in which the data will be collected
through a normative survey which will be approved and endorsed by the Director of
the Campus that will be sent to the respondents before conducting the survey. The
data that will be gathered from the survey was organized, tabulated, processed and
interpreted.
RESEARCH INSTRUMENT
In this study, the researchers employ a normative survey as its research
instrument in which, it’s an adequate and accurate interpretation of the information
related to objective of this study which is the distributors’ satisfaction towards multi-
level marketing of a leading networking in San Pedro, Laguna. It will be conducted to
100 distributors from San Pedro City, Laguna. A pre-tested, approved and verified
self-designed Likert format questionnaire served as the survey instrument. It contains
questions that will be covered the variables identified.
STATISTICAL TREATMENT OF THE DATA
The researchers will be used a descriptive statistics to summarize the collected
data allowing the researcher to draw simple interpretations that measures the central
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tendency such as mean, mode and median that will be computed to describe the
central position of the frequency distribution.
Percentage was also used to determine the ratio of the frequency of responses (f)
to the total number of respondents (N) where the formula is as follows:
P = (f/N)*100
Whereas;
P – is the percentage
F – is the frequency
` N – is the total number of respondents
100 – is the constant value
The Weighted Mean which is the sum of the product of the frequency and the unit
weight (Σw) divided by the number of respondents (N) was used to determine where
the most of the data collected gravitates to the center. The formula is written as
follows:
Weighted mean = Σwx/Σw
Σ = the sum of
w = the weights
x = the value
A t-test is a type of inferential statistics used to determine if there is a significant
difference between the means of two groups, which may be related in certain
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features. It will be used as a statistical method to aid with either proving or disproving
a hypothesis.
ANALYSIS OF VARIENCE (ANOVA) is a strong statistical technique that is used to
show difference between two or more means or components through significance tests. It
also shows us a way to make multiple comparisons of several population means. The
Anova test is performed by comparing two types of variation, the variation between the
sample means, as well as the variation within each of the samples.
- where F is the variance ratio for the overall test, MST is the mean square due to
treatments/groups (between groups), MSE is the mean square due to error (within
groups, residual mean square), Yij is an observation, Ti is a group total, G is the grand
total of all observations, ni is the number in group i and n is the total number of
observations.
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES- SAN PEDRO

Department of Marketing Management

Polytechnic University of the Philippines

San Pedro City, Laguna

In partial fulfillment of the Requirements of the Degree Bachelor of Science Major in

Pelayo, April Rose L.

Dela Cruz, Gian Paulo S.

THE PROBLEM AND ITS SETTING

Multi-level marketing (MLM) is also known as a direct selling or network marketing

in which products and services are sold by an agent or distributor to an individual

services to others (Coughlan ‘Grayson, 1998).

For you to be called as a distributor of a MLM company, an individual should or

volume contributed by their network (Keep & Nat, 2014).

to be successful. While there is a wide literature on employee satisfaction, studies on

Multi-level Marketing or also known as Network Marketing or Networking today is a

which provides opportunities for the emergence of successful entrepreneurs. Multi-

supplement to their regular income. It enables customers to receive goods directly

from the manufacturer.

just want to patronize there product with a discount.

In 2008, the two of the most-promising new-breeds of entrepreneurs spearheaded

Frontrow is a 100 percent Filipino owned corporation. It is dynamic and rapidly

Philippines today. It is the revolutionized scale model of the multi-level marketing

empire consisting of young entrepreneurs. Empowered with potentials of self-growth

are effective, high-quality and award-winning health and beauty products.

income even if you are a housewife, executives, corporation, retired persons,

their own income or incentives (Kiyosaki, 2007).

Delgado (2000) developed a model on the impact of recruiting and training

practices on distributors’ satisfaction and success in network marketing. This model

on the impact of recruiting and training practices on distributors’ satisfaction and

success in network marketing are methods of diffusing business opportunity,

perceived quality of recruitment process, perceived quality of training program and

them to achieve the desire goal (Delgado, 2000).

The Conceptual Framework of the I.P.O of the Distributor Satisfaction toward

INPUT PROCESS OUTPUT

1. Demographic 1. Questionnaire Distributor

Profile 2. Survey Satisfaction

2. Methods of 3. Statistical towards Multi-

Promoting the Treatment Level Marketing

Business 4. Data Gathering

Satisfaction towards Multi-level Marketing. The input is the independent variables

1.3 Marital Status

1.4 Years as MLM Distributor

a. Methods of Promoting the Business Opportunity

b. The Process of Recruiting People

c. Understanding the Quality of the Training Program

d. The Up-line support

3. Is there a significant difference in the influencing factors of distributors when

grouped according to demographic profile?

grouped according to demographic profile.

This study aims to attain the following objectives

1. To produce a research based on the data of determining the distributors

satisfaction towards multi-level marketing

2. To determine the influencing factors of satisfying a distributor.

3. To recommend a proper quality training program about the right process of

recruiting people as a distributor

people wants to be part of this business.

SCOPE AND LIMITATIONS

respondents or distributor of a Multi-level Marketing Company. The research that was

will be distributed to the distributor of Multi-level marketing.

SIGNIFANCE OF THE STUDY

This study focuses on determining the distributors’ satisfaction towards Multi-level

will be significant to the following;

on entrepreneurial marketing and encourage them to do further research on