Multi-Level-Marketing in short form, (MLM) is a marketing tactic, which the sales force is rewarded not only for sales they personally generate, but also for the sales of others which they recruit, by creating a down line of distributors and a hierarchy of multiple levels of compensation. Those salespeople usually sell their products throughout relationship referrals and word of mouth directly to consumers. As a result, MLM is always relates to direct selling, but MLM is only one of the many type of direct selling among others (Nat & Keep, 2002). According to Nat & Keep (2002), multi-level marketing is one form of direct selling which refers to a business model in which company distributes products through a network of distributors who earn income from their own retail sales of the product and from retail sales made by the distributors’ direct and indirect recruits. Each member in the MLM network earn a commission from the sales their recruits make hence they has an incentive to continue recruiting additional sales representatives into their down lines. (Nat & Keep, 2002).
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Malaysia has over 30 years of history in direct sales and is considered a matured market in this region. Throughout these years many experienced marketing and management experts have been built up. Generally, Malaysian society shows positive attitude towards Direct Sales industry and indirectly this has helps to attract large numbers of experts who possessed qualification in administration and business to join in the industry and contribute in company’s management. Many international Direct Sales companies also picked up Malaysia as a centre to train and develop their managerial and executive staffs, after that reassign them to overseas offices to hold responsibilities in the company’s management (Khor & Leo, 2007).
The economy has been going through ups and downs recent years but MLM industry still progress gradually without much being affected. Some of the key players have performed greatly to outshine others; this is a very encouraging sign for the industry. Undoubtedly, MLM is the journey to personal development, career establishment, financial freedom, and many more. It is also about the opportunity and life fulfilment for the achievers. MLM is always an industry of wealth and opportunities which offered a way for achievement and success in life, wealth and personal development as well. There are undeniable facts that MLM has created a lot of success stories around us, therefore many others are going after it regardless individuals or corporate (Khor & Leo, 2007).
Though MLM seems to bring lots of benefits not only to us, but also to the economy of the country, still, there is some issue occurred. Fair and equitable distribution of income in compensation plans is virtually non-existent in MLM. In retail MLM, every participant can earn a decent income selling products without recruiting a large down line, and in fact the incentives would favour retailing over recruiting. Based on review of compensation plans of approximately 300 MLM programs and their resultant effects, MLM would be harmless only to the degree it is not at all like a typical MLM – but more like a standard retail sales model. The most likely candidates for a legitimate MLM, if such existed, are party plans, which allow a host to actually earn money for a party he/she sponsors. However, most eventually change their compensation plans to reward recruitment over retailing – probably because direct selling is no longer as attractive or competitive in a society with big box chain stores and internet shopping options. So they turn to chain selling of participants as primary customers (Taylor, 2011).
From time to time, an MLM company makes a list of fastest growing companies in a state or even in the country. What few business writers understand is that this is to be expected with any recruitment-driven MLM, or product-based pyramid scheme. Even MLM promoters and defenders acknowledge the rapid growth of MLM in the momentum phase, followed by a levelling off period. What few acknowledge is that the levelling and decline periods are part of the natural progression from rapid momentum to market saturation and ultimate collapse – at least for most of the MLMs (Taylor, 2011)
There are some existing studies which showed the research gap of direct marketing. According to Evans, Patterson and O’Malley (2001), consumers’ response to direct marketing are an amalgam of paradoxes. Direct marketing has possibly not reached (for most companies) the phase of being able to treat each consumer as an individual and should revert to a segmentation approach until it can. At present consumers observe there to be a lack of true understanding of their personal circumstances which aggravates their cynicism toward marketers. From a consumer perspective, direct marketing is seen to offer a number of substantial benefits over traditional marketing such as greater convenience (Darian, 1987) and a more extensive product assortment (Rosenberg and Hirschman, 1980; Gehrt and Carter, 1992; Gillett, 1976). However, there can also be disadvantages. The subject of privacy is increasingly conceptualised as both exacerbating and influencing consumer concerns with regard to direct marketing (Cespedes and Smith 1993; Milne et al., 1996; Maynard and Taylor, 1996; Patterson et al., 1997). Although the degree of perceived risk is another potential weakness, it is encouraging that, as far as satisfaction with direct mail goods and services is anxious, there has been a stable rise over recent years: in 1989 just over 30% of a sample of consumers was “very satisfied” compared with 45% in 1995 (DMIS, 1998). So in general terms, consumers are becoming more relaxed about ordering via the telephone and post and are more pleased with the goods and services they buy in this way.
From the review of previous studies, there is no study which conducted on customers’ purchase intention towards direct marketing products. Thus, this research is carried out to classify the purchase intention of consumers towards direct marketing products and compare the factors affecting consumers to purchase direct marketing products. Decomposed Theory of Planned Behaviour is used in this research which to study the customers’ purchase intention. Factors that will be using in this research are come from the variable in the theory which is relative advantages, attitude, normative norms, subjective norm, compatibility, perceived behavioural control, and facilitating condition. Since there is no previous study focused on this, I believe that by conducting this study we are able to generate new knowledge in this field. The research question is developed as below:
The first chapter would serve as an introduction identify and determine the research topic and introduction on MLM companies. The topic of this research is “Purchase Intention of Consumer towards Direct Marketing Products” and my main purpose is to determine the relationship between some factors and purchase intention. This chapter included the problem statement, research objectives, research questions, and significance of the study. The second chapter covered the literature review concerning the concept of past research about the theoretical framework on behaviour and intention.
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The Theory of Reasoned Action (TRA) was found by Martin Fishbein together with Icek Ajzen, which conduct the study on attitude and behaviour under person’s intention (Ajzen & Fishbein, 1980; Fishbein & Ajzen, 1975). This theory is always used as a prediction tool to predict the purchase intention of consumer in past research. TRA has thus far been successfully applied to a variety of situations to conjecture the performance of behaviour and intentions. For instance, TRA is utilized to predict turnover (Prestholdt, 1987); education (Fredricks & Dossett, 1983); and breast cancer examination (Timko, 1987).
TRA is concerned with rational, volitional, and systematic behaviour (Fishbein & Ajzen, 1975; Chang, 1998). The TRA is appropriate when the behaviour being studied is under the volitional control of the individual (Ajzen, 1988). However, Sheppard (1988) found that there are two main problems in this theory. He found that there are limitations in this theory, which are the use of attitudes and subjective norms to predict intentions, and the use of intentions to predict the performance of behaviour. According to Sheppard (1988), the prediction of behaviour from intention is problematic because a variety of factors in addition to one’s intentions determine whether the behaviour is performed. In addition, there is no provision in the model for considering either the probability of failing to perform one’s behaviour or the consequences of such failure in determining one’s intentions (Chang, 1998). Liska (1984) and Sheppard (1988) pointed that TRA cannot deal with behaviours that require resources, cooperation, and skills.
The factor affecting consumers’ purchase intention towards direct marketing products is examined by using quantitative data collection method which is from Taylor and Todd (1995). A questionnaire is one of the research instruments which consists a series of questions for the purpose of collecting answer from respondents. Questionnaires are an efficient data collection mechanism when the researcher knows exactly what is required and how to measure the variables to interest. Questionnaires can be administered personally, mailed to the respondents, or electronically distributed (Sekaran, 2003). In this study, questionnaires will be use to measure consumer’s purchase intention towards direct marketing products. The main reason conducting this instrument is because it requires less cost to gather data from potentially large amount of respondents. A cover letter explaining the purpose of this study was attached, assuring them of confidentiality and instructing them to complete the questions. The data will be then collected, analyzed and interpreted.
After data begin to flow in, data analysis will be given attention. To test those developed hypotheses and provide justification of this research are the purpose of conducting data analysis. The findings will be analyzed using Statistical Package for Social Science (SPSS) software after collecting the data from respondents and keying data entry and after that followed by a more significant assessment of descriptive analysis, reliability analysis, mean analysis, frequency analysis and Pearson correlation.
Descriptive statistical analysis is to develop sufficient knowledge to describe a body of data (Cooper & Schindler, 2003). In data analysis, Sekaran (2003) has identified three objectives: getting a feel for the data, testing the goodness of data, and testing the hypothesis developed for the research. Reliability test is used in this study to examine the consistency of the questionnaire. There are four ways to improve reliability of measures, which are clearly conceptualize constructs, use a precise level of measurement, use multiple indicators and use pilot test. Mean analysis is study is used to obtain the mean and standard deviation of the variables. Frequency analysis is used to analyze the demographic variables such as gender, age, education level, race, allowances, and others. Correlation is a degree to which changes in the dependent variable are associated with changes in another. It is used to examine and analyze the relationship between independent variables and dependent variable. The correlation coefficient (r) ranges from +1.0 to -1.0. A value of +1.0 represents a perfect positive correlation whereas a value of -1.0 shows a negative correlation between variables (Saunders, Lewis & Thornhill, 2000). This means that the two variables are precisely related and that, as values of one variable increase, values of the other variable will increase.
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