for
Direct Selling Business
believe that it was just 16 years ago when Amway, an American multi-level marketing
company, started its direct sales operation in Taiwan.
performance, the direct selling industry have not only shaken off the negative image of
money-sucking schemes, but also successfully proven itself to be an innovative,
formidable marketing channel.
Examining its success factors, we found out that the multi-level marketing
industry is very keen at exploring marketing niches in a changing society and at
developing strategies that utilize its existing channel advantages, unique product
characteristics, effective information flows, innovative benefit offerings, and all-out
corporate efforts to achieve its current market dominance.
In probing the industrys future development, several trends are worth noticing.
That includes the extension of targeted segments, the market demands for innovative
products and services, the needs to widen and deepen the product mixes, the
supplementary sales efforts, new products for leisure-related and female-oriented
market opportunities, and finally, the development of company image and public
relations strategies.
1. Introduction
Multi-level marketing is one of the direct selling methods. According to Fair
Trade Laws, multi-level marketing(MLM) is defined as marketing activities in which
participants pay a certain amount of fees in order to gain the membership from a sales
or promotional organization who grant its members the right to sell/distribute the
product and service, to recruit other new members, and to obtain economic rewards.
From data released by the Fair Trade Commission, in 1997, the total number of
registered MLM enterprises has increased to 758, the total participants has reached 2.36
million and the total sales revenue of the industry was estimated to be NT$ 40.8 billion.
Known by its unique way of connecting the end user and the producer, todays MLM
industry has not only won increased acceptance among general public but also made
itself an innovative, powerful marketing channel that generates robust revenue growth.
It was just about 16 years ago when Amway, a well-established American
household product producer, started its multi-level marketing operation in Taiwan.
And since then, the multi-level marketing industry has firmly rooted itself in this island
and flourished in an amusing speed.
2. Literature Review
The success of a marketing strategy depends largely upon a companys ability to
effectively utilize its organizational and human resources toward the goal of fulfilling
the needs of its target customers in a dynamic environment.
this process in an innovative way, a company can create a dominant market presence,
customer loyalty and satisfaction.
practitioners.
Before studying the success factors for the industry, we first focus
briefly on purchasing behavior theories and external factors affecting buying decisions
which would lay the groundwork for the further discussion.
Theories of consumer behaviors provide useful insights for explaining the
consumers evaluation process as well as predicting purchasing behaviors.
For
example, The Black Box Theory (Jung Tai-Sheng, 1991) views a customer as an entity
that receives external stimuli which provokes evaluation processes and generates
responses.
background, attitude, and social class as factors that affect ones buying decision.
Additionally, according to Philip Kotlers(1995) view, a purchasing decision is mainly
determined by the consumers personal traits and evaluation process, along with stimuli
from the external environment.
technological factors can all have different degree of influences on consumers buying
decisions, studying each of these factors individually are crucial for understanding their
possible impacts on the market success of an industry as well as for forming an effective
marketing strategy.
A successful business must have realized the change and adapted a policy to
meet it.
In this section, we start with the discussion and analysis of the external
This is especially
This trend is
reflected by the increasing market demands for health-related products such as nutrition
supplement and health-enhancing/fitness equipment.
people in their young age have realized the importance of preventing illness from
happening in the first place.
spend a big proportion of their money on educational goods and basic necessities for the
children.
As the small size families constitute the majority of the society, two trends
As a result,
people no longer live with their offspring under the same roof, their daily needs of
health care are calling for a well-round social welfare system and a comfortable health
care providing environment.
(4) In the traditional job market, male has always played the role of bread-earner.
However, as the society evolves and the long-existing gap between two sexes narrows,
females participation in the job market are taking a big leap.
power increases, the time available for house works will be shortened. All these
effects induce demands for more time-saving products and efficient shopping methods.
3.1.2 The economic factor
The average annual income per capita in Taiwan has reached US$12,439 in 1995.
This will lead to a bigger share of consumer spending on high quality and luxury
items.
the mushrooming urban and rural recreational facilities built in recent years.
Balancing a fast-pace lifestyle in a dynamic economic environment, innovative
products and services that provide consumers with desired convenience and
benefits will certainly take a big lead in the market place.
3.1.3. The natural factor
The excessive pursuit of economic glory has taken its toll on the nature
environment.
tolerate toward the polluted air, piggish environment, and the overly-used artificial
ingredients in the things they consume.
consciousness and concerns for the nature will promote more nature-friendly
materials used in producing and packaging goods on the store shelves.
3.1.4 The technological factor
In the last two decades, the successfully commercialized applications of many
modern technologies have significantly changed the patterns of market competition.
Three major effects brought by advanced technologies are observed:
Whats
To ensure the
For manufacturers,
For
different
and
channel
members,
hassle-free
shopping
atmosphere
For
government, the establishment of the Consumer Protection Foundation and the birth
of Consumer Protection Laws have set a milestone not only in promoting fair trade
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consumers today may place the same importance upon the overall image and
reputation of a company they are buying from and the product and service it
provides.
products deliver more values for their money, adding attributes desirable by the
consumers are becoming another market imperative.
3.2.2 Social influence factors
Reference groups have always been a major determinant influencing purchasing
behaviors.
As
consumers become more educated and sophisticated, they consult the opinions of
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experts and the experienced product users around them when making the decision.
Moreover, using the product demonstration to prove its effectiveness has become a
useful way in increasing creditability and persuading consumers.
Combined with
conformity, consumers obtain new product information not only for satisfying their
own needs but also for fulfilling expectations from others.
Since todays
consumer tastes, needs, purchasing habits, and changing market trends are critically
important.
In the last 16 years, the development of the MLM industry, with its
immense organizational and sales growth, has undoubtedly been proven to be a huge
market success.
Through close
examination, we discover a linkage between the industrys success and its very ability
to seize the merging opportunities in a changing social and economic environment.
The following analyses details four major contributing factors to the success of the
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industry.
4.1 Attributes that meet needs
In selling, the attributes of a product and/or service are the most essential part of
the offering.
A favorable
word-of-mouth reputation would not only enhance customer loyalty but also
encourage the first time customers.
the machine provides a great opportunity not only for showing prospective
customers how the machine operates but also for instructing consumers the proper
operation.
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C. Health-oriented Nature
According to a survey conducted by the Fair Trade Commission(1997), the top
three
categories
of
direct
selling
products
are:
health
and
nutrition
selling agents at the customers house, it largely eliminates the customer travelling
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time and efforts and at the same time, reduces the consumers perceived buying
risks.
F. The Multi-Functional Nature of the Product
Facing abundant new product offerings and market information, the total value of
a product has become a often-used criterion in the consumers decision making.
Compared with multi-functional ones, products that perform only limited functions
are destined to be less competitive.
For this
Through
companies can use these first hand market information for strategic decision
making in the area of production, pricing, quality control, and after sales
service.
C.
In
the direct selling business, this merging role of product consultant is normally
assumed by the field distributor in serving his or her busy customers.
4.3 The innovative benefits of direct selling
While the term marketing channels has been redefined by rapid technological
and economic development, various channel inventions have also been putting into
practice.
client at home, the direct sales people have the opportunity to explain the
benefits of their offerings thoroughly and could also reduce the clients
inconvenience for after sales service.
long-term
relationship
with
their
clients.
And
this
Even when the client is unsatisfied with the product or the level of
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service, direct contacts can be a very productive way in diminishing the clients
discontent.
C. Quick Response Marketing Mechanism
Resulting form the progresses in new technologies and mass media, the
current consumer market is greatly shaped by manifold demands and supplies
in the market place.
To gain an edge
over fierce competition, it is very advisable for companies to measure their success
not only in the area of sales and profits, but in their employee training, public
relations, and promotional management.
on its ability to match the needs arise from a changing society with its every strength.
Nevertheless,
facing
with
the
increasing
competitive
pressure
from
both
The
followings are areas that are currently under-cultivated and deserve more attention.
5.1 The extension of target markets
Based on survey done to the top-10 MLM companies (The Fair Trade
Commission, 1997), the cluster of the main target segments are most commonly
aimed at adult customers.
awareness, we can predict that the market demands for health-related products will
grow even greater.
supplement, and fitness equipment, the health checkup service is also getting its
popularity.
In
addition, through cooperating with local medical care institutes, multi-level marketing
companies can even take a further step in developing themselves into professional
health care consulting agents that benefit a wide range of people.
5.3 Developing the width and depth of product mix
Due to rapid technological advancement, the life cycle of new products has been
dramatically shortened.
have a system that enables them to adjust their offerings precisely to meet the
merging demands.
much truth.
consumers, MLM companies should develop strategies to broaden both the width
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professional brand name image and investment made to enhance the productivity of
human resources will all play crucial roles in tomorrows success.
5.4 The use of intelligent marketing database
To effectively broaden customer base and expand marketing network, many
companies are now taking advantage of the use of the intelligent market
information database.
resources,
multi-level
marketing
can
incorporate
However, todays
consumers have more to ask than simply have their needs satisfied.
In the eyes of
To
flow with this trend, multi-level marketing companies should involve themselves in
activities that promote better social welfare and environmental concerns.
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female consumers have form a representing voice in the market place, finding out
their exact needs and tailoring marketing programs to serve them is no easy task.
However, the rewards should outweigh the efforts in the long run.
6. Conclusion
It was just 16 years ago when Amway set up its multi-level marketing operation
in Taiwan.
Today, with more than 2.3 million participants, the multi-level marketing
After studying
factors that contribute to its amusing rate of growth, we conclude that the industry has
succeeded in finding niches characterized by changes in the society and in developing
strategies that incorporate genuine market and customer focuses with relentless
entrepreneurial spirits.
industry has successfully reborn from the image of ill-reputed money-sucking schemes
and proven itself to be an innovative, powerful marketing force.
Despite its formidable market presence, the industry is also facing challenges of
coping with the intensifying competitive pressures in its operating environment.
To
gain an edge over competition, the concrete efforts made to find out the needs of
consumers and to serve the target segments at an exceptional level will make a big
difference.
Putting them into practices, companies should cautiously tailor strategies aimed
to widening the customer reach, broadening the product line, developing the winning
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product mix, supporting field sales efforts, cultivating leisure and female-oriented
market opportunities, and building up the companys public image.
In Japan, the annual sales generated by a direct sales person is approximately ten
times of those in Taiwan.
growth.
As the industry moving into a mature stage, how to reinvent itself and remain
More
Reference
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