Multi-Level Marketing a Promise or Problem Essay Example
Multi-Level Marketing a Promise or Problem Essay Example

Multi-Level Marketing a Promise or Problem Essay Example

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  • Pages: 9 (2443 words)
  • Published: March 21, 2018
  • Type: Essay
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The use of personal relationships and word of mouth is a highly cost-effective marketing communication method, which many third world countries employ in their local markets. However, most developed countries have banned this strategy. Recently, the Bangladesh government also banned multi-level marketing in the country. Consequently, many people in Bangladesh now hold a negative perception towards this strategy. Nevertheless, if implemented correctly, multi-level marketing can prove to be useful for the Bangladeshi economy and business sectors.

Therefore, this study aims to explore people's perception of multi-level marketing in Bangladesh. It will also examine the prospects and issues associated with this strategy in the country. Ultimately, the study will assess the usefulness of multi-level marketing and its potential for successful implementation in Bangladesh.

1.Introduction

Marketing is an essential business activ

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ity that generates revenue for a company. Over time, marketing has evolved significantly. Initially, there was no concept of marketing. However, in the early 20th century, selling and marketing concepts emerged.Multi-level Marketing is one such technique that utilizes personal relationships and social networks as marketing tools.Social networking through the internet and telecommunications has significantly increased in recent years.

The emergence of web-based social networking platforms such as Facebook and Twitter has facilitated the dissemination and attraction of investors for multi-level marketing (ML) purposes in Bangladesh (Meek et al., 2011). However, ML was not implemented in Bangladesh until the 2000s. Recently, the government banned 45 ML companies operating in the country, resulting in a division among the population with some supporting and others protesting this decision. This study aims to explore both sides of people's perspectives on this strategy. Prior to the ban, there were numerous investors wh

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claimed to be profiting from these companies. To comprehend people's reactions towards the ban, it is crucial to analyze the advantages and disadvantages of ML companies. By examining people's behavior towards ML, this research will contribute to future implementations of this strategy in Bangladesh. The problem statement addresses that most domestic ML companies have been prohibited by the government of Bangladesh, highlighting the importance of identifying factors impacting ML within the country's economy and hindering its full potential realization. Over time, individuals have developed certain perceptions about ML which can influence its success as a strategy in Bangladesh. Hence, this study seeks to identify people's observations regarding this strategy and ultimately determine its validity as a marketing approach within Bangladesh's economy.

Reference:
Meek S., Chouinard J.A., & Hurst C.S.(2011). Social media effects on developing countries: A case study of multilevel marketing (MLM) firms' online engagement strategies in rural Bagerhat District,Bangladesh.Journal Of Research In Interactive Marketing ,5(4),264-283According to the American Marketing Association, marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. It serves as the link between a society's material requirements and its economic patterns of response. Marketing fulfills needs and wants through exchange processes and building long-term relationships. It involves effectively communicating the value of a product or service through positioning to customers. Marketing is both a social and managerial activity where individuals and organizations obtain what they need or want from others through creating and exchanging goods, services, or values (Kettle & Armstrong, 2003).

Marketing is an organizational function involving creating, delivering, and communicating value to customers while managing

customer relationships for the benefit of the organization and its shareholders. It also includes selecting target markets through market analysis and segmentation, understanding consumer buying behavior,and providing superior customer value.

Multi-level marketing (ML) is a marketing approach that encourages participants to promote a specific product to their friends.The popularity of this approach has grown due to the availability of social networks.ML existed in various forms prior to the Internet era, including pyramid schemes, which are based on relationship marketing. This involves establishing and maintaining strong relationships with customers and other stakeholders in order to achieve high profitability. In ML, salespeople typically sell products directly to consumers through referrals and word of mouth marketing. Although ML is often referred to as direct selling, it is just one type according to (1996). One major advantage of ML is that sales force members receive compensation for both their personal sales volume and the sales volume of recruited individuals (Wisped, 2013). Effective recruitment of investors is crucial for the survival of direct selling organizations like ML companies. The ability to continuously recruit new members is essential in replacing those who have left. ML distributors maintain relationships with both their "uplink" sponsor and their "downlink" recruits, collaborating by organizing recruitment meetings and sales training sessions. Networks are built by ML distributors based on a combination of friendship and instrumentality. A pyramid scheme resembles a pyramid structure where one person or company at the top acts as the initial recruiter. Investor A is then recruited by this person or company, who must bring in additional investors each required to invest a certain amount of money.
Investor A can earn commissions on each investment

brought in and profit as long as the pyramid scheme continues to grow. However, pyramid schemes cannot continue indefinitely due to a limited number of potential participants. Rather than offering real products or services to the public, this business model promises payment or services for enrolling others into the scheme.

Pyramid schemes are illegal in numerous countries including Albania, Australia, Austria, Brazil, Canada, China, Colombia, Denmark, Dominican Republic, Estonia, France, Germany... (list of countries).

Multi-level marketing (MLM) differs from traditional promotion and advertising methods by relying on direct selling techniques and personal relationships between salespersons and customers. MLM companies operate similarly to regular organizations but utilize personal relationships and direct selling. In Bangladesh's implementation of MLM strategy, these salespersons are referred to as investors.When individuals in Bangladesh purchase a product from any MLM organization, they become part of the organization. When a person sells products to others, they become linked in their downlink, while the person from whom they bought the product becomes linked in their uplink. This creates a pyramid-like structure in the diagram (Wisped, 2013).

The history of multi-level marketing is unclear, with some stating that it began before World War II. The first multi-level marketing company, "Underweight," started marketing its products through the MLM system in 1940-41, founded by chemist DRP. Carl Rein Borough of California. In 1949, two young individuals named Rich Devon and Jay Van Ended joined "Underweight" as distributors and brought a new trend to MLM after 10 years. Through a 10-vote victory in the US parliament, MLM started its business with franchise parallel in 1958. From there, MLM expanded globally and in 1959, Devon and Van Ended founded a new

MLM company called Anyway Corporation. Eventually, they acquired "Underweight" and merged it with Anyway Corporation.

Currently, MLM operates in over 135 countries with more than 12,000 companies selling products and services in the MLM system (Hake, 2009). The operation of MLM is as follows: Company X recruits Vendor A to sell its products.For each unit that Vendor A sells, they receive a commission.Company X encourages Vendor A to expand the distribution network by recruiting other vendors to sell products, providing an opportunity to increase earnings. As a result, Vendor A recruits Vendor B and five other friends to sell products. Instead of selling directly to consumers, Vendor A becomes Distributor A and supplies products to Vendor B and others, earning commissions for all sales. Once Vendor B gains experience, they can also recruit and sell to Vendor C and five other friends. In this case, Distributor A will earn commissions from the sales of both B and C. Multilevel marketing (ML) remains a legitimate business model as long as rewards are tied to consumer product sales and unsold goods can be bought back by Company X. However, issues arise when the focus shifts solely to recruiting new members, transforming ML into a pyramid scheme. The multilevel marketing industry is rapidly growing globally with estimated worldwide sales reaching up to ninety billion dollars. Many people have purchased products and services from multilevel marketing organizations, indicating its increasing popularity. In 2011, major multilevel marketing companies in America generated nearly $30 billion in sales with around 16 million distributors. According to the Direct Selling Association's report, worldwide there were 92 million distributors who grossed $154 billion in sales. Nevertheless,

with this growth come questionable companies and practices like pyramid schemes that have also emerged.Currently, there are more than 500 multi-level companies operating worldwide, with 60 well-known in the field. The top ten MLM companies globally are Ensure, Anyway, Menelaus, ASANA, Nu Skin, Assassin, Forever Living, Legal Shield, CAN, and Herbalist. Despite their success, multi-level marketing faces criticism worldwide. In developed countries like the United States where it is not illegal according to a decision made by the FTC in 1979 regarding Anyway Corp., some MLM companies have been found guilty of unethical practices such as price fixing and making exaggerated income claims. These organizations have also been criticized for their cult-like tendencies and pyramid scheme structures. Some fraudulent MLM schemes can be identified by high entrance fees or requirements to purchase expensive inventories. When these schemes fail due to the inability to sell merchandise, only those at the top avoid financial losses. However, the issue with MLM lies not in the concept itself but in the individuals it attracts – it is essentially a micro-franchising business model with low entry costs and potential for high revenue (Wisped, 2013).However, the MLM industry often exaggerates opportunities, discusses business inappropriately in social settings, prioritizes recruiting over product information, and uses deceptive tactics. In Bangladesh, MLM is a relatively new addition to the business landscape, introduced in 1998 through GANG (Global Guardian Network) (Wisped, 2013).

ML functions as a direct marketing channel used by Multi-Level Marketing, Network Marketing, and Direct Selling companies. There are currently 65 such companies operating in Bangladesh. However, most of these companies operate under the disguise of legitimate ML businesses while actually running

pyramid schemes. Due to lack of government monitoring, there is no precise data on the amount of money collected from individuals by these ML companies or their investments and spending on unprofitable projects.

One notable company that utilizes the ML system is Destiny-2000 Limited. However, along with 45 other companies, Destiny has been banned by the government and its bank accounts have been frozen by Bangladesh Bank due to alleged money transfers. It has been reported that the directors of Destiny hold a total of 443 bank accounts with only TX1.77 billion traced funds; moreover, 225 of these accounts have already been closed.

Nippy-2 and Kobo are among other notorious companies known for defrauding the public out of billions.The government is taking steps to implement stricter regulations by contacting various agencies for feedback on the ML act, known as "Direct Sales Law-2011". The aim is to increase accountability in multi-level marketing (ML) businesses. The ministry has assured that the ML (Control) Act 2011 will be passed soon. A draft law has also been prepared for the marketing strategy, which includes penalties such as imprisonment, fines, and license revocation for ML companies involved in specific types of businesses. The study's main goal is to assess the applicability of ML in Bangladesh's economy and understand investors' perspectives. This will be achieved through four objectives: identifying promises and problems associated with ML, understanding public opinion, and comparing problems and promises to determine if this strategy can be effectively implemented. Data will be collected from Dacha and Chula city using open-ended questions and depth interviews based on secondary data analysis.The survey will include individuals who have experience in ML

business in Bangladesh, as they can provide insights on the promises and challenges associated with ML. Additionally, individuals who are not involved in ML but have significant knowledge about this strategy will also contribute to achieving the third objective.

Destiny 2000 Ltd, MIX Modern Herbal Ltd, Unpaid Ltd, and Tolerance Outsourcing Ltd will be the sampling units. These four companies cater to various customer segments, making sampling easier. Although it is difficult to determine the exact number of investors in these companies, a safe assumption is to consider a sample size of 200.

Snowball and Quota sampling techniques will be used. Snowball sampling is suitable because there isn't a definitive list of investors for these companies that can be directly accessed. The sample size will consist of 200 respondents, with 50 from each of the four companies.

This research aims to categorize a total of 50 respondents into different occupations including government service holders, non-government service holders, students, business people, and unemployed individuals. The study will primarily focus on exploring and describing the viability of multi-level marketing in the Bangladesh economy. Secondary data will serve as the primary source of information for this research.

To achieve the objectives of assessing the advantages of multi-level marketing and understanding people's perceptions towards it, open-ended questionnaires will be used to gather data. The collected responses will be analyzed through depth interviews, secondary data analysis, and expert interviews to identify the main advantages from an investor's perspective and comprehend why individuals are inclined or against it.

Furthermore, hindrances to the implementation and growth of multi-level marketing in Bangladesh will be analyzed using secondary data from published literature, journals, books, as well

as expert interviews. Statistical tools such as percentage analysis and ranking will be employed to analyze investors' viewpoints in order to determine the promises offered by multi-level marketing.

The research will visually present the results using pie charts and histograms. The significance of this study lies in its focus on the specific problems and advantages of multi-level marketing in Bangladesh, which has not been explored in previous research. As Bangladesh's economy grows and its GDP increases, various companies are establishing operations in different sectors within the country. Multi-level marketing, a marketing strategy banned in most first-world countries but successful in some third-world countries, holds potential for future growth in Bangladesh if implemented effectively. This research aims to evaluate the pros and cons of multi-level marketing in the Bangladeshi economy and investor intentions towards this strategy. The findings will benefit companies interested in adopting this strategy and prospective investors considering investment opportunities. However, there are limitations to this study: it will only focus on Dhaka and Chula cities; finding suitable respondents may be challenging due to government shutdowns of some companies with high investor numbers; samples will be drawn from four companies with different product segments, potentially yielding different results compared to the total 65 industry companies included.In conclusion, the sample in this case is derived from non-probability sampling as there is no specific list of investors available. This may restrict its ability to accurately represent the entire population.

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