Consumer Attitude And Consumer Behavior Toward Multilevel Marketing Essay

Published Date: 23 Mar 2015

In this chapter, we are discussing about the variables as indicated in the figure 1. With this, we will look into the relationship between independent variables and dependent variables. In independent variables, we will discuss the attitude towards multilevel marketing company, attitude towards distributor/ agent/ supplier and attitude towards multilevel marketing's product which will affect the consumer buying behavior. Furthermore, we will be further discussing about the consumer buying behavior affecting the dependent variables which are the purchase intention and word of mouth.

2.1 Multilevel Marketing

According to Ong & Ernest (2007), multilevel marketing is a firm which practicing the network marketing where offer a rewards program which will encouraging its distributor to recruit their own sales teams and taking the responsible on the promotion and selling the company's products. As an incentive, the company wills pays the commission for the particular distributor based on their sales as well as their down liner (Coughlan and Grayson, 1998; and Msweli and Sargaent, 2011). According to Bloch (1996), the individual distributor of multilevel marketing not only earn from their own sale but also enjoy in overriding the commission from the down liner that recruit by that particular distributor, in addition, Biggart (1990) support that the distributor will be rewarded according to their performance and the contribution of the profitability of the company.

In 21 century's market segment, multilevel marketing industry has been addressed as a new trend of environment to do the business (Poe, 1999). According to King & Robinson (2000), those involve in this multilevel marketing are called the new professionals. There is no end to the amount of literature that is being generated almost daily in praise of the multilevel marketing business, by the multilevel marketing companies themselves, individual distributors and multilevel marketing umbrella bodies with vested interest in the industry (Dykema, 1999). Although the multilevel marketing industry involves millions of distributors globally and is being looked at as the marketing system of the 21st century (Poe, 1999), there are many skeptics and detractors who are adamant about multilevel marketing being flawed and even morally wrong (Clements, 2001).

There are many researchers who have come up strongly in support of multilevel marketing or the more dignified label, network marketing, as the marketing system of the 21st century (Poe, 1999; King and Robinson, 2000; Hedges, 2001; and Kiyosaki, 2004). Multilevel marketing is seem as the opportunity that provides passive or residual income that offers the possibility of a high level of income, which is not attainable by those who only enjoy linear income (Kiyosaki, 2004; Hedges, 2001). It is a business that promises financial independence and personal freedom with the power of leveraging, by focusing on the ability to earn residual income or passive income rather than a linear income (Kiyosaki, 2004).

There is an intensive effort to give multilevel marketing a credibility and dignity (Ong and Ernest, 2007). The people involves in multilevel marketing are depicted as a new and exciting breed of people (Poe, 1999). The multilevel marketing industry sells an idea that appeals across the board to many, that one is a business (King and Robinson, 2000). The normal rhetoric includes "You have personal independence, benefit personally but have a down line that works for you and with you" or "You are indeep in business for yourself, but not by yourself" (Ong and Ernest 2007). Distributors believe that the down line that they build is their pipeline that will pump the money, 24 hours a day, 12 months a year, year after year whether they continue to work or not (Hedges, 2001). Multilevel marketing distributors are hooked on the prospect of "working from home. Wearing the most comfortable clothes in their closet, taking a break whenever they want to and still earning a substantial income in a now respectable profession" (King and Robinson, 2000).

The critics of multilevel marketing contend that multilevel marketing is an industry full of hype and unrealistic goals for the majority of individuals involved, claiming that no more than 5%-7% make the amount of money that they expect (Fearer, 1999a). These critics quote specific cases of high distributor dropouts, like Amway 50% annual dropout rate (Dykema, 1999). Others state that multilevel marketing, in general, contains a lot of pitfalls, and a lot of companies take advantage of the people (Fearer, 1999b).

What is even more damaging is the fact that many of the detractors and critics are people who were once closely connected to and involve in multilevel marketing (Ong and Ernest. 2007). They have been inside and did not like or agree with what they saw (Fearer, 1999b and Dykema, 1999). The very method of direct selling and the system of recruiting new distributors and building down line as practiced in multilevel marketing, is strongly criticized as being socially and ethically unacceptable because it betrays friendships and personal relationships (Ong and Ernesdt, 2007). According to Bloch (1996), it is unacceptable behavior that a multilevel marketing distributor recruits a friend, associate or relative; he or she does it out of the vested interest of enjoying a commission from the efforts of the down line that he or she recruited.

2.2 Consumer Attitude

According to Goodwin (1999), attitudes, perceptions and motivations are not apparent from clicks on banners or online purchases, but are an important part of the success or failure of marketing. A person's buying choices are further influenced by four major psychological factors: motivation, perception, learning and beliefs and attitude (Armstrong and Kotler, 2000). So Wells & Prensky (1996) agree that the four tools are used to identify the consumer's feelings, gather and analyze the information, formulate thoughts and opinions and action taken which we called that consumer's decision making. So, what is actually the attitude? According to defining of Allport (1935), attitude is defined as a mental or neural state of readiness, organized through experience, exerting a directive or dynamic influence on the individual's response to all object and situations that related. According to Borkowski (2009), attitudes are closely related to perception. Perception is the process whereby the organisms interpret and organize sensation to produce a meaningful experience of the world (Lindsay and Norman, 1977). However, according to Lovelock, Wirth & Keh (2002), perception is psychologically connected with the pattern of expectations and plays an important role in determining whether distributors decide to leave or stay in the multilevel marketing industry. Many researches have borrowed and extended the C-A-B paradigm concept and added more factors (Hanna and Wozniak, 2001). The C-A-B model expresses the interrelationship of these components. According to Peter & Olson (1996), cognition is defined as the mental process of interpretation and integration and the thoughts and meanings they produce, and Blythe (1997), support that cognitive is claimed to be the perceptual component of attitude as well.

Affect is a basic mode of psychological response that involves a general positive or negative thinking (Peter and Olson, 1996). In other words, affective component is the consumer's emotions or feelings about particular product or brand (Schiffman and Kanuk, 1999). This general inclination or liking may simply develop without cognitive information or it may also result after several evaluations on the particular products (Hawkins, Best and Coney (1998). Behavioral which known as conation (Blyther, 1997), is the consumer's tendency to respond in a certain manner towards an object or activity. Behavioral intention is an expression of the favorable or unfavorable feelings formed earlier (Hanna and Wozniak, 2001). Cognitive is not necessarily the likelihood or tendency that the consumer will undertake a specific action (Ong and Ernest, 2007). As Schiffman & Kanuk (1999) says, it may include the actual behavior itself.

The above three components are claimed to be interrelated. Both affective and cognitive systems respond independently to stimuli and each of the systems can respond to the output of the other system. Affective responses can be referred to as emotions, feelings, moods and evaluations. On the other hand, cognitive responses include knowledge, meanings and beliefs. Interpretation from both affective and cognitive systems will then determine the decision made (Peter and Olson, 1996). It is obvious that many join multilevel marketing industry because of their positive perception towards multilevel marketing that influence their subsequent deliberate behavior, which is to participate in the multilevel marketing industry (Ong and Ernest, 2007).

2.3 Consumer Buying Process

Agreeable what to buy, how to buy, where and when to buy and in how much the quantity going to buy or purchase influenced by the individual perception, self-concept, social and cultural environment. In addition age and family cycle, attitudes, beliefs, motivation, personality, social class and many other internal and external factors that will influence the behavior (Kumar 2012). She also revealed that consumer behavior involved decision-making process and also acquiring, evaluating, using and disposing of goods and services of physical activity. Hence, in consumer buying behavior, the process not only concentrates on the on buying of goods or services but the understanding of initial process before the goods have been acquired or purchase. This is because she also believes that buying process begin when the individual start to think of the good and services. When the individual start has the thinking, this will lead the individual try to find of alternatives between the product such as the advantages and disadvantages of the products.

According to Rowley (1997), two perspectives that very important in consumer buying process are regarding decision making process and the factor that influence the buying process. Factors affecting consumers' buying decisions are extremely complex.

2.4 Consumer Buying Behavior

Imam, A (2011) thought that the strength of the country's economy rely on the prosperity of product and services produced. To encourage this it is significant to have better understanding of consumer buying behaviour. Iman had identified the behavior of the individual in making buying decision and called this as "buyer behavior".

There are many studies have been done on consumer buying behavior. According to Sabine (2012) consumer buying behavior involved of the study of all range of people included individual, groups, or organizations and involved on how people make decision, secure, and consumed of product and services and also experienced the product and services. This also involved on the ideas to fulfill customer needs and the consequence of this activities to the consumer and society.

Meanwhile East, R (1997, page 3) pointed out that consumer buying behavior is regarding the human's responses in the commercial world. The response is about how and why people and use the product. In addition consumer behavior also involved how to react to the prices, advertising and other promotional tools and the essential mechanisms operate to encourage and prevent the selection of the products.

Meanwhile, few researchers mentioned that consumer behavior often interpreted similar to the information processing activities of computers (McGuire 1976,; cf. Olshavsky and Granbois 1979). In addition, the three major "comprehensive" models of decision making and described that psychological state of individual purchased begin at where the individual intent or looking for need to satisfy a material by purchasing and consuming a product after the final evaluation of the consequences of selection of the material or products. (Engel et al. 1968; Howard and Sheth 1969; Nicosia 1966)

Over the years, many researches had been done regarding consumer buying behavior as by understanding this concept will helps in increasing company performance and revenue (Peter & Doneenly (2007, pg 40). However, they also mentioned that no single theory of consumer behavior that really explain on consumer buying behavior. This supported by Armstrong (1991) that believed the consumer is unpredictable even though by expertise people. He also indicated that actually the customer behavior study according to buying behavior whereby the customer played three different roles. The three roles are user, payer and buyer.

The Maslow's Hierarchy of needs portrayed as below:-

Maslow's hierarchy of needs proposed by Abraham Maslow in 1943 is regarding the theory of psychology. The theory describing the stage of growth of human which consist of physiological, safety, belongingness and love esteem and self-actualization. The idea of the hierarchy of needs based on human have different stages of need and consumer buying behaviour, motivation is influenced by need. This theory believed that if human unable to fulfil the basic needs, he or she will not move to second needs and so on. They only will move to higher level of needs once they fulfil the stage and satisfied. Therefore, once they have fulfilled the lower needs, they will move to higher level needs and the lower level needs no longer as the motivator.

The five stages of hierarchy divided as below:-

Physiological needs. This is basic to survival and must be satisfied first. For example, the food, water, shelter and oxygen.

Safety needs. This involves self-preservation as well as physical and financial well-being.

Social needs. This are concerned with love and friendship..

Personal needs. This includes the need for achievement, status, prestige, and self-respect.

Self-actualization needs. This involves personal fulfillment.

Hence this proven that insurance fall under safety needs stage. This supported by Kreitner et al (2009, pg 211) whereby agreed that insurance able to fulfill the safety needs. Therefore insurance companies should concentrate on how to fulfill the safety needs (Kerin, Hartley and Rudelius, 2011, pg 119).

2.5 Repurchase Intention

From the view of Fornell (1992), repurchase intention is referes to the likelihood of using a service provider again in the future. However, Jackson (1985) argue that, the "repurchase intent" as a "consumer behavioral intention" that measures the tendency to continue, increase, or decrease the amount of service from a current supplier.

According to Kitchathorn (2009), the measures of repurchase intention are usually obtained from surveys of current customers assessing their tendency to purchase the same brand, same product/ service, from the same company. The Cronin, Brady & Hult (2000) treated "behavioral intentions" and "repurchase intention" and as synonymous constructs. Further definition of "future behavioral intention" had been defined as the future propensity of a customer to continue or to stay with their service provider by Ranaweera & Prabhu (2003), and according to Zeithaml (1981), many researchers used the term "customer retention" to describe the construct with this definition.

From Jones & Sasser (1995), customer repeat purchase or retention is the most vital goal for company success and probably the most important concept in marketing. As Rosenberg & Czepiel (1984) stated that, the cost of generating a new customer is believed to be approximately "six times", the cost of keeping an existing customer. So, as a result, firms are refocusing their efforts on keeping existing customers or making them repurchase, rather than focusing entirely on gaining new customers (DeSouza, 1992).

Existing research from Marketing and Tourism literature has yielded several key antecedents as influencing a customer's intent to revisit or repurchase (Petrick, Tonner and Quinn, 2006). The example of variables like:

Consumer satisfaction

Past experience/ behavior

Brand loyalty

Quality and service quality

All the variables have been talked in this literature (Kitchathorn, 2009). Numbers of researchers have stated that traditionally customer satisfaction is viewed as the most important factor leading to repurchase intent (Sharma and Patterson, 2000).

According to Hellier, Geursen, Carr & Rickard (2003), repurchase intention involved the individual's perspective about buying again a product or services from the same company after consider the individual recent situation and condition.

Customer repurchase decision usually is based on the overall evaluation of the service and supplier and the decision is based on numerous experiences after the consumption of the services with the supplier (Danaher and Mattsson, 1994; Liljander and Strandvik, 1995).

2.6 Word of Mouth

Hawkins, Best & Coney (2004) state that, consumer duplicate each other following a social or vicarious learning paradigm, but the most importantly is they also talk to each other. Hawkins et al (2004) describe the word-of-mouth as the process allows consumers to share information and opinions that direct buyers towards and away from specific products, brands, and services. In the early years, word of mouth was defined as face-to-face communication on products or companies between those who are not commercial entities (Arndt 1967; Carl, 2006). Later, Westbrook (1987: 261) described the informal communication which also supported by Anderson (1998) and Dichter (1966) on that more broadly in including "all informal communications directed at other consumers about the ownership, usage, or characteristics of particular goods and services or their sellers," Westbrook's writing is clearly specified that "informal communications" are the communications of interpersonal relationships, as contrasting to those through mass-media channels that pass the product knowledge from company or distributor to the consumers while Westbrook didn't specifically defined what constitute "informal communications".

Recently, an argument has been done by Buttle (1998), state that word-of-mouth can be introduced by electronic means. Due to the improvements of the Internet technology, the Internet empowers a new platform of communication to the distributor and consumers to share the information and opinions (Litvin, Goldsmith and Pan, 2008). This is what we consider as electronic word-of-mouth (eWOM). This is because according to definition of Westbrook (1987), electric word-of-mouth (eWOM) is the informal communications directs at consumers through Internet-based technology which related to the usage or characteristics of particular goods and services, as well as their sellers. In addition, this have been supported by Goldsmith (2006) and Lazarsfeld, Berelson & Gaudet (1944), which pointed out that, this includes the communication that happen between the supplier and consumers as well as between the consumers themselves where the vital parts of word-of-mouth happen, and both specifically differentiated from communications by the mass media.

According to Lindgreen & Vanhamme (2005), Buttle also noted that "informal communication" might not be all broad and argue with the fact that more and more companies had adopted viral marketing practices which confused the borderline between the commercial messages and word-of-mouth.

Word of mouth important as it facilitate in appealing new customer which is significance for firm's long term profitability (Hennig-Thurau et al, 2002). Meanwhile according to Wangenheim (2005) word of mouth help to minimize the thinking conflict happened to existing customer. As when thinking conflict happened to existing customers this will bring to the wrong decision concern (Festinger, 1957). Hence the customers spread word of mouth in order to persuade in purchase decision (Wangenheim, 2005). Again this supported by Festinger (1957) that mentioned word of mouth help to minimize the individual post decision conflict.

Undoubtedly word of mouth played important roles especially for service providers that offered large intangible product and experience. This is because customer highly relies on the word or advice and suggestion from other that ever experienced or used the service (Kinard and Capella, 2006). In addition, the customer can generate better trust and communication compared to communication from firm. Hence this proved that word of mouth is essential (Zeithaml and Bitner, 1996).

2.7 Relationship between Multilevel Marketing and Consumer Attitude

2.8 Relationship between Consumer Attitude and Consumer Buying Behavior

According to Pride and Ferrel (1991) company brand will influence behavior. These two authors agreed that there is positive relationship whereas positive attitude towards company or brand can influence behavior. Therefore they believe that customer's attitude to the company and its product this will hugely impact the successfulness of the firm's marketing strategy. Therefore this proven the hypothesis there is relationship between attitude towards multilevel marketing's company and buying behavior.

Besides attitude toward company, Pride and Ferrel (1991) also agreed that is positive relationship between the brand or product and behavior. They pointed out that attitude of the customer towards the brand of the product will hugely impact the successfulness of the firm's marketing strategy. Therefore this proven the hypothesis there is relationship between attitude towards multilevel marketing's product and buying behavior

2.9 Relationship between Consumer Buying Behavior and Repurchase Intention

2.10 Relationship between Consumer Buying Behavior and Word of Mouth