The Circle of Life in Network Marketing Relationships

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Uppsala University 2008-06-04

Department of Business Studies Spring Semester 2008

Master Thesis

Supervisor: Leon M. Caesarius

The Circle of Life in Network Marketing Relationships

A Case Study of Tahitian Noni International

Authors:

Camilla Bråneryd Tobias Friberg

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ii Abstract

The marketing industry is moving towards customer centric marketing where it is important to establish and maintain relationships with customers. This need is even more crucial for a network marketing company which relies solely on relationships. The purpose of this thesis is to identify how a network marketing company establishes and maintains relationships with independent product consultants (IPC). This study was conducted by interviewing seven IPCs from the network marketing company Tahitian Noni International (TNI). The investigation shows that the main reasons for joining are either the business opportunity or the product. The relationship is maintained through various communication channels.

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1. Introduction

Network marketing is a business form that originated in the United States during the 1950’s.

From there on, network marketing companies have gained exceeding ground and have become widely spread and recognized, especially during the past ten years. Companies such as Tahitian Noni International, Herbalife, Oriflame and Forever Living Products are all examples of well-known network marketing companies. Today, an estimated 58 million people are involved in network marketing throughout the world and in 2006 the worldwide sales accounted for an estimated USD 109 billion (Direct Selling Association: Worldwide Sales, 2008). In Sweden, more than 100 000 people are involved in network marketing companies and the turnover amounts to over SEK 2.9 billion (Direkthandelns Förening:

Nyckeltal, 2008).

Network marketing companies are in many aspects similar to any other type of company; they have customers, employees and sell goods or services and market their products. What makes network marketing companies unique is that their main asset is their distributors (independent product consultants: IPCs). The IPCs continuously recruit new persons to join the company and without this recruitment there can be no network, which in its turn would undermine the entire business form.

Network marketing companies have, throughout the years, fought for becoming accepted as a legitimate business form. Even though the business form has been around for quite some time and engages millions of people around the world, it has been looked upon with great

skepticism mostly due to the association with illegitimate pyramid schemes. Still today this skeptical view to some extent lives on, but the business form continues to grow rapidly.

(Direkthandelns Förening: Akta dig för pyramidspel, 2008)

1.1 Problem statement

Network marketing is a business form that engages many people and is growing rapidly, yet it is still surrounded by skepticism. This contradiction makes the area interesting to study and it is no longer possible to write off the industry as a scam or a passing trend. Although the recruitment aspect may be the key to understanding how network marketing companies can function and grow, it has received little attention by researchers and is therefore a relatively unexplored area in the academic sphere. (Bråneryd & Friberg 2008) In order to bring

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legitimacy to the area, it is important to understand how the network marketing industry works. It therefore lies upon the academic sphere to analyze the business form in order to gain an academic perspective, not just a practical view.

Today, merely 1 percent of Sweden’s population is engaged in network marketing companies.

What, then, are the factors that hinder people from joining network marketing companies?

What are the factors that make certain people decide to join? When someone has joined the network - what is done to uphold the relationship to ensure they stay with the company?

These are all key concepts in understanding the recruitment process of network marketing companies and will be investigated throughout the study.

The case company chosen for this study is the network marketing company Tahitian Noni International (TNI).

1.2 Purpose

The purpose of this study is to identify how independent product consultants (IPCs) within network marketing companies establish and maintain relationships with new recruits.

1.3 Definitions

Since network marketing is a relatively new occurrence certain definitions will be given in order to avoid any confusion to the reader; those who distribute goods in TNI are referred to as independent product consultants (IPC). They are referred to as independent since they are self-employed, not employed by the company. The term downline refers to the IPCs below an IPC, whereas upline refers to the IPCs above an IPC. A sponsor is a person who recruits new IPCs to the network. The person that is about to join the network as a new IPC is referred to as a recruit.

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Figure 1: Sponsor & Recruit. Source: Authors’ construction.

In Figure 1, A and B have the same sponsor. A is the Sponsor of two recruits and has a downline of four IPCs, while B has not sponsored any IPCs and therefore has no recruits in his/her downline. A and B’s upline are identical, consisting of their sponsor and all those above him/her.

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2. Theoretical framework

In this chapter, the theoretical framework regarding recruitment of new customers and

business partners is presented. Thereafter, the importance of business relationship is discussed with aspects of upholding the relationship. Termination of a relationship can sometimes be an outcome, which is shown in the final section of this chapter. This section makes up the base for the analytical framework.

2.1 Relationships

Marketing has changed greatly since World War II, when the marketing industry started to move from transactional marketing with a focus on mass marketing and single purchase customers, to service-marketing with a relational approach (Grönroos 2007:24).

“Relationship marketing is to identify and establish, maintain and enhance and when necessary also to terminate relationships with customers and other stake-holders at a profit, so that the objectives of all parties are met, and that this is done by mutual exchange and fulfilments of promises” (Morgan and Hunt, 1994)

This also describes the circle of life of network marketing relationships, with entails a recruitment phase, a maintenance phase and, if necessary, a termination phase of the

relationship. To illustrate this circle of life, different theories are used to give a clearer picture of what the different phases are characterized by. These different theories are categorized into seven categories; direct contact, communication, interaction, relationship history, adaptation, commitment and trust. (Håkansson 1982, Liljander & Strandvik 1995, Homans 1961, Blau 1964)

2.1.1 Direct contact

Awareness and exploration are two stages that take place prior to the development of a relationship, but are still considered stages in a relationship. Awareness refers to one party’s recognition that another party may be a possible exchange partner, thus there is no interaction here. In this stage it is more likely to become aware of local companies than distant ones due e.g. local marketing (Dwyer, Schurr & Oh 1987). The exploration stage is characterized by a

“search and trial phase in relational exchange”, in which trial transactions may take place.

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During the exploration stage, the potential partners consider different criteria, e.g. obligations, benefits & burdens and the possibility of exchange (Dwyer et al 1987).

The influence of meeting face-to-face and having a direct contact with the customer can perhaps do more for the relationship than has previously been perceived. This is when the seller and buyer meet each other to give the relationship a solid start. Thereafter they meet continuously in order to maintain a strong relationship.

It has been stated that customers form a relationship with the product they are purchasing.

Despite this, most of today’s products are not merely goods, but rely on being services as well. Thus, a greater need for employees to form relationships with customers emerges. The employee is the only face the customer sees and therefore, in regard to the product, a

connection is essential. (Bendapudi 1997)

Since the customer creates a relationship with the service provider, social bonding may

influence the relationship maintenance. This could take the form of e.g. giving gifts within the relationship or becoming a part of each other’s life outside of the business relationship, such as e.g. going to the same church. When this reaches a higher level in the relationship, other people may get involved and, for example, the business partners’ families become acquainted.

(Bendapudi 1997) “The greater the customer’s social bonds with the partner, the greater the dependence on and trust in the relationship” (Bendapudi 1997:26).

2.1.2 Communication

Ballantyne (2004) presents the importance of communication, which allows emotions, ideas, facts and arguments to be transferred. He divides communication into one-way and two-way communication. One-way communication focuses on reaching a larger population where the receiver has a marginalized opportunity to reciprocate communication. This is done in order to transfer information and thereby secure loyalty and awareness (Ballantyne 2004). Two-way communication, on the other hand, is to a greater extent characterized by interaction.

2.1.3 Interaction

Ballantyne’s two-way communication focuses on having dialogue with the counterpart, where both parties may contribute to the communication: “Dialogue can be understood as an

interactive process of learning together. This definition recognizes a necessary sense of

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spontaneity, bounded by a serious intent to reach mutual understanding by listening and learning” (Ballantyne 2004:117). Dialogue can be categorized into communication “with”

and “between”. “With” can be done face-to-face, by direct selling or through call-centres, where one part takes the initiative to communicate with the other. Communication “between”

parties is based on trust, learning and adaptation and may include teamwork, mutually beneficial activities and dialogue about common interests. (Ballantyne 2004) This type of two-way communication may be synonymous to interaction since both parties participate in a dialogue.

2.1.4 Relationship history

Every interaction in a relationship between a service-provider and a customer has the

possibility to strengthen or weaken the relationship, which can be crucial for future business relations. It may be costly to have a high level of interaction with a single customer, since it demands a high level of commitment and time. There is, however, a possibility to build trust through long and faithful service, since the customer will have more opportunities to evaluate the service-provider. Also, there may be a chance for the service-provider to engage in

service-recovery instead of losing a customer. If two parties have frequent contact with each other, it will be easier to understand and adapt to the needs of each other. (Bendapudi & Berry 1997)

2.1.5 Adaptation

Mutual adaptations have been found to, in most cases, be a prerequisite for the development and continuity of business relationships between two parties (Hallén, Johanson & Seyed- Mohamed 1989). These adaptations are frequently occurring and often lead to adaptation and modification to the products that are being exchanged between the parties. Rules, routines, administrative tasks and logistics are also commonly adapted, which will generate a more functional relationship and generate and increase mutual commitment. This mutual commitment both constrains and empowers companies at the same time. (Håkansson &

Snehota 1995)

2.1.6 Commitment

Commitment has a central position in defining a relationship and is present when a party is motivated to conduct business with another party (Grönroos 2007:41). Commitment can also be said to be a “pledge of relational continuity” between two parties (Dwyer et al 1987: 19).

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Commitment may develop through good relations with a supplier. If a supplier, for example, offers extra assistance to resolve a problem that requires rapid attention, the sense of

commitment may deepen. A supplier that proves itself trustworthy is more likely to create commitment with its customers. (Grönroos 2007:41)

2.1.7 Trust

In most business areas, recruitment of customers is essential. It has been discovered that customer loyalty creates a higher profitability, which has made companies change from an

“offensive” strategy that focuses on finding new customers to a more “defensive” strategy, which aims at keeping the customers they already have. (Tax & Brown 1998).

Trust, commitment and attraction are key concepts in the area of relationship marketing (Grönroos 2007:41) Trust is a concept that has many definitions, since it is very hard to pinpoint and define. One definition of trust is “one party´s expectation that the other party will behave in a certain predicable way in a given situation”, another is “willingness to rely on a business partner in whom one has confidence”(Grönroos 2007:40) . Trust partly depends on past experiences from interaction with another party, contracts, regulations, social norms, but also personality factors.

The customers’ welfare should always be first priority for a service provider when attempting to develop a relationship marketing strategy. It should be of utmost importance to make sure that the customers’ expectations are met and preferably exceeded and also assist customers in finding the best solutions to their problems. (Grönroos 2007:41)

2.2 Termination

Relationship fading is the process of a temporary or permanent weakening in the strength of the relationship where the outcome, i.e. termination or continuation, is unknown. It is important to understand the fading process, since it thereby is possible to prevent the

relationship from being terminated and also identify when fading relationships do not pose a threat of a negative outcome to the company, e.g. if a customer leaves due to natural causes (Åkerlund 2005). In this context, Åkerlund (2005) proposes four different relationship fading processes:

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Crash landing process: This fading phase is often of a turbulent nature and is characterized by disappointment, anger, frustration and hate etc. Certain critical incidents or situations influence the crash landing and customers have often been pushed to enter the

company/industry. Some crash landing relationships start strong, but later crash land in a weak or terminated relationship (Åkerlund 2005).

The altitude drop process: This drop is a relatively smooth process through which the relationship fades. Some of these relationships may, after the altitude drop, regain altitude and therefore increase in strength, whereas some of these relationships result in termination.

(Åkerlund 2005)

Fizzle out process: The fizzle out process is a passive process where the parties fail to engage in adequate interaction and dialogue. This results in a process where the relationship slowly disappears. This relationship has no phases or stages, instead the relationship seemingly vanishes. Weakening commitment and involvement are main drivers in this relationship.

(Åkerlund 2005)

Try out process: The try out process is characterized by the customer not being sure that the services offered are suitable for them or not, they are “trying out” the services. This is often a smooth process where cost is a major decision maker and the service provider may have given the customer high and unrealistic expectations. The relationship loss is seen as a natural consequence by both parties since they are aware of that the service may not have been suitable for the customer in the first place. (Åkerlund 2005)

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3. Methodological approach

Certain issues that have emerged are presented in this chapter and an explanation for why certain choices were made is provided. The choice of company and the different interviewees are presented and the reasons for why qualitative interviews were chosen are discussed. Also, the execution of the interviews is covered in order to provide the reader a clear picture of how they were carried out.

3.1 Selection

Tahitian Noni International was chosen as a case company for this study since it is an established network marketing company that operates on a multinational level. TNI also has many IPCs, which makes it easier to acquire interviews with people that have a larger

network, and therefore can share their experiences based on a greater population. (Bråneryd &

Friberg 2008)

The interviewee selection was based on two main preferences; how long they had been a part of the network and how extensive their downline was. The IPCs should have been part of the network for a minimum of five years in order to obtain more information and thereby see changes in the network. Also, a large downline in the network was preferable in order to collect more information and being able to speak for a greater population. It is also more likely that those IPCs that fulfill the above requirements had experienced several recruitment episodes.

A total of seven interviews were performed; four were male and three were female. All interviewees landed in an age range of 45 to 65 years of age. After doing five interviews a rather clear pattern started to emerge. However, instead of settling with the completed interviews and the already collected data, two more interviews were scheduled in order to verify the data further. This time the interviews were not only conducted with people with a high status in the network, but rather two IPCs with mid-level status in order to verify the data already gathered. The reason for not interviewing IPCs with a low status is that they have a small or non-existing network and most likely have experienced fewer recruitment episodes.

They would therefore not have been able to give a generalized view of the recruitment process since they might only have had a few recruitment episodes to make a statement upon. Further, no IPCs that have exited the network were interviewed since, due to natural reasons, TNI

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cannot provide this information to the public. Also, interviewing people about their individual experiences and dissatisfaction was not the purpose of this study, since this would only

provide information about one individual and his/her personal experience. This would make it difficult to generalize in this area.

Since most of the interviewees have a high status in the Swedish TNI network and are

therefore probably well known people within this business, they will therefore be anonymous.

The interviewees were all informed of this matter, so that they would feel more comfortable in sharing information of a more sensitive nature. It is important that the interviewees feel secure and confident when being interviewed, which may be achieved through ensuring their anonymity throughout the study and also leaving out certain specific details or statements that may compromise their anonymity. This has therefore been done in this study.

3.2 Qualitative interviews

In gathering empirical data for this study, qualitative interviews were carried out. By

conducting qualitative interviews, the possibility of obtaining deep and extensive information was optimized. The interviews were carried out both in person and per telephone. It is

important to be aware that during telephone interviews there is a risk of information loss, since it is not possible to see the interviewee or interpret their body language. The same goes for the interviewee, who might have misunderstood some questions or did not feel confident enough to tell their entire story. Due to geographical distance and different time schedules, however, certain interviews had to be held per telephone in order to conduct an adequate number of interviews and thereby gain sufficient empirical data for the study.

The questions during the interview were of a semi-structured nature and should be considered open questions. Through posing open questions it was possible to obtain more detailed

answers with increased depth, since the interviewee could explain themselves thoroughly without feeling restricted by the questions.

3.3 Critical remarks

There could be a risk that the interviewees do not want to disclose reasons for why people quit the network in their own downline. During the interviews some reasons have been mentioned, but perhaps not all significant stories were told. It is important to consider the probable bias of

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the interviewees, since they have been particularly successful within TNI. This is a matter of concern which needs to be taken into consideration (Trost 2002).

3.4 Trustworthiness

According to Guba and Lincoln (1994) trustworthiness is a key aspect to take into consideration when assessing qualitative research. In order for a study to be regarded as trustworthy certain criteria must be fulfilled. The interviewees, for example, should confirm that the researcher has understood the situation correctly. This has been fulfilled in this study by explicitly asking the respondents to elaborate their answers if there was any uncertainty regarding their response. Also, the study should not be biased and the study should preferably have been handed out to peers in order for them to review the material and determine that the study was carried out in a correct manner. This has been fulfilled through having peers review the material before publication. (Guba & Lincoln 1994)

3.5 Ethical aspects

When conducting a study such as this, it is important to be aware of the ethical dilemmas that can be encountered. Bryman (2004) emphasizes four aspects that researchers should be aware of when executing interviews. The first is the information-criteria, which must be fulfilled by informing the interviewees about the purpose of the study (Bryman 2004). In this study, it has been fulfilled by explaining the purpose of it to the interviewees. The second criterion is the consent-criteria, where the interviewees are informed that the interview is voluntary (Bryman 2004). The interviewees in this study were contacted through email or telephone prior to the interview. These conversations were formulated as interview requests, therefore is it unlikely that the interviewees believed the interviews to be mandatory rather than voluntary. The third ethical aspect is the confidentiality-criteria, which highlights the importance of informing interviewees that their personal information and other details about them will be treated confidentially (Bryman 2004). In this study no personal information is presented and the interviewees are referred to anonymously. The final ethical criterion is the use-criteria, which determines that the data collected should be used strictly for research and may only be used by the researchers, which means that the interview recordings etc should not be shared with others (Bryman 2004). To achieve this criterion, the transcripts and recordings have not been shared with people outside of the research team.

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4. Empirical findings

This section commences with a brief summary of the company and its background.

Thereafter, the empirical findings from the conducted interviews are presented. The questions that were posed to the interviewees are divided into four sections; first, the main reasons for joining are accounted for. Second, different entry barriers are listed. Thereafter, the reasons why people stay in the network, i.e. relationship maintenance, are described. Finally, the reasons that cause people to exit, i.e. relationship termination, are covered.

4.1 Background of Tahitian Noni International

TNI, an American company, was founded in 1996 and has since then expanded into over 70 countries around the world. During 2007, their sales totaled at US$ 530 million (Tahitian Noni International: Our Story, 2008). Today, TNI has approximately 250 000 IPCs

throughout the world and 1000 persons employ the different national head offices. (Tahitian Noni International: Our Story, 2008) TNI is the fastest growing network marketing company in the world and is also the fourth fastest growing company in the world after Google, Fed-Ex and Intel (Why Tahitian Noni?, 2008).

TNI’s feature product is their noni juice which is taken as a nutritional supplement. (Tahitian Noni International: Historik, 2008). Although the noni juice is their main product, they have, extended their product range greatly which today incorporates products such as shampoos, soaps, skin treatment lines and energy drinks- all of which contain noni juice. (Tahitian Noni International: Produkter, 2008). TNI has also opened so-called lifestyle centres in several countries, where customers can purchase healthy food and experience the Tahitian Noni concept. (Tahitian Noni International: Our Story, 2008)

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The following table provides a brief overview of the interviewees and may help give the reader a certain indication of the interviewees’ experience in TNI.

Started in TNI

Sponsored IPCs

IPCs in downline (estimated)

Interviewee 1 1997 17 >30000

Interviewee 2 1997 100 1500

Figure 2: Interviewees’ networking background

The reasons for joining TNI as an IPC are many and varied. Interviewee 1 admits that his reason for joining TNI was to escape an acquaintance who had been nagging him to join for quite some time. Interviewee 5 also provides a similar story which also involved a pestering acquaintance. Interviewees 2 and 4 joined TNI due to their affection for TNIs products after trying them. Interviewee 7 also had a great affection for the product, but had no plan to become an IPC until she heard of the business opportunity presented by the company.

Interviewee 3 did not at first use the product himself, but after experiencing great results on others he decided to try the noni juice himself. He too experienced highly pleasing results regarding his health and decided to join TNI. Prior to Interviewee 6 joining TNI he had both health and financial troubles and joined the company in an attempt to resolve these issues.

4.3 Network entry: the recruitment process

4.3.1 Reasons for joining

When asked what the main reason for people joining TNI is, Interviewees 1, 2 and 4 answer

“the possibility to earn money”. According to Interviewee 4, it does not necessarily have to do with making a lot of money – some persons will be satisfied with making an extra one to two thousand SEK a month. Interviewee 1 believes that most people never admit their desire

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to make money, “especially not Swedes” he adds. Interviewee 3 agrees that speaking of money in Sweden is somewhat taboo.

Interviewees 5 and 7, on the other hand, think that the product (noni juice), is the main reason for joining the network and Interviewees 2 and 7 also believe that people become IPCs in order to buy the various products at the 30 percent discount, which IPCs are entitled to.

Interviewees 3 and 6 are also of the previously mentioned belief, although they add that the social aspect and the possibility for personal development also play a rather major role when a person contemplates joining the network. Further, Interviewee 7 stresses the importance to offer a choice when presenting the offering; some are more interested in the product than building business and vice versa.

All interviewees agreed that the product, the possibility to earn money and social interaction were protruding reasons for becoming an IPC in TNI. Nearly all interviewees thought that some people become IPCs to have a hobby. Interviewee 3 and 4 are certain that many are active in the network in order to meet others and uphold a social aspect. Those who are members due to this reason often do not bother building a network. (Interviewees 3 and 6) Further, a majority believe that many join due to the company’s credibility and good reputation. Interviewee 2 explains that TNI is far ahead of their counterparts regarding fair trade, charity and environmentally friendly activities. Interviewee 6, on the other hand, does not believe that the company has a decisive role when joining, instead he is of the opinion that it is the sponsor that has to be credible and the person being sponsored must have faith in his/her sponsor. If you cannot build a relationship, the company does not matter and if a person lacks confidence in their potential sponsor they will not join the network. (Interviewee 6) When asked if people join the company as an obligation to a close friend or relative, none of the interviewees believed that this was a primary reason for joining.

4.3.2 Primary entry barriers

The interviewees were asked about the main reasons that hinder people from joining TNI, so- called entry barriers. There were four primary reasons that nearly all interviewees believed were the most common entry barriers; pyramid scheme association, lack of knowledge, lack of time and fear of being conned.

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Most of the interviewees have experienced a decrease in the association with illegitimate pyramid schemes, but it still remains an excuse not to join. Interviewee 3 adds that network marketing is becoming more common which is a main reason for negative pyramid scheme associations decreasing. Interviewee 2 says that if people use this argument, they are unlikely to be open and susceptible to new information.

Interviewee 3 is certain that the greatest barrier for joining is lack of knowledge. Interviewee 6 agrees and adds that lack of knowledge is not only the sole greatest reason that people are hesitant about joining, but also is the main reason for why they end their membership. Most people do not know how TNI and other network marketing companies work and are therefore prejudiced in their perception of the industry. They have often heard many negative views and opinions about the business from relatives or in the media and therefore do not join

(Interviewee 3, Interviewee 5). Many have a hard time understanding why it is not possible to purchase the products in a store instead of buying it through IPCs and are suspicious because of it. People in general fear the unknown (Interviewee 4).

According to the interviewees, a highly common excuse for not joining is “I don’t have time”. ”Not having time is the biggest excuse for not joining the company”, Interviewee 1 says. “We live in an information society, where there is always a lack of time”, Interviewee 3 explains and continues “people are always busy and often do not feel that they have enough time for anything more”. Interviewee 6 sees the excuse of not having enough time as an easy way to get out of the situation and thinks that “people are afraid of setting aside time”.

Interviewee 7 has also experienced that people say they do not have enough time, however she finds this rather strange since “TNI does not have to take that much of your time”.

According to Interviewee 1, working with TNI does not have to take more than a few hours per week, although the more work you put into your business the more likely it is that it will prosper. Interviewee 4 also questions that people do not have enough time and says that your time is set by your priorities – you can always find the time if you truly want to.

Many of those interviewed have experienced that people are afraid of being conned in this type of business, which according to Interviewee 1 has a clear correlation to the many

pyramid schemes that have been exposed during recent years. He goes on to say that the main fear is being conned for money. Interviewee 2 notices this fear as a reaction to hearing the presentation to the business opportunity posed by the company and many react negatively

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since it seems “too good to be true”. Interviewees 6 and 7 have experienced this fear in people, although Interviewee 6 is convinced that this is merely used as an argument or excuse.

Interviewees 3 and 5 have not experienced this fear in people to the extent of those mentioned above; when they have, they have not had the feeling that this has been the main reason for people not joining TNI.

4.3.3 Secondary entry barriers

Not wanting to be a salesman is a rather common argument, according to Interviewees 2 and 5. Interviewee 4 estimates that around 99 percent say this, perhaps because they are not comfortable with selling to relatives or friends. Nearly everyone claims they are not salesmen,

“but we are not a seller-organization – we are a user-organization”, therefore you do not have to be a salesman to work in TNI. TNI is interested in people who can teach and communicate information about the products and the business opportunity to others.

(Interviewee 3)

Many people use the excuse ”it’s too expensive” when avoiding to join TNI as an IPC.

(Interviewee 5) Although some of the interviewed IPCs can relate to the products being somewhat costly, it is important to put the cost in correlation to the quality (Interviewee 6).

Interviewee 3 has a similar view and says “everything has a price, but also a value”.

Interviewee 2 firmly believes that the greatest reason for not joining TNI is fear of failure and a fear of speaking in public in front of other people. People are afraid of failing, but will never admit to it (Interviewee 5; Interviewee 7). They also do not want to take on responsibility and run the risk of failure; therefore they try to get away (Interviewee 6). Although it may sound strange, people are also afraid of succeeding, so people are in fact frightened of change overall, Interviewee 6 says. People generally speak of their failures and problems and therefore have a hard time imagining what success would feel like (Interviewee 6).

It is not uncommon to come across people who do not know what network marketing companies are or how they work, however this does not have to be a barrier or a problem, since these people often do not have any prejudice feelings towards the company (Interviewee 2; Interviewee 3; Interviewee 4). In this case, it is important to explain the system thoroughly, i.e. that IPCs are paid in bonuses for marketing the company and its products to other people -

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money that a normal company would spend on marketing campaigns and advertisements etc (Interviewee 3).

Interviewees 2, 3, 4 and 5 had all experienced that people claim not to be social as an excuse for not becoming an IPC. A few interviewees also mentioned the excuse of “not knowing anyone” (Interviewee 3). Some had experienced that people find the registration process complicated and do not want to fill out the required forms and therefore do not join the network (Interviewee 4; Interviewee 7).

During the interviews, many various reasons as to why people choose not to join were shared by the interviewees. Some find the fact that TNI is an American company as a barrier to joining and some find filling out forms very tedious and use this as an excuse (Interviewee 4).

Interviewee 5 has experienced the potential IPC’s family or spouse as the main entry barrier.

Perhaps they have attended a meeting and are enthusiastic, but their spouse believes it is a scam – the spouse might speak in a demeaning manner about the company or product, which may cause the potential IPC to no join. (Interviewee 5) Interviewee 6 has found that many find the compensation plan rather complicated and do not want to take the time to learn it and therefore do not join. Interviewee 6 is adamant that most “reasons” for not joining are merely excuses, not real reasons. People are afraid of change both for good and for worse and

therefore you should ask them further questions in order to find out what they really feel – it is important to involve people, talk about their possibilities and encourage them to act immediately. (Interviewee 6)

Although Interviewee 3 focuses mainly on the health benefits of the product, many who used to speak only about the product have now moved on to instead focus primarily on the business opportunity (Interviewee 2; Interviewee 4; Interviewee 5; Interviewee 6; Interviewee 7). In the past, Interviewee 4 has been very product-oriented and says that this approach makes progress very slow; however, most people are interested in the health aspect and want to know more about the product than the business at first. Interviewee 6 has focused on both products and business opportunity during the years he has worked with TNI and has for many years thought about what perspective is the most effective to focus on. Today, he focuses primarily on finding out what their dreams and goals are and from there offer a solution, “I may have a solution for you, but it will take hard work, dedication and discipline”

(Interviewee 6). It is important to find out what the person you are talking to is looking for

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and is interested in, since your approach will be very different whether the person is interested in health or in business (Interviewee 7). Interviewee 5 finds it very important to focus on the entire lifestyle concept as a whole, i.e. better health and better economy.

Interviewee 1 often recruits through random encounters, e.g. if he meets someone in his everyday activities. Interviewee 3 prefers having coffee with a potential IPC and talking casually about his experiences with TNIs products and the company. He also likes to listen to other people’s experiences about the products and also stresses the importance of creating interest in everyday life, e.g. by using bumper stickers on your car or boat, which may catch the eye of someone who may be interested in the business. This has become especially important to him since this has become his full-time job. (Interviewee 3) Interviewee 4 often meets people randomly and contacts them after that. She has also tried recruiting family members and personal contacts, though this has given varying results; some find the business and product interesting, whereas some do not.

Since there today is an abundance of material to use when educating and recruiting people, it is very common to use brochures, DVD-films, booklets, power point presentations and also websites. (Interviewee 2; Interviewee 3; Interviewee 4) Interviewee 4 finds it most effective to meet face-to-face and discuss the business, although telephone or emails are quite effective tools as well. Interviewee 5 prefers to talk to smaller groups about TNI. Interviewee 7 has tried placing advertisements in newspapers and leaving her business card in health food stores, but she admits that these activities hardly generated any business for her. Interviewee 6 says that face-to-face contact is the only contact that truly works, “you cannot leave the recruitment process to dead media – YOU have to make it interesting!” Interviewee 1

recommends those who are new IPC to make a list of those they would like to involve in TNI.

Thereafter, it is wise to start with contacting those who you believe are the least likely to be interested – “this way you do not have to be disappointed”. (Interviewee 1)

4.4 Relationship maintenance

The fact that relationship maintenance is a crucial part of a sponsor’s contact with his/her recruits is stressed by all interviewees and they have a relatively similar approach to it.

Interviewee 3 finds meeting with his IPCs as the most important step in upholding the relationship. Interviewee 1 is adamant that 100 percent of the responsibility lies with the

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sponsor and they are solely responsible for coaching their IPCs. Interviewee 6, however, believes that the newly recruited IPC also has a responsibility to stay in touch with his/her sponsor and this is an important routine to implement – “if you fail to do this, your

relationship cannot be successful” (Interviewee 6).

Communication, Interviewee 1 says, is the most important aspect of relationship maintenance with your IPCs. In his experience, many are afraid to call or contact their IPCs of fear that they may not want to continue working with them. It is extremely important to call your IPCs and make sure they are doing well and answer any questions they may have; “you have to let them know you are there for them.” (Interviewee 6). Many do not phone their IPCs, but instead send emails, which is not as effective as actually speaking directly to someone since only around 20 to 25 percent actually check their emails (Interviewee 1; Interviewee 6).

Interviewee 4 tries to contact her IPCs by telephone for the most part, although if they are hard to reach she will send them an email. Interviewee 5 tries to support and educate his IPCs as much as possible through meetings and by telephone. “Most people have never done anything like this before” and therefore it is important to be as supportive as possible (Interviewee 5). Interviewee 2 explains to her new IPCs that she will work closely and intensely with them, tells them about meetings, websites etc and informs them that they are welcome to contact her with any questions they may have. She also travels wherever she is needed (Interviewee 2). Interviewee 7 assists her new IPCs with everything from placing orders to recommending informative books and websites.

Frequent contact is of major importance, especially for the newest members of one’s team (Interviewee 4). Nonetheless, it is crucial to not keep in touch with too many members, perhaps only a maximum of five to ten, since this may compromise the quality of the contact.

Instead, it is better to delegate responsibility further along in your downline (Interviewee 3;

Interviewee 4).

The meetings that take place can be both formal and informal, but although there may not always be an agenda, “you always end up talking about TNI” (Interviewee 3). The meeting can entail anything from having a coffee to going through TNI-material and going through the compensation plan; “maintenance is the key to growth”. The focus, however, lies on

education and coaching. (Interviewee 3) Coaching and educating one’s IPCs is a common occurrence, but TNI also has educations which are important and often required to attend

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(Interviewee 5). Interviewee 4 stresses the importance of sponsors not being too hard on their recruits, there has to be a balance between encouraging and pestering. (Interviewee 4) It is also important to be open and honest – not doing so may give people a reason to doubt their sponsor and the company (Interviewee 4).

4.5 Relationship termination

Sometimes, exiting the network does not have to do with the company or the products. Many times there have been changes in the IPCs life, which cause them to exit. Examples of these are moving, changing jobs, having children, divorce and becoming unemployed (Interviewee 5).

Money in general seems to be an issue when people exit the network. Many of the interviewees were certain that the main reason for exiting was not making enough or any money (Interviewee 1; Interviewee 4; Interviewee 6; Interviewee 7). “Many find it very tough in the beginning since your business generally will not generate that much money in the first three to five years” (Interviewee 7) Interviewee 1 says that “no one who makes money quits!”

Those who exit are those that have not recruited any IPCs of their own and/or are very new to TNI (Interviewee 3; Interviewee 7). Those who have started building their downline will most likely stay in the network (Interviewee 7).

A few find the products too costly (Interviewee 1; Interviewee 3; Interviewee 4) According to Interviewee 2, people often try to make excuses when they do not succeed and the most common excuse when it comes to TNI, she believes, is that it is too expensive. Although the noni juice is fairly pricy, faithful users rarely find it expensive since they have experienced its great health benefits (Interviewee 3; Interviewee 5). However, many will never admit not being able to afford something and will instead blame it on not having enough time or find another excuse. (Interviewee 1)

According to Interviewee 1, the sponsor is to blame for all IPCs that exit the network. Perhaps the sponsor has made promises that he/she cannot keep. Sometimes personal conflicts can arise in the network or maybe the sponsor and his/her IPC do not get along. (Interviewee 1) If something happens to the sponsor, e.g. if this person switches to a different company or exits the network, it is highly likely that the IPC will quit and therefore the network will fall

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(Interviewee 4; Interviewee 6). When a sponsor does not take care of its downline or those he/she has recruited, people are likely to exit the network – “communication is the key to success.”

People widely refer to not having time as an excuse for exiting the network (Interviewee 2;

Interviewee 3). However, how much time is too much depends entirely on what goals they have set, where they want to go and what they want to do – “it is up to everyone individually”

(Interviewee 2). The interviewees all agree that it takes quite some time to build up your network and you should not see working with TNI as quick and easy money (Interviewees 1- 7). Often, people exit the network since they feel disappointed in the slow development. This can be related to the recruitment process where, unfortunately, people often make promises that cannot be fulfilled, especially regarding the earnings (Interviewee 5). Today, people are looking for quick results and do not have the patience to wait for the results to appear – earlier, people were more patient (Interviewee 6). People in general believe it is easier to make money and build the business than what it actually is, says Interviewee 5. He has found that most people do not have the stamina to continue building the business and therefore give up. It is important to see your business as a long-term project and give it five to ten years to prosper (Interviewee 5).

Very rarely are people dissatisfied with TNI’s products, but when they are it is often a matter of not having taken the noni juice for a long enough time and therefore not achieving the desired results, “you have to drink the juice for around two to six months to achieve results”

(Interviewee 6).

Interviewee 2 thinks that the most common mistake when recruiting new IPCs is giving people unrealistic expectations (Interviewee 2; Interviewee 3), e.g.” in TNI you can make 100 000 SEK a month”, when you in fact have to work extremely hard for at least three years to have a chance at achieving this (Interviewee 2). According to Interviewee 5, another frequently occurring mistake when recruiting is introducing too much information too quickly. By doing this, people cannot digest the information and either becomes suspicious and think “this sounds too good to be true”. It is better to avoid information overload and instead try to awaken people’s curiosity by speaking more generally. (Interviewee 5) Often, this is best done by having several meetings where you can focus on one or a few aspects instead of all, so that the information can sink in (Interviewee 7). The mentorship you give to

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your IPC is the most important aspect of your relationship, since it is from there you give your IPCs a large part of their education. (Interviewee 2)

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5. Analysis

In this chapter, the results from the empirical findings are put against the reasoning from the theoretical section and will follow a similar structure. The analysis begins with the

recruitment process, thereafter the relationship maintenance phase is treated and lastly relationship termination is looked at.

5.1 The recruitment process

It is not surprising that people want different things in life and the same goes for IPCs, they all want different things when they join. The two primary reasons for joining are earning more money and improving health by using the product. Secondary reasons for joining are the social interaction that comes with the territory and having a meaningful hobby.

To succeed in recruiting, it is important to investigate the wants and needs of the recruit, in order for the sponsor to better understand and adjust to the recruit so the relationship can be more fruitful. It will also be easier to recruit him/her if the sponsor knows what to emphasize;

the business opportunity or the health oriented focus. In order to adapt to the recruit and establish his/her needs, a presentation focusing on customer centric marketing is of the essence.

Just as what each IPC wants is very different, there are also a wide array of entry barriers that exists in people’s minds. There seems, however, to be certain entry barriers that are more common than others and therefore should be considered to be the primary entry barriers. One of the most common entry barriers is the belief that the recruit feels they do not have the time that this type of business may demand at their disposal. Another primary entry barrier is the fear of being conned due to alarming reports of illegitimate pyramid schemes. Also, a reason for not entering can be that the recruit cannot afford the products. Most of these barriers exist due to a lack of knowledge within the area, which makes the barriers more emotional than fact-based.

The recruitment is usually a face-to-face interaction where both parties participate in the dialogue, which makes the process easier for the sponsor who can then interpret the recruits’

body language and identify their needs and wants. It is important to not give too much

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information at once so that the recruit does not drown in information. When someone is overwhelmed by information it makes it harder for them to digest information.

There are also other forms of important communication where the sponsor can transmit information to the recruit, which consists mostly of information via e-mail, telephone, internet, and DVDs regarding product information, business ideas, time and place for new meetings and so on. This communication, with a few exceptions, is mostly one-way, where a dialogue may be difficult to engage in.

5.2 Relationship maintenance

The main role of the sponsor is to support and coach his/her recruits to the best of his/her ability. The interviewees in this study all believed communication is the most important thing in the relationship between sponsor and recruit. According to them, communication can entail anything from face-to-face meetings, emails and telephone calls to informal or formal

meetings. This approach is consistent with Bendapudi’s (1997) view that direct contact and face-to-face encounters with the customer is highly important in developing the relationship.

Moreover, it is important to be open and honest when dealing with the recruits in order to create trust and commitment. Proving to be a reliable business partner is essential for a continuous relationship and should be strived for at all times. A recruit that feels well taken care of and understood is more likely to be willing to continue and will also feel more motivated to do so, thus performing better.

The relationship between a sponsor and recruit may result in friendship if the relationship has been cared for in the right way. The adaption in this case is often of a social character and the commitment level is often high and on a personal level. Through investing a great deal

socially it will hopefully make sure that the reasons for staying outweigh those for leaving the network. Relationship maintenance is a crucial engagement which a key to preventing

relationship termination. Therefore, it is important to not only be satisfied with recruiting new persons to the network but continuously uphold, build and nurture the relationship.

5.3 Relationship termination

As already stated, all people are looking for different things when contemplating joining the network there will also be different reasons for leaving the network. The main reasons

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identified in this study are not making any or enough money and unfulfilled expectations. The business taking too much time and a changed life situation have also proved to be common reasons for leaving the network.

Sponsors and upline have an essential role in maintaining relationships with IPCs in their downlines and new recruits, since TNI as a company does not keep in touch with IPCs on a personal level. The most common mistake made by sponsors is giving new recruits high and unrealistic expectations. Since every interaction between a service-provider and a customer has the possibility to strengthen or weakening the relationship, it is important to avoid giving promises that cannot be kept or that are unrealistic (Bendapudi & Berry 1997). Also, by being reliable and honest, trust may deepen and therefore increase the level of commitment in the recruits and thereby minimize relationship termination.

The road to termination of a relationship can be characterized by different types of endings, according to Åkerlund (2005). A crash landing is characterized by a turbulent relationship state, which in this case can be accrued to wrong-doing by the sponsor or perhaps the recruit does not get along with his/her sponsor or upline. The recruit will then exit the relationship abruptly and with severe dissatisfaction, which may result in them spreading a bad reputation about the company and business. An altitude drop can also be the result of a sponsor not taking enough responsibility for his/her recruits. Not making enough money may cause the recruit to lose interest in the business and in which case the sponsor has a responsibility to identify this loss of interest in order to prevent the person from exiting the network. An altitude drop relationship may be terminated, but still has the chance to gain altitude if adequate measures are taken. A fizzle out is characterized by lacking commitment and

communication from both parties. To avoid this it is important that the sponsor stays in touch and tries to motivate the recruit as much as possible. However, the recruit must also be interested in continuing the business and want to be committed. During a try out relationship, the recruit is merely trying out the company to see if it is suitable for them. These recruits are very cost oriented and if they feel that it is too expensive to continue their membership in the network, they will terminate the relationship. If a person enters with the attitude of “just trying it out”, the likelihood of success diminishes. In order to avoid relationship termination it is essential that relationship maintenance is carried out with great care, since this is the grounds upon which the relationship may be built.

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6. Conclusions

The reasons why people join a network marketing company are either the business

opportunity, which hopefully will generate revenue, or the appeal of the products. The reason for joining will determine how successful a new IPC will be within the network; a business- oriented person will have a greater chance of succeeding than a product-oriented person. Due to this, it is essential for the sponsor to find out if the recruit is product or business oriented so that he/she can adjust the recruitment strategy in order to meet the needs of the recruit.

Most of the entry barriers that exist and challenge the sponsor are based on lack of knowledge within the network marketing area. This makes the barriers more emotional than fact-based.

This is also important for the sponsor to know in order for appropriate measures to be taken to overcome these emotional barriers and see through the excuses for not joining.

These entry barriers are generally the same as the reasons for terminating the relationship; too expensive, do not have enough time, a concern of being conned and not making enough money. This means that it is important for the sponsor to, from the start, identify the recruits’

reasons for joining and their goals. Hopefully the sponsor can help the recruit to reach his/her goals and has not made the common mistake of setting the recruits’ expectations too high and promising quick results in a short period of time.

The foundation for a good relationship is built by having an honest recruitment process from the start, without false pretences, as well as knowing what drives the recruit. The most important factor is to ensure success as a sponsor is, however, continuous communication with the recruit in order to keep a high level of trust. This will minimize the risk of

relationship termination, thus increasing the chance of success for both sponsor and recruit within the network.

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References

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Blau, P., (1964), Exchange and Power in Social Life”, New York: Wiley.

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Bråneryd, C. and Friberg, T., (2008), “Behind The Scenes of Network Marketing”, Department of Business Studies, Uppsala University, Bachelor Thesis

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International Industrial Marketing: Advances in International Marketing, JAI Press Inc., Greenwich, Connecticut & London, pp 7-23, 1989.

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Websites:

Tahitian Noni International: Historik (2008-04-18)

http://www.tahitiannoni.com/sweden/swedish/retail/company/entry.html

Tahitian Noni International: Produkter, (2008-04-18)

http://www.tahitiannoni.com/sweden/swedish/retail/store/index.html Tahitian Noni International: Our Story (2008-05-15)

http://www.tahitiannoni.com/united_states/english/retail/company/story.html

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Direkthandelns Förening: Akta dig för pyramidspel. (2008-05-15) http://direkthandeln.org/BizPart.aspx?tabId=101&tci=49

Direkthandelns Förening: Nyckeltal. (2008-06-01) http://www.direkthandeln.org/BizPart.aspx?tabId=60

World Federation for Direct Selling Association: Statistics. (2008-06-01) http://www.wfdsa.org/statistics/index.cfm?fa=display_stats&number=1

Why Tahitian Noni? The Right Leadership (2008-06-01) http://whytninow.com/4_right_leadership.php

Interviews:

Interviewee 1: 2008-04-18 Interviewee 2: 2008-04-28 Interviewee 3: 2008-04-23 Interviewee 4: 2008-04-25 Interviewee 5: 2008-04-28 Interviewee 6: 2008-05-02 Interviewee 7: 2008-05-05

The Circle of Life in Network Marketing Relationships

The Circle of Life in Network Marketing Relationships

A Case Study of Tahitian Noni International

Table of contents

1. Introduction

2. Theoretical framework

3. Methodological approach

4. Empirical findings

4.4 Relationship maintenance

4.5 Relationship termination

5. Analysis

5.1 The recruitment process

5.2 Relationship maintenance

5.3 Relationship termination

6. Conclusions

References