Professional Documents
Culture Documents
Mei Retno A
Nuruni Ika
Universitas Pembangunan Nasional Veteran
E-mail:
Jl.
ABSTRACT
It is a fact that any product categorized as a daily need and therefore, it is considered the
first product in the customer’s hand. The key to such a condition is by increasing the custom-
ers’ loyalty to the product. To do so, multi-level-marketing (MLM) can be implemented in a
business. This research attempts to see the influence of the variables such as communication
satisfaction, marginal satisfaction, and product satisfaction, Loyalty to salesperson, Product
Loyalty, and Business Builder toward the customers’ loyalty to the product. The author uses
semantic scale differential as variable scale. The respondents as the subjects studied are the
active members of Oriflame multilevel marketing company which have joined the company for
at least 1 (one) year. There are 112 members taken as the sample and it uses Sstructural Equa-
tion Mmodeling (SEM) to analyze the data. It was found that the product satisfaction factor
have positive influence toward the loyalty to product, the loyalty to product has also positive
influence toward the loyalty to salesman and the business builders. Next hypothesis say they
marginal satisfaction has positive influence toward the loyalty to product, marginal satisfac-
tion has positive influence toward the loyalty to salesman, and communication satisfaction
factor has positive influence toward the loyalty to salesman all are not accepted.
Key words: Communication Satisfaction, Marginal Satisfaction, Product Satisfaction, Loy-
alty to Salesperson, Product Loyalty, Business Builders.
INTRODUCTION cide to buy a certain product. For example,
It is important to be able to determine the cus- after the customer gain the trust and commit-
tomers’ needs and wants, as well as delivering ment to such a product, they would commit to
satisfaction to them. Such activities are con- future repurchase of such product or service
sidered the key to success in a business, es- (Gundlach & Mentzer 1995). Pritchard &
pecially for achieving the company goals. In Howard (1999) also pointed out that the cus-
other words, a company should continuously tomer loyalty emerged as a result of customer
attempt to maintain the production for fulfill- commitment. Loyalty, in terms of "business
ing the customers’ needs and wants. In order building" in MLM, is an effort to recruit new
that this effort can be fulfilled, it is also im- members known as down line who would buy
portant to take into account some factors such and then resell products offered by the com-
as the customer’s sex, age, and also group pany or manufacturer (Dick & Basu 1994).
preferences. One of the promising business Thus, customer loyalty to salesperson will
advertisements comes from Multi Level Mar- bring some benefits.
keting (MLM), in which, this type of business ORIFLAME is a Swedish cosmetics
opens provides the company with opportu- company that is currently running its business
nity to achieve unlimited gain or profit. through MLM system. The main attraction of
It is the fact that there is always a process their business proposition is unlimited income
of evaluation before the customers finally de- or gain. In that case, direct profit is obtained
1
ISSN 2085-7381 The Influence of........... (Mei Retno A & Nuruni Ika)
from price differences between catalog price son would eventually affect positively toward
(non-member price) which MLM member the company (Beatty et al. 1996; Grember and
must charge to their customer and distributor Brown, 1996; Maeintosh and Locksin 1997).
price (member price) which MLM members In another occasion, Morgan & Hunt
shall pay for the product. This direct profit can (1994), for instance, revealed that the behav-
go up as high as 23%. Other benefit gained ior of relationship existed between a company
from the calculation of total products that a and its partner, that is determined by trust and
member could sell. Monthly sales will be cal- commitment, will lead to positive relationship
culated in the invoice as Business Point (BP). of the intention to repurchase (remain loyal).
The more BP a member can collect – which In 2004, ORIFLAME Surabaya owned ac-
mean bigger sales – the bigger our income a tive members of 5851 members; in 2005 it
member will gain. Yet, multiple gains are ob- increased up to 6274 members or by 6.74%;
tained when members are able to recruit other and in 2006 it fell to 6023 members or fallen
members as their down line, based on their by 4.17%. The decline in 2006 was due to the
down lines’ sales performance. inability of the up-line members to convince
Besides the description above, ORI- and recruit prospective new members. Most
FLAME, as an MLM company, possesses prospective members were also reluctant to
its own limitations concerning selling activi- buy ORIFLAME products due to the relative-
ties and advertising. Therefore, in its strate- ly high price. As a result, the company suffers
gy, ORIFLAME hand those over to fleets of from decline in sales performance due to re-
Salesperson (sales associates) and its custom- duced marketers/distributors/sales force.
ers. For that reason, it is essential to ensure ORIFLAME Surabaya is present on the
customers’ loyalty to salesperson and prod- demand of quality products at affordable pric-
uct as both are important factors in market- es by the society. This company provides new
ing. Direct Selling-Multi Level Marketing colors in its beauty and cosmetics products. It
Company, like ORIFLAME, does not adver- is in the effort to satisfy the customer in or-
tise their products on the market and none of der to gain customers loyalty to the brand or
its products is sold in retail or convenience product through loyalty to ORIFLAME sales-
stores. In such a way, it delivers the conse- person firsthand. Ultimately, they will be able
quences of Salesperson (up line) to take ma- to build their own business, or often called by
jor part in introducing products to market, as many MLM companies as Business Builders.
well as maintaining customer loyalty in the THEORETICAL VIEWS AND
products or services offered. HYPOTHESIS
From the perspective of relationship mar- Multi Level Marketing (MLM)
keting, customers can build relationships with Multi Level Marketing is a way that compa-
the company especially either by its branch nies market or distribute or sell their products
store or salesperson as an individual. This in- by building and developing a fleet of market-
dicates to whom loyalty is given or expressed ers or distributors or direct sellers working in-
(Beatty et al., 1996; Berry and Gresham 1986). dependently (independent), without company
This concept of relationship marketing is usu- or manufacturer interference. Sales target is
ally used in retail business. The researchers completely determined by independent dis-
found that inter-personal relationships play tributors and direct sales network that is de-
a bigger role than the retailing context. Cus- veloped. On the other hand, returns obtained
tomers would prefer personal service and as in discounts, or commissions or incentives
closer relationship with salespersons (Beatty is determined by the manufacturer based on
et al. 1996). In addition, according to other stages according to the number of sales value
proponents it is stated that loyalty to salesper- (volume or business point-point) obtained
2
Journal Economic, Business, and Accountancy Volume 13, No.1, April 2010, page 1-8
Acreditation No. 110/DIKTI/Kep/2009
3
ISSN 2085-7381 The Influence of........... (Mei Retno A & Nuruni Ika)
tained at the time of purchase, in which trust H4: Product satisfaction positively influences
to salesperson will have a major role since the toward product loyalty.
salespersons are supposed to deliver to con- Loyalty to Salesperson and Product Loyalty
sumers the information they required. Thus, Inter-personal relationship of trust be-
honesty in communication and helping-hand tween buyer and seller effects on loyalty to
behavior of salesperson would have positive salesperson (Crosby, Evans and Cowles,
impact on customer satisfaction with margin 1990); and it is a result of commitment and
and product. Thus, the hypothesis is as the desire to continue repurchasing, especially
following. with the salesperson. This relationship can
H2: Marginal satisfaction positively influ- be developed from the benefit of total shop-
ences toward loyalty to salesperson. ping experience into visiting (Swan and No-
Marginal Satisfaction and Product Loyalty lan, 1985). Loyalty to the company including
Salespersons that are able to explain the qual- to salesperson (commitment) reflects an im-
ity of products and benefits of purchasing the portant relationship between loyal behavior
products to customer will lead them to be and repeat purchase/repurchasing (Betty et
loyal to buying the products. Customers who al, 1998, Jacoby and Kyner 1973); they also
are satisfied by goods or service will also cre- defined an existence of strong commitment to
ate their loyalty. In addition, customer loyalty future repurchasing. Berry and Parasuraman
will trigger the customers to repurchase the (1991) argued that the buy-more action is an
products or services that they are satisfied evidence of customer loyalty. The hypothesis
with (Anderson, Fornel and Lehman, 1994). is as fiollows.
Therefore, it is assumed that satisfaction has H5: Loyalty to salesperson positively influ-
an effect on the product loyalty. Based on ences toward product loyalty.
such argument, the hypothesis is as follows. Loyalty to Salesperson and Business
H3: Marginal satisfaction positively influ- Builder
ences toward product loyalty. The higher customer loyalty to salesperson,
Product Satisfaction and Product Loyalty the higher repurchase they will do as in the
According to Anderson, Fornell and Lehman form of Business Builders. It is in line with
(1994), if customers were satisfied by the the statement by Constance Gustake (1998)
goods or services provided, they will have that the life and death of MLM business de-
loyalty. With the increased customer loyalty, pends on the network of distributors and the
the customers tend to repurchase the products consistent purchase of products. In MLM
or services. Fornell et al (2001) added that the business context, the loyalty is shown by ac-
customer will perceive higher product satis- tively selling or buying products and the ef-
faction if their feeling towards the products or fort to recruit new distributors or members. In
services exceeds their expectations. By doing this condition, the trust on salesperson would
so, they will remain loyal to the same product also influence the customers’ desire to remain
with the repurchase action. In that case, cus- loyal and therefore, they decide to repurchase
tomer satisfaction of certain products or ser- (Kennedy-2001, Doney and Cannon-1997).
vices provided will create customer loyalty, Thus, when we want to increase the repur-
thus the company needs to focus on customer chase and maintain customer loyalty, it is nec-
satisfaction to encourage them to repurchase essary to improve reliability and trustworthy
the products or services. By doing so, it will of the salespersons involved.
create loyalty to product (brand) or service According to Holden (1990) and Kennedy
which also can deliver much benefit to the (2001), the effect of having trust on the com-
company. So, it can be hypothesized as the pany and salesperson is loyalty. Trust could
following. also maintain a continual relationship in a
4
Journal Economic, Business, and Accountancy Volume 13, No.1, April 2010, page 1-8
Acreditation No. 110/DIKTI/Kep/2009
marketing relationship between them. Final- ness of customers to re-consume or reuse the
ly, having gained the trust from the custom- products that have been consumed earlier. In
ers, the company can maintain the customers this study, the measurement is based on the
to repurchase. In that way, the repurchasing is customers’ behavior to recommend consum-
measured by the willingness of customers to ing products or services to other customers.
re-consume or reuse the products they have This Business Builders indicator is measured
consumed previously (Kennedy, 200; Duncan by the behavior to recommend products to
and Cannon, 1997). In that condition, it is as- others, provide training program for their
sumed that the customers’ trust affects their down line and to perform consistent products
desire to remain loyal and to repurchase, thus repurchases. Based on the arguments above,
to improve and maintain customer loyalty, the hypothesis can be asserted as the follow-
it is necessary to improve reliability of the ing.
salesperson. H7: Product Loyalty positively influences
H6: Loyalty to Salesperson positively influ- Business Builders.
ences toward Business Builders. Based on the description above, a conceptual
Product Loyalty and Business Builders framework and hypotheses in this study can
Repurchase is defined as the desire to re- be drawn as the following.
consume the products or services that have RESEARCH METHODS
bought. The customers who have higher trust Population and Sample
on a company and salesperson will lead cus- The population in this study is the active mem-
tomers to repurchase the products than those bers of ORIFLAME for ≥ 1 year membership
who have low trust (Kennedy, 2001). For that in Surabaya. This study uses primary data
reason, loyalty is defined as a strong com- which were collected by using questionnaire.
mitment to consistently buy or repurchase The questionnaire was distributed to the re-
products or services in the future. Customer spondents to see their perceptions toward the
loyalty is proved by the act of buying more question items as depicted in the construct.
(Berry and Parasuraman, 1991). These 112 active members are taken as the
The relationship between customer trust sample by applying purposive sampling tech-
and the act to repurchases can be shown by nique.
the indication that the customers could depend
themselves upon company’s integrity (Doney, Analysis Technique
1997). According to Ganesan (1994), trust is The data gathered from questionnaires were
an essential element in maintaining long-term analyzed by creating SEM model (Structural
relationship. Customer trust toward a compa- Equation Modeling) with One-Step Approach
ny enabled them to continue the relationship to Structural Equation Modeling (SEM).
(Doney and Cannon, 1997). RESULTS
Repurchase is measured by the willing- The following Causality Test is the magnitude
5
ISSN 2085-7381 The Influence of........... (Mei Retno A & Nuruni Ika)
of regression coefficients for each factor. repurchase such products in the future. In ad-
As observed from the probability of caus-dition, the perceived customer satisfaction in
al direction, the results of the tested hypoth-certain products or services will create cus-
eses are as the following. tomer loyalty. Thus, it is necessary for the
company to create satisfaction by producing
1. Product Satisfaction factor positively influ-
ences Product Loyalty factor, is accepted. high-quality products that will result in repur-
2. Marginal Satisfaction factor positively in-chases.
fluences Product Loyalty factor, is not ac-The Influence of Marginal Satisfaction to-
cepted. ward Product Loyalty
3. Product Loyalty Factor positively influ- In reference to the test results, it is acknowl-
ences Loyalty to Salesperson factor, is ac-edged that the marginal satisfaction variable
cepted. did not prove to have a positive and signifi-
4. Marginal Satisfaction factor positively in-cant influence toward product loyalty. This is
fluences Loyalty to Salesperson factor, is because of low marginal profits obtained by
not accepted. salesperson indicated by low commissions,
5. Relationship Satisfaction factor positivelylow discount as well as low business point
calculation. Therefore, marginal satisfaction
influences Loyalty to Salesperson factor, is
not accepted. factor is unable to affect their loyalty to the
6. Loyalty to Salesperson factor positively product, or other product loyalty is merely af-
fected by high-quality products indicated by
influences Business Building factor, is not
repurchase action.
accepted.
The Influence of Product Loyalty toward
7. Product Loyalty factor positively influenc-
Loyalty to Salesperson
es Building Business factor, is accepted.
Based on the test results, it is acknowledged
REVIEWS that product loyalty variable is proved to have
The Influence of Product Satisfaction to- a positive and significant influence toward
ward Product Loyalty loyalty to salesperson. Product Loyalty is a
In connection with the test results, it is ac- strong commitment of customers to consis-
knowledged that product satisfaction vari- tently buy or repurchases preferred products
able has a positive and significant influence in the future. Customers that are satisfied with
toward product loyalty. In this case, product certain products will tend to continue using or
satisfaction is the customers’ demand of qual- consuming such products. This customer loy-
ified product as expected from Oriflame. The alty triggers them to buy the product again.
increased customer satisfaction on products It also can make the company become more
or services provided will trigger customers to profitable because by having experience with
Table 3
Causality Test Result
6
Journal Economic, Business, and Accountancy Volume 13, No.1, April 2010, page 1-8
Acreditation No. 110/DIKTI/Kep/2009
7
ISSN 2085-7381 The Influence of........... (Mei Retno A & Nuruni Ika)