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PUBLIC PERCEPTIONS TOWARDS NETWORK MARKETING IN BULGARIA

Conference Paper · October 2015

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 Economy and politics in the post-crisis world*

PUBLIC PERCEPTIONS TOWARDS NETWORK MARKETING IN BULGARIA

Valentina Makni, valentina.makni@ue-varna.bg

University of Economics – Varna, Bulgaria

Abstract: The object of study in this paper is network marketing, referred to also as
multilevel marketing (MLM), one of the main channels of non-store retailing. Over the past
two decades, its turnover and sales worldwide have been increasing steadily year after year.
However, the polarization of opinion about this industry has been clearly manifested since its
inception. This raises questions about consumer perceptions and assessments as objective
feedback to the management of MLM companies. The available literature contains
publications in this area in several countries, which serve as a basis for comparison in this
study. In this line, the author's purpose is to examine consumer perceptions of network
marketing in Bulgaria and on this basis to make recommendations to the industry in the
country.
Keywords: network marketing, direct selling, consumer perceptions, Bulgaria

Introduction
Network marketing (MLM) was developed in the United States in the 1940s as a
modern successor of direct selling. Direct selling is a major channel of non-store retailing.
Network marketing (MLM) is the main form of direct face-to-face selling, outside the
traditionally established retail outlets, and has a multilevel compensation structure (Albaum
& Peterson, 2011). The concept is based on building a direct relationship between consumers
and manufacturers, thereby eliminating the role of intermediaries in the distribution channel
(Jain et al., 2015). The end result of the sales process and customer satisfaction depend
largely on the professionalism and approach of the distributor dictating the sale.
Network marketing is a controversial phenomenon, but as Peterson & Albaum (2007)
underline, "millions of people are positive about it, judging by the number of distributors and
the sales worldwide." In 2014, global direct sales were worth USD 183 bln, and distributors
numbered 100 million (WFDSA, 2015). These figures are the result of constant annual

* th
Proceedings of international conference dedicated to the 25 anniversary of the specialty International
Economic Relations held at University of Economics – Varna, 16-17 October 2015; University Publishing House
“Science and Economics”, Varna 2015

1
growth on both counts. On the other hand, many users "fiercely" criticize MLM through
publications, blogs and websites. In practice, the system has always had supporters and
opponents, each side producing its own arguments. All addressed issues are contained in the
survey of consumer perceptions and assessments of network marketing.
Direct selling and network marketing have existed in Bulgaria since the 1990s. In 2014,
the industry sales were worth USD 107 million, which ranked the country sixth in sales
among the CEE countries in the EU, while according to last year’s sales growth (3.3%) the
country ranks second in the region after Croatia (18.9%) (WFDSA, 2015). Since 2007, direct
selling in Bulgaria have marked a steady annual growth, following the global trends in the
development of the industry. There are opinions that the industry grows in periods of crises
and financial uncertainty (SPIRE, 2011; Mukherjee, 2010). The three most developed product
categories in the country are beauty and personal care products, wellness products and
household goods (WFDSA, 2014). The US company Avon and the Swedish company
Oriflame are the leaders on the American market. There are over 118,000 independent
distributors in the industry, representing 1.6% of the Bulgarian population.

Literature review
There are few studies in the specialized literature related to consumer perceptions and
public attitudes to network marketing. Most publications present consumer perceptions of
direct selling. The first studies devoted to consumer perceptions of direct selling were
conducted in the US back in the 1970s (Jolson, 1971). A more in-depth and comprehensive
study among 988 US consumers was made by Peterson & Albaum (1989). Later it was used
as a benchmark by Kustin & Jones (1995), who conducted a similar study in Australia.
Consumer perceptions of MLM were the subject of analysis also in Taiwan (Chen et al,
1998); customer satisfaction was examined in Malaysia (Musa, 2005). The analyses based on
the different studies show inconsistent results. In 2004 an international study of Brodie et al.
(2004) examined consumer perceptions of global direct selling among over 4,000 consumers
from eight countries (the USA, South Africa, Australia, New Zealand, Taiwan, the
Philippines, the UK and Finland).
It is known that as far as people are familiar with the system, public attitudes about
MLM are not particularly good as a whole. The main reasons highlighted in the studies are
aggressive sales techniques used by most distributors (Kustin & Jones, 1995), taking
advantage of relationships with family and friends to convince people to buy and sell
products (Mathews et al., 2007) or as Bloch (1996) underlines, "the activities of recruiting

2
people into MLM schemes are socially and psychologically unacceptable to most people in
our society."

Methodology
The survey was conducted in the form of online questionnaire, sent to Bulgarian
customers in March and April 2015 via e-mail and social media. 219 respondents were
involved, who were divided into two groups for the purposes of the analysis: purchasers (who
have made purchases of network marketing products / services in the last 12 months) and
non- purchasers (who have not purchased MLM products in the last 12 months). This
approach has provided us with a starting point of the study.
The questionnaire includes three sections, exploring several aspects of network
marketing (1) awareness of MLM, common perceptions of purchasers and non-purchasers of
the image of network marketing, purchases made and intentions of making purchases in the
future; (2) consumer perceptions of the individual characteristics of MLM perceived as
positive or negative for the industry: quality of the products, competitive prices, pushy
salespeople, distributor professionalism, fair commissions, etc.; (3) socio-demographic
characteristics of the respondents.
With the exception of the last section describing socio-demographic characteristics, all
other questions are presented as statements using the five-point Likert scale, where
respondents choose between 1 (at least agree) and 5 (agree the most). The statistical software
SPSS has been used for data processing. Descriptive analysis, χ² test, T-test in combination
with nonparametric (non-parametric Mann-Whitney U test) have been used to analyse the
results.

Socio-demographic characteristics of respondents

The sample involved 163 women (74%) and 56 males (26%). Of all 219 respondents, 88%
have a university degree, the remaining 12% have secondary education. The respondents are
a diverse sample, both in terms of age, and in terms of occupation. All participants are over
the age of 18; most are from the 30-39 age group (30%), 61% of respondents are employed
full time. Table 1 shows the proportion of respondents by individual demographic
characteristics, both in total and divided in the two independant groups: purchasers and non-
purchasers of MLM products in the last 12 months.
Through the χ² analysis we test the presence of a statistically significant difference
between the two surveyed groups in terms of gender, education, age and employment. The

3
aim is to study whether the indicated socio-demographic indicators influence the purchase of
products and services from network marketing companies. It turns out that only gender is an
essential factor for the consumption of MLM products (Chi-Square Pearson p <0.01), and the
correlation is a weak one (Cramer's V = 0.271 at p <0.01). Women are more active users of
MLM products in Bulgaria than men. It is assumed that this is due to the predominantly
female nature of the product categories offered on the Bulgarian market through direct sales.
Age, education and employment do not affect the consumption of MLM products. In
contrast to these results, Peterson et al. (1989) found that in the United States gender does not
influence consumption, unlike age and education. US consumers are younger and highly
educated. Kustin & Jones (1995) found that in Australia, none of the studied demographic
characteristics was statistically significant with regard to buying products of MLM
companies. Results in Taiwan are similar to those in Bulgaria. Chen & Jeng (1998) confirmed
the importance of gender in Taiwan and proved that women do more purchases via network
marketing than men.

Table 1. Socio-demographic characteristics of respondents in Bulgaria

Characteristics All Purchasers Non-purchasers
Sex**
Men 26% 15% 38%
Women 74% 86% 62%
Age
18 -29 28% 28% 28%
30-39 30% 27% 31%
40-49 23% 27% 18%
50-59 13% 10% 16%
60 + 6% 7% 7%
Education
Primary 0% 0% 0%
Secondary 12% 10% 13%
University 88% 90% 87%
Occupation
Full-time employment 61% 51% 73%
Part-time employment 8% 8% 8%
Own business /self-employed 11% 14% 8%
Freelancer 14% 18% 8%
Unemployed 6% 5% 4%
Student 12% 9% 14%
Pensioner 4% 5% 2%
** χ² Pearson level of significance p<0.01

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 Respondents are most aware of the companies Oriflame (96 %), Avon (95 %) and
Herbalife (79 %), which are among the first global direct selling companies to enter the
Bulgarian market.
The majority of respondents (88%) have no idea of the existence of the Bulgarian
Direct Selling Association (BDSA) as an institution that should formally represent the
industry in the country. The aim of each direct selling national association is to promote
among the companies and their local distributors the implementation and compliance with the
Global Code of Ethics in direct selling issued by the World Federation of Direct Selling
Associations (WFDSA, 2008), and to represent the industry before government, media,
academic and other circles of influence. Established in 2004 by seven companies as a non-
profit organization, in recent years BDSA has existed rather formally, without any active
involvement on its part.
Respondents in Bulgaria are relatively familiar with network marketing. Overall, they
have heard of MLM, but have a vague idea of what it represents. Only 5% of respondents
have never heard of MLM, an equal percentage (5%) are currently running such a business,
19% have previously been part of the system, 23% have only heard of MLM, but do not
know anything about it, a further 23% define themselves as consumers of such products /
services and 25% have attended presentations and meetings, but have never been engaged in
the business. Therefore it cannot be argued that network marketing is among the popular
sectors in Bulgaria, as for example is the case in the USA, South Africa, the Philippines,
Taiwan (Brodie et al., 2004).
Much of the respondents (73%) indicated that they have relatives or friends who are
distributors in direct selling. Perhaps this explains the fact that only 15% of respondents have
never purchased products / services in this sector. Most respondents (85%) have been
purchasers of MLM products at least once. 53% have bought such products in the last 12
months, 32% bought such products longer ago (not last year), 15% have never made such a
purchase. This allows us, as in other studies (Peterson et al., 1989; Kustin & Jones, 1995) to
classify MLM ex-purchasers and those who have never bought such products into the group
of non-purchasers. Therefore, actual consumers of MLM products make 53% and non-
purchasers make 47%.
In the global survey of Brodie et al. (2004), purchasers are generally less (46%)
compared with those in Bulgaria, however percentages vary between the eight countries. The
Bulgarian results converge mainly to the UK percentage (51%). The most active purchasers
featured in the said study are from South Africa (72%) and the Philippines (69%). There are

5
some differences compared with the results produced by Peterson et al. (1989) in the United
States (57%) and more significant differences with the Kustin & Jones study (1995) in
Australia (41%). These comparisons should be perceived as relative, since the studies were
conducted within different time frames.

General perceptions of MLM among purchasers and non-purchasers in Bulgaria

The study of the opinions of the two separate groups on network marketing and some of
its characteristics aimed to identify any differences in perceptions of MLM between
purchasers and non-purchasers. For this purpose we used the Student T-test (Argyrous, G.,
2011), comparing the means of purchasers’ and non-purchasers’ assessments of different
characteristics of MLM in a 5-point scale and the non-parametric Mann-Whitney U-test due
to the lack of normal distribution among the studied characteristics established by the
Kolmogorov-Smirnov test (Goev, 1995). The two tests lead to the same solution: adoption
(no difference between two samples) or rejection of the null hypothesis (the existence of
differences in the means). The appplication of the 5-point Likert scale suggests that the 3
answer is rather neutral, answers over 3 rather suggest agreement with the statement, while
answers below 3 rather suggest disagreement. Table 2 shows that for the first three variables
no significant difference between the perceptions of purchasers and non-purchasers exists.
Both groups are rather inclined to assume that network marketing is a way of earning
additional income. At the same time, both groups rather confirm that for them MLM is a
pyramid scheme and disagre with the claim that network marketing allows to achieve
financial independence. It is noteworthy that none of the groups demonstrates a desire to
receive more information about network marketing.

Table 2. Consumers perceptions towards MLM

Variables Purchasers Non-purchasers
х̅ х̅
MLM is a way to earn additional income 3.41 3.35
MLM allow to achieve financial independence 2.68 2.56
Future purchases of MLM products** 3.56 2.44
Would you join the MLM business** 2.14 1.51
Image of MLM industry** 3.20 2.50
Distributor image ** 3.49 2.68
Would you like to have more information about MLM 2.44 2.54
** Sig (2-tailed) < 0.01

The differences in the assessment of purchasers and non-purchasers of the image of

MLM are easy to account for. The assessment is slightly above average for purchasers and

6
negative for non-purchasers (Table 2). This is consistent with the results obtained among
respondents from the USA (Peterson et al., 1989) and Australia (Kustin & Jones, 1995).
Bulgarian results are very close to the results of the global study of Brodie et al. (2004). The
average score on the perceived image of direct selling among users (purchaser mean about
image) in that study was 3.40 compared to 3.20 among consumers in Bulgaria. The average
score of non-users was 2.70 compared to 2.50 in Bulgaria. Despite the differences in the
responses of purchasers and non-purchasers, the industry as a whole enjoys a weak positive
image. The mean score of all surveyed respondents in Bulgaria is 3.11.
Although purchasers and non-purchasers show considerable differences in their
answers concerning their possible involvement in network marketing, neither group declares
it would like to take up the MLM business. Their average scores are below 3. Among all
respondents 74 % are not willing to be involved in network marketing, while 16 % are
neutral in their answers. A mere 11 % tend to be affirmative. These results are similar to the
results of a study conducted in the USA in 1970, where over 85% of surveyed consumers did
not want to be engaged in direct sales (Jolson, M., 1971). The MLM industry was developing
in the USA in the 1970s, which is the current situation with direct selling in the Bulgarian
market.
There is a significant difference in the mean results of the two groups as concerns the
intentions of buying MLM products in the future. Purchasers would buy products in the
future as well, while non-purchasers are rather reluctant to become purchasers or to make
repeat purchases.

Perceptions of purchasers and non-purchasers of specific characteristics of MLM

It is known that certain characteristics of network marketing stand out as positive
features while others are seen as inherent shortcomings. Based on results of other studies we
have defined four important perceived benefits of MLM and four perceived shortcomings
(Peterson, 1989; Jones & Kustin, 1995; Brodie et al., 2004; Chen et al., 1996). Perceived
benefits of network marketing are: product quality, competitive prices compared to other
similar products on the market, convenience of purchase, ability to examine products.
Perceived shortcomings are: pushy salespeople, pressure of the moment, distributor’s
professionalism or lack thereof, after-sales service.
Significant differences in the mean scores are outlined between the two groups in terms
of positive characteristics of MLM (p <0.05), but no differences appear in the mean scores
for perceived disadvantages. There is a difference only in the assessment of perceptions

7
concerning after-sales service. Purchasers are satisfied with the interest shown by the
distributor after the purchase, while non-purchasers give a negative assessment. Similarly to
the US respondents, purchasers are more likely to appreciate the positive features of MLM,
while non-purchasers are rather negative with regard to quality, product prices and do not
believe that network marketing provides a good opportunity to test new products.

Table 3. Consumer perceptions of certain advantages and shortcomings, as well as awareness

of MLM
Characteristics Purchaser Non-purchaser
Mean Mean
Perceived advantages
Product quality** 3.53 2.82
Competitive prices* 3.02 2.69
Convenience* 3.46 3.06
Ability to examine products** 3.42 2.79
Perceived disadvantages
Pushy salesperson 3.36 3.52
Pressure at the moment 3.23 3.51
Professionalism (salesperson’s skills) 3.30 2.92
After-sales service** 3.50 2.89

** р < 0.01; * р < 0.05

Purchasers evaluate positively the quality of the products they consume (х̅=3.53). They
perceive this as a convenient method of shopping (х̅=3.46) and consider it as a good
opportunity to test new products on the market (х̅=3.42). According to them, the products
offered within the system have more competitive prices on the consumer markets (х̅=3.02).
On the other hand, two of the drawbacks of MLM are equally perceived as negative by
both purchasers and non-purchasers (p> 0.05), similar to the Australian respondents. Pushy
distributors and pressure at the time of purchase are evaluated as problematic and lowering
the image of network marketing by both groups. Non-purchasers add to the disadvantages
also the poor after-sales service (х̅ = 2.89) and the distributors’ low professionalism (х̅ =
2.92), while the latter two characteristics are appreciated by purchasers (Table 3).

Conclusions and recommendations to the MLM management

A conclusion could be drawn that public perceptions of network marketing among
Bulgarians differ considerably between purchasers and non-purchasers in network marketing.
Logically, purchasers are generally more positive than non-purchasers. Purchasers evaluate
considerably higher such characteristics of MLM as quality, prices, convenience of purchase,

8
testing new products, after-sales service. Both purchasers and non-purchasers are negative
towards most problematic areas of network marketing concerning mainly factor markets:
distributors’ aggressiveness and pressure at the time of purchase.
The following recommendations can be made to the MLM managers in the industry.
 Accounting for the fact that as far as network marketing is concerned, factor markets
and their successful operation are more critical success factors than the development of
products markets (Granfield & Nicols, 1975), companies and managers should emphasise on
their continued improvement, looking for optimal approaches in the systematic training of
human resources in their capacity as main asset and driving force for the growth of the
industry.
 The direct connection between the buyer and seller in the sales process and the
possibility of direct psychological impact on the decision to purchase require that the
elements ethics and tactfulness play a leading role in distributor training for building the
professional distributor’s image. Companies should strongly postulate among their
distributors the negative feedback received as a result of the aggression exerted on potential
consumers. Aggression as an intrinsic feature of the typical dealer, which is used by some
distributors as a means to boost the sales or network should be replaced by other more
intelligent and consumer-attracting sales techniques.
 The activities of the Bulgarian Direct Sales Association in its role as a formal
industry representative in Bulgaria should be renewed. A good approach would be that MLM
companies operating in the Bulgarian market take a joint effort to build a better image of
network marketing and ensure greater transparency in society.

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