The influence of distributor satisfaction on loyalty within multi-level marketing in South Africa : the mediating role of trust

MCom (Marketing Management), North-West University, Potchefstroom CampusMulti-level marketing (MLM) businesses use distributors to sell the products offered by the MLM business to customers for financial compensation. Distributors are paid based on their business’ weekly and monthly sales volume. Therefore, distributors are encouraged by the MLM business to actively recruit new downline distributors to sell the products on their behalf. There are various advantages for the distributor when joining an MLM business. These advantages include low initial investment costs, relatively easy income opportunities, and the development of entrepreneurial, selling, and interpersonal skills. In South Africa, the high unemployment rate and limited economic growth create potential success for the MLM industry, especially in South Africa. Therefore, the MLM industry is actively growing not only worldwide, but also in South Africa. Based on the literature review conducted, it was discovered that considering that the distributors are responsible for recruiting an active downline and new customers in their business, distributors’ satisfaction, trust, and loyalty are crucial for the success and longevity of an MLM business. The primary objective of this research study was, therefore, to determine the influence of distributor satisfaction on loyalty, and whether loyalty is affected by trust as a mediating factor within a multi-level marketing business. This objective was realised by means of an in-depth literature review and an empirical investigation into distributor satisfaction, trust, and loyalty in the South African MLM industry. During this study, a descriptive research design was used, and a quantitative research approach was utilised to collect data by means of computer-administered methods. Nonprobability sampling methods (convenience-, chain referral-, and quota sampling) were used to reach respondents on social media platforms to participate in the research study. Since the research aimed to measure distributors’ satisfaction, trust, and loyalty, there was a minimum requirement to ensure a reasonable evaluation could be made. Consequently, the minimum requirement was that the respondents must have been distributors for their MLM business for a minimum of six months before participating in this research study. The sample included 376 usable responses, which was the correct sample size range for structural equation modelling (SEM) to be performed. Moreover, various assessment methods were used to determine whether this study’s measurement scales were reliable and valid with a good model fit statistic. The empirical results found that using SEM established that there are three significant positive impacts on the proposed hypotheses. Specifically, distributor satisfaction has a significant positive impact on loyalty and trust, and furthermore, loyalty has a positive and significant impact on trust. In addition, the SEM found a significant indirect effect on distributor satisfaction and loyalty when mediated by trust. Interestingly, the SEM found that there is a significant positive impact on the method of diffusing business opportunity towards distributor satisfaction. Based on the results, it is recommended that, to achieve distributor satisfaction, MLM businesses should ensure that they explain the business opportunity in-depth to recruits. The MLM business should pay close attention to providing the best possible discussion and training events to recruits to increase their retention rate and prevent losing distributors to other MLM businesses. Secondly, based on the results, it was implicated that respondents feel the job is enjoyable, and therefore, the MLM should continue to offer incentives and merchandise to the distributors to keep the distributors engaged accordingly. Finally, the results found that the respondents rely on MLM businesses to keep their promises. Therefore, the MLM business should continue to deliver good service delivery and keep the promises made towards their distributors. Recommendations for further research suggestions include extending the study’s primary aim to the global MLM industry. Further studies can also research more marketing constructs, a greater variety of MLM businesses in South Africa, and different demographic, age, and income groups. Finally, further research can study the influence of customer satisfaction, loyalty, and trust towards an MLM businessMaster