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The MLM/Relationship Marketing Affair

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People throughout the business community use the word relationship in many ways: relationship marketing, business-to-business relationships, customer relationship management, brand relationship. MLM is touted as being a relationship marketing business. What exactly does that mean?

Relationship businesses are personal and steady:

  • The provider and customer get to know each other through repeated interaction—this enhances the ability of the provider to personalize the service.
  • The provider is directly dependent on customers for income.
  • The provider may become friends with the customer. A sense of personal duty as well as satisfaction from contributing to the quality of someone else’s life leads that individual to do his/her best for the customer.
  • The provider, working in partnership or sole proprietorship, has legal obligation to deliver the service he/she offered.
  • The customer is attracted to the quality of the services.

In regard to relationship marketing, MLM parallels traditional professional services in the way they specialize in individualized service—personal services as well as services involving special skills, tools, or equipment. For example, doctors, dentists, and hair stylists have specialized knowledge, which is why customers develop a relationship with them. You see them on every visit and they adapt to you and your relationship with them.

Gutek and Welsh (2000) conducted a study on business relationships, which cites four types of business connections people experience:

  • Encounter
  • Enhanced Encounter
  • Pseudo-relationship
  • Relationship

Encounter. In an encounter, the customer is dealing with the organization, such as WalMart. Providers and customers are interchangeable in encounters. It doesn’t matter who buys or sells. If I always buy a particular brand of vitamin, my connection is with the company who manufactures it, not with the cashier who sells me the product. I don’t expect Vitamin, Inc. to adapt to me as one individual. In return for a lower level of connection, I expect consistency and efficiency. Encounters have the following characteristics:

  • Customer deals with the organization.
  • Business is divided into detached tasks.
  • The encounter offers little self-improvement.
  • Encounters decrease in efficiency over time.
  • Service fits a standard as opposed to the individual.
  • The encounter involves higher emotional labor.

Enhanced Encounter. In an enhanced encounter, the company knows me well enough to make adaptations for me. The provider with whom I interact has the information and power to help me with my specific concern. I do not expect to get to know an individual provider in a personal relationship manner.

In an MLM scenario, the company tracks my sales and knows that I like specific products. I expect corporate to know my personal history with the company and to help me navigate the rules and processes.

Pseudo-Relationship. A pseudo-relationship is a pretend relationship, when in fact we just met at the front door over a cleaning product. Few of us are pleased to be treated as if we have a relationship with a particular airline, credit card company, or network marketer, when we clearly are not being treated uniquely. This type of superficial relationship develops when organizations replace real passion with smile training and stereotype customers.

In MLM, this means the business relationship is disconnected from the MLM organization’s intent.

Ironically, the very things that marketers are doing to build relationships with customers are often the things that are destroying those relationships. Why? Perhaps we are skimming over the fundamentals of relationship building in our rush to cash in on the potential rewards of creating close connections with our customers. Perhaps we do not understand what creating a relationship really means; that is, how customers’ trust and intimacy factor into connections we are trying to forge. Relationship marketing is powerful in theory but troubled in practice (Harvard Business Review).

Relationship. A true relationship involves adaptation, trust by both parties, mutual knowledge, and an expectation that we will interact in the future. If I always buy my laundry soap from the same MLM distributor, she soon learns where I live and how much soap I buy. Most likely, she also learns why I buy this product and what other products I might be interested in.

Of these four types of business connections, the Gutek and Welsh study found that people prefer business relationships, though they also like the availability and efficiency of encounters. A relationship takes more time than an encounter, but over time, relationships typically get more efficient while encounters get less efficient. No business includes just all relationship or all encounter contacts, but a combination of the two.

Generally, an MLM relationship can be defined as an association that develops when individuals see the same company representative each time they do business, and both parties expect to continue doing business together. MLM companies typically function within the framework of a Tight-Tight-Loose relationship illustrated in the Types of Relationship Model in Figure 1 from the study. The Organization is the network marketing company, the Provider includes distributors of that company, and the Customer refers to individuals who buy a product or service. In this model, the strong bond is between: 1) the Organization and the Provider, and 2) the Provider and the Customer.

Triangle

Figure 1.

MLM companies work hard to create a strong link between the company and its distributors, especially top distributors. It relies on top distributors to create and maintain relationships further away in the downlines. Uplines work at developing their connections with their downlines. The uplines often recruit family and friends, so tight relationships exist prior to company affiliation. Distributors work hard to connect with customers and new distributors they recruit. They labor to diminish ambiguity, which occurs when these individuals are new, trying new products, changing levels, and so on.

Some companies want to move faster and faster, but still maintain a relationship. When you treat customers as encounters, it may cause friction. Essentially, effective follow up is a key to every relationship (business or social). This is the time when, in a personal relationship, you send flowers “just because.” Or, in a family or friend relationship, you call a bit after a crisis is over. Rather than breathe a sigh of relief after a sale or gaining a new recruit, you should send a coupon for the next sale or call to see how the product is working. Simply saying, “We have a great customer relationship program!” is not enough.

Conclusion

One of the crucial keys to success in the MLM industry is effective relationship marketing—the balancing act involving relationships between MLM companies, their distributors, and customers. This business is challenging because relationships are hard work and require money, but they can be extremely rewarding as has been proven by the spectacular, record-breaking success of a number of well-known MLM companies. The successful relationship marketer will remember that relationships are complex and require time and effort. They know that keeping in contact and offering support through all MLM phases, especially uncertain ones, is crucial for success. The core principle of relationship marketing is to put the relationship before the marketing.

References:

Gutek, B. A., & Welsh, T. (2001) The brave new service strategy: Aligning customer relationships, market strategies, and business structures. San Francisco: American Management Association.

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