Network Marketing
Network Marketing
Network marketing entails the use of social relationships between customers in order to enhance an organization’s sales. The main purpose of this work is to develop a framework that can enable firms to create a competitive advantage through network marketing. Over 100 literatures have been analyzed with the purpose of identifying theories and concepts that relate to network marketing. The findings of the study reveal that in order to enhance network marketing organizations must invest in four key areas. These areas include; creation of personal relationships; establishment of customer connections; establishment of customer networks and technology. The only limitation in this study is that data was obtained from secondary sources only. One of the implications of this research is that organizations may need to shift from mass marketing to personalized way of marketing in order to create a competitive advantage. Another implication of this study is that organizations need to invest in technology in order to realize the benefits of network marketing.
Key Word: Network marketing; competitive advantage; network neighbors; social networks and transactional marketing
Network Marketing
The modern business environment has become highly competitive and increasingly dynamic. Therefore, managers must find ways of positioning their businesses in the market better than competitors in order to remain in operations. These ways of positioning a firm better than competitors are what are referred to as a competitive advantage. According to Cheng, Hung & Chien (2011), there are three broad strategies for achieving competitive advantage. These strategies include differentiation, cost leadership and focus strategy. Cost leadership mainly entails gaining advantage over competitors by reducing the cost of operation (Njuguna, 2009). Focus and differentiation strategies entail achieving a competitive edge through value addition. Focus strategies seek to add value by directing product to specific markets while differentiation seeks to add value by delivering more product attributes. Unlike cost leadership, value addition is a long term source of competitive advantage. This is because this strategy is difficult to imitate (Magut and Bitange, 2010). One way of adding value is by enhancing the customers’ experience. Network marketing is among the approaches that firms can use to add value to a company product.
Business Success Goal
Network marketing views marketing as a business function that seeks to create value by enhancing production, distribution and selling functions. It seeks to involve all stakeholders of the business in creating value. These stakeholders include suppliers, employees and customers. It also focuses marketing activities on customers’ needs and satisfaction. Network marketing creates competitive advantage by enhancing marketing efficiency (Gregurec, Vransevic & Dobrinic, 2010). The networks enable consumers to communicate with business, as well as, among them. This promotes the rapid diffusion of product information. Network Marketing creates brand recognition by making use of social network to market products (Hill, Provost and Volinsky, 2006). This is whereby product awareness and use is spread from consumers to other consumers. This approach promotes consumer to consumer product advocacy. Network marketing targets consumers who are closely linked. The principal objective of this work is to create a model that will enable organizations to create a competitive advantage through network marketing.
Model
Factor 1: Creating Personal Relationships
Quote: Collaboration means closer relationships with the customer and the company thus reducing competition
Network marketing seeks to create personal relationships with customers in order to sell products (Maxim, 2009). Communication is paramount to the creation of personal relationships with customers. Businesses communicate with the customers of a personal basis. Create relationships enables organizations to enjoy long term support from the market. According to Favreau (2000), value within a company is created through sharing of information.
Pre Factor 1: Personalized marketing channels
Companies need to identify new methods of communication in order to create a personal touch when communicating with the consumer. While mass advertising was an efficient channel of communicating to a large audience, such channels do not offer personalized communication. In the past business relied on media such as telemarketing in order to build a personalized relationship with the client.
Pre Factor 11: Relevant Marketing Content
Network marketing seeks to give customers greater control over the product (Assaad & Gomez, 2011). Customers have different characteristics and needs. Therefore, these customers are bound to demand for different aspects when it comes to products. Network marketing seeks to make the marketing process relevant to customers by focusing marketing content to the relevant market segment (Maxim, 2009). Companies must find better ways of controlling and managing their marketing activities. Organizations need to learn habits and expectation of clients in order for them to provide goods that can satisfy these customers’ needs. Network marketing enables organizations to get information about the customers (Ansari, Koenigsberg & Stahl, 2011). Social networks enable organizations to segment their customers according to their interests and characteristics. This is because the social networks are crucial links between individuals who share common interests. Unlike mass marketing, network marketing enables organizations to maintain closeness to consumers by providing relevant content. A social network also enables efficient utilization of resources.
Pre Factor III: Brand Positioning
Brand positing entails different strategies for positioning a firm’s products in a given market niche (Pridmore & Zwick, 2011). It ensures that the attributes of a given brand have a common aim. Brand position need to be distinct from competitors and relevant to the market niche. Customers need to have a clear idea of the brand. Network market provides business with new dimensions that enable them. Organizations need to identify the correct mix of product in order to achieve brand positioning (Ansari, Koenigsberg & Stahl, 2011). This means identifying the right product features, setting the most appropriate prices, establishing efficient distribution network and development of efficient methods of communicating with the consumers. Brand positioning is an essential part of network marketing (Ansari, Koenigsberg & Stahl, 2011). After identifying the behaviors and needs of a particular network neighborhood, an organization must identify product attributes that offers the best value proposition. The organization must ensure that the company’s products meet the specific needs of this network neighborhood.
Factor 3: Consumer Connection
The connectedness of a firm is a significant determinant of competitive advantage (Pillai, 2006). In the past, organization relied on transactional marketing to gain a competitive edge. Transactional marketing entails the management of the different elements of the marketing mix in order to attract and satisfy the customers. In transactional marketing, buyers remain passive as the seller actively manages the entire process. However, transaction marketing has become inefficient in the modern business environment. In order to enhance appeal, modern day organizations need to turn customers into active participants in the value addition process.
Pre Factor I: Database Marketing
Quote; eighty percent of transactions in most business can be attributed to repeat/ regular clients rather than new buyers. It is much cheaper to focus on existing client than to try and attract new clientsThis is a marketing strategy that relies on technological tools to form marketing relationships with the customer. The database is a technological tool that enables the organizations to manage and share information with the customers (Ansari, Koenigsberg & Stahl, 2011). It is a program that empowers companies to document and keep information about their clients.
This technology gives organizations the ability to maintain direct relationships with the customer. The intention of database marketing is to promote customer retention and loyalty. The database enables organizations to create competitive advantage in number of ways. One way is by providing crucial information about the needs, behaviors and preference of the existing customers. Thus, organizations are able to use this information to design their product attribute (Ansari, Koenigsberg & Stahl, 2011). The information contain in the database can also assist organizations to identify the most appropriate communication strategy. Through this information, organizations are able to understand the customers purchasing behaviors. This knowledge enables organizations to develop communication strategies that will get through to the clients (Doraszelski & Markovich, 2007). The database also provides information that enables organization to maintain personal contact with the client. This enables organization to create favorable relationships with the clients thus, building customer loyalty.
Pre Factor 11: Interaction Marketing
Database marketing offers personalized relationship to clients. However, this relationship is a little bit distance. Interaction marketing seeks to create a close relationship between organizations and customers by enhancing interaction (Ross, 1997). Interaction marketing seeks to promote direct communication between organizations and customers. In this form of marketing, organizations make personal contact, allow customers to bargain terms and promote exchange of information between the customer and the company. It involves a social exchange between firms and their customers (Coviello, Brodie & Munro, 1997). In the modern business environment, many firms have adopted interaction marketing. These firms usually open accounts for each client and assign an account representative to each account. The account representatives are responsible for keeping the customers updated about events taking place within the firm. The account representatives also receive communication from the customer and air the customers’ messages to the company’s management.
Pre Factor III: Network Marketing
Interaction marketing focuses on the relationship between individual customers and organizations (Coviello, Brodie & Munro, 1997). However, customers’ experiences are not only influenced by these two stakeholders. Network marketing seeks to explore the totality of the relationships within the markets and industries. Network marketing recognizes the existence of multiple and intricate relationship with the market place. In network marketing, firms seek to create multiple relationships with suppliers, distributors, customers and other firms (Doraszelski & Markovich, 2007). Firms establish strategies that facilitate the establishment of relationships between stakeholders. Firms then use these networks to develop position for their brands.
Factor 2: Consumer Network
Consumers are 3 to 5 times more likely to adopt products when these products are introduced by friends and acquaintances rather than when the products are introduced by strangers (Hill, Provost & Volinsky, 2010). Company can take advantage of the social interaction between people to sell product. The advent of technology has led to the creation of giant social networks. This has made networking marketing an extremely viable option. Create a sense of community
Pre Factor 1: Explicit Advocacy
Quote: “Sometimes real customers are not found in the market and, therefore, organizations form relationships in order to reach out to these consumers”, (Gummesson, 1994)This is whereby product consumers become vocal advocates of the company’s products. This is also known as word of mouth marketing (Trusov, Bucklin & Pauwels, 2009). Friends, colleagues and neighbors, play a significant role in influencing an individual’s purchasing decision (Galeotti & Goyal, 2009). Presence of a single informed neighbor or collogue can lead to knowledge of product and even purchase by other members of the community. Explicit advocacy creates a competitive advantage by enabling firms to expand their market shares at minimal costs. A study conducted by Trusov, Bucklin & Pauwels (2009) reveals that only 49% of individuals believe that advertising is a reliable source of product information. This implies that the majority of individuals rely on different source of information when making purchasing decisions. Recommendations by friends and other acquaintances is one of the main sources of information.
Pre Factor 11: Implicit Advocacy
Implicit advocacy refers to situations where individual advocate for products indirectly (Murphy, Laczniak & Wood, 2006). Even if customers do not speak directly about the product they may advocate for the product through their action. This is referred to as implicit advocacy. Individuals within the society share different relationships. In certain occasions, individual relationships are bound by feeling of admiration. Through the adoption and use of products, customers may motivate individuals who admire them to purchase similar products. Organization may capitalize on implicit advocacy by targeting influential individual (Doraszelski & Markovich, 2007). For example, fashion companies have in the past used popular sports people to implicitly advocate for their products. When the popular athletes wear the company product they motivate their funs and supporters to purchase similar products.
Pre factor 111: Network Targeting
This is whereby a company targets its product to consumers who share a common interest. These targets are often referred to as network neighbors (Doraszelski & Markovich, 2007). These groups may be divided according to income, age, occupation and many other attributes. This strategy is often applied in online marketing (Wang, 2010). Consumers are linked if they have a similar profile. Network marketing seeks to deliver the right information to the appropriate people. The information should be focused and relevant to the target group.
Factor 4: Technology
In previous years, it was difficult to exploit the power of social network because companies did not have a platform from which to obtain data (Coviello, Brodie & Munro, 1997). The growth of technology has improved accessibility to data by firms thus making it possible for them to exploit the power of social network. Technology has become an essential part of network marketing. The introduction of the internet made it easier for firmsto personalize their communication (Coviello, Brodie & Munro, 1997). Advanced information technologies have boosted organizations capacities to build long term relationships with customers thus collecting crucial market information.
Pre Factor I: Email
Email is one of the technologies that have facilitated network marketing (McTaggart, 2006). Emails have made it possible for organizations to send personalized messages to clients. It has also enabled clients to provide feedback to the company. Many companies have created CRM solutions, which assist them to maintain a list of clients in their database (Doraszelski & Markovich, 2007). Organizations use this list of clients to send messages to existing and potential client. Through emails, firms can identify potential customers, define customers’ needs and design personalized information for the customers.
Pre Factor II: Online Social Networks
Social networks are one of the greatest technological innovations of the 21stcentury. Social network have become popular in modern society, connecting billions of people from different parts of the work (Gregurec, Vranesevic & Dobrinic, 2010). These social networks have also become essential platform for marketing activities. Today, the creation of customer relationships has been pushed a notch higher by the development of online social networking platform (Galeotti & Goyal, 2009). Apart from enabling two ways communication between companies and their customers, online networking platforms enables customers to interact and share their experiences. Organizations can send information to the most influential individuals and count on these individuals to spread the information to others. Organizations are using social media to promote the diffusion of information in order to promote sales.
Explanation and Discussion of the Model
Network marketing is a strategy that seeks to exploit the links between consumers in order to generate sales (Hill, Provost & Volinsky, 2010). Network marketing can be an essential source of competitive advantage. This model identifies factors that can be used to enhance network marketing within an organization in order to create a competitive edge. Four factors have been identified in the model. One of the factors is personal relationships. This factor recognizes that mass marketing have become ineffective due to their general approach of communicating to consumers (Coviello, Brodie & Munro, 1997).
In order to establish a competitive edge, organizations need develop a personal and close contact with the customer. Firms should seek to establish active participation of clients in the marketing process. The model seeks to create a close relationship between organizations and consumers by establishing personalized marketing channels, developing relevant communication content and through brand positioning.The Second factor that makes up the model is consumer connection. In order to create close and personal relationships with the customers, organizations must identify connecting strategies (Doraszelski & Markovich, 2007). Three strategies have been identified; database marketing, interaction marketing and network marketing. Database marketing relies on technology to manage customer information and to communicate with the customer.
Interaction marketing seeks to create face to face communication between the firm and the client. It enables the customer to provide feedback and bargain terms (Doraszelski & Markovich, 2007). Interaction market recognizes the intricate nature of the market relationship. This strategy seeks to establish and promote multiple relationships in order to promote sales.The third factor that comprises the model is customer network. This factor recognizes that social networks can be effective marketing tools for organizations. According to Hill, Provost & Volinsky (2010), consumers are most likely to adopt a product when the product when the product is recommended by friends and family. Thus, organization can enhance marketing efficiency by tapping into the social networks. The model has identified three strategies through which a firm can enhance marketing through consumer networks.
These strategies include; explicit advocacy; implicit advocacy and network targeting.The forth factor that makes up the model is technology. This model notes the critical role that technology plays in network marketing. Network marketing is about exploiting customer relationships in order to achieve competitive advantage (Doraszelski & Markovich, 2007). Without technology, it was difficult to find data concerning customer relationship. However, development of technology has enhanced the capabilities of organizations to exploit social network. These technologies include emails and social networks. Network marketing leads formation of chains which enhances the organization adaptation (Pallai, 2006). It also leads to transfer of knowledge and efficient utilization of resources. In addition, network marketing also make consumer behaviors predictable.
Research Method
The principle objective of this work was to establish a model that would enable an organization to develop a competitive advantage through network marketing. Several research methods were combined in order to come with a rich theoretical insight (Keith & Hase, 2008). One way of developing rich theoretical insight is by reviewing existing theories from centric research studies. Theoretical insight can also be obtained by evaluating case study researches that are founded on observations of organizations and practitioners (Dubois & Gadde, 2002). This research combined theories that have been presented in previous research studies concerning the discipline of network marketing. This research provides a synthesis of various literatures with the aim of broaden the readers’ understanding on this topic (Keith & Hase, 2008). This study has identified four factors that organizations can use to enhance network marketing so as to generate a competitive advantage. The research approach used in this study incorporates the “interpretive paradigm” in which a rich description of each factor in current organizational context is established The relevance of the network marketing model has been demonstrated in a causal model (Keith & Hase, 2008). This study entails a comprehensive evaluation of the goal and relationship of each factor to the goal of the study. The target of this study was to generate a model for creating a competitive advantage through network marketing. The significance of creating a competitive advantage by firms has been elaborated in the paper (Magut and Bitange, 2010).
The paper has also interpreted how network marketing can results in the creation of a competitive advantage for firms. The paper argues that in order to enhance network marketing, firms need to invest in four key areas. These areas include; creations of personal relationships; establishing customer connection; establishing customer networks, and technology.The study has consulted over one hundred literatures. Five to ten articles have been selected for each factor that was identified in the study. The review of factor one, creation of personal relationships, identified that impersonal communication with the clients are becoming ineffective in terms of convincing clients to purchase products (Trusov, Bucklin & Pauwels, 2009). In order to enhance sales, organization need to actively involve customers in the value creation process. The review of factor two, establishing customer connection, revealed that organization need to establish connectedness with the consumers. The review also established several strategies that firms can use to enhance connectedness (Hill, Provost & Volinsky, 2010). A review of factor three, establishing customer network revealed that social networks can give rise to giant chains that append value to the firm. A review of the final factor, technology, revealed that organization must invest in various types of technology in order to develop network marketing.
Conclusion
Creating a competitive advantage entails the establishment of areas of competence within the organization in order to survive in a competitive business environment. There are various strategies for building a competitive edge. This paper has explored the use of network marketing as a strategy for creating a competitive edge within firms. Network marketing involves the use of customer relationship in order to enhance the firms’ sale. This study has reviewed a number of literatures in order to develop a model for enhancing network marketing. The study led to the establishment of four factors that firms need to implement in order to enhance network marketing. These factors include; personal relationship with the customers, customer connection, customer networks and technologies.
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