Network Marketing
Network Marketing
Abstract
Network marketing entails the use of social relationships between customers in order to enhance an organization’s sales. The primary objective of this work is to create a structure 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 three key areas. These areas include; building strong brands, modern technology and establishing expansive networks. This model provides marketing managers with an effective tool for enhancing network marketing. The only limitation in this study is that this model has not been implemented in an organization setting in order to evaluate its practicability. The model created in this study is original and add value to the discipline of marketing. It also provides crucial information that may be of value to business organizations.
Keywords:Network marketing; brand positioning, brand resonance, brand value chain, competitive advantage, social networks, and transactional marketing
Network Marketing
Introduction
The modern business environment has become highly competitive and increasingly dynamic(Achrol & Kotler, 1999). 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(Wang & al, 2010). According to Cheng, Hung & Chien (2011), there are three broad strategies for achieving competitive advantage. These strategies include differentiation, cost leadership and focus strategy(O’Shannassy, 2008;Stonehouse & Snowdon, 2007). Cost leadership mainly entails gaining advantage over competitors by reducing the cost of operation(Njuguna, 2009&Stroud, 2007). Focus and differentiation strategies entail achieving a competitive edge through value addition. Focus strategies seek to add value by directing product to specific markets(Maxwell, 2012). Differentiation seeks to add value by delivering additional product attributes(Maxwell, 2012). Unlike cost, leadership, value addition is a long term source of competitive advantage. This is because this strategy is difficult to imitate(Ostovsky, 2008). 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 company products.
Research Method
The principle point 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(Doraszelski & Markovich, 2007). 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 study has consulted over one hundred literatures. Five to ten articles have been selected for each factor that was identified in the study.
What is Network Marketing?
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, Vranesevic, & Dobrinic, 2010;Hill, Provost, & Volinsky, 2006). 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 et al., 2006). This is whereby product awareness is spread from consumers to other consumers. This approach promotes consumer to consumer product advocacy. Network marketing targets consumers who are closely linked. The student’s objective in this work is to create a model that will enable organizations to create a competitive advantage through network marketing
Network Marketing Model
Building Strong Brands
Network marketing seeks to create personal relationships with customers in order to sell products(Maxim, 2009). One way of establishing personal relationships is by building strong brands. A brand represents the organization’s promise to the client. It informs the clients of what to expect from the firm. It is the personality of an organization that differentiates it from other organizations. Brands help the organization to attract customers by differentiating its products from the rest.
Not only does a company need to have a brand, but it also need to position this brand in the consumers’ mind. Brand positioning is an essential part of network marketing(Ansari et al., 2011). 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. Organizations need to identify the correct mix of product in order to achieve brand positioning(Ansari et al., 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 should lead to brand recognition.
Another element that is essential to building a strong brand is brand resonance (Moore & Wurster, 2007). Brand resonance refers to the connection between consumers and the company’s brand. Companies need to establish a strong connection between its brand and the customers (Suh, 2010). This entails making consumers identify with the company’s brands. The brand should be capable of evoking string emotions and attachments among customers. Emotions influence the attitude of consumers, thereby, influencing the purchasing behaviors of customers. Companies need to establish brand resonance that strong enough to encourage consumers to invest their time and money in promoting the brand. In order to achieve this, companies need to develop band that capture the imagination of the customers. The company also needs to ensure that customers have the right experience while using the company’s product. Brand resonance should lead to brand loyalty.
Evaluating the brand value chain is also an essential process in building strong brands. Brand value chain enables an organization to examine the financial returns of developing brands (Keller, 2006). This model has identified four stages through which brand must pass in order to generate value. The first stage is marketing investment. Organizations need to invest resources towards popularizing their brands (Keller, 2006). It is essential for firms to provide clients with information concerning the existence of brand. The second stage entails influencing the customer’s mindsets. Brands need to have an impact on the customer’s awareness, emotions and attitude in order for brands to be successful (Keller, 2006). The third stage is the market performance of the brand. The brands need to demonstrate strong market performance in terms of attracting premium price, expansion success, cost saving and profitability. The final stage assesses the impact of the brand on the value of shareholders. Brands need to translate to higher stock prices, higher market capitalization and P/E ratio.
H1: Strong brands enhance the relationship between organizations and consumers.
Investing in Technology
Organizations need to invest in technologies that enable customers to communicate, interact and create new communities (Assaad & Gomez, 2011). 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 et al., 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 easy for firms to personalize their communication(Coviello et al., 1997). Advanced information technologies have boosted organizations capacities to build long term relationships with customers thus collecting crucial market information.
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 customers.
Online social sites are one of the greatest technological innovations of the 21st century. These include; social networking sites, wikis, weblogs and instant messaging. Social sites have become popular in modern society, connecting billions of people from different parts of the work(Gregurec et al., 2010). These online social sites have also become essential platform for marketing activities(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.
H2: Modern technologies enhance the relationship between organizations and customers.
Establishing Expansive Networks
It is easy to transact with people that we know. Network marketing seeks to sell products by creating close relationships with consumers. 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. Establishing a network of customers enables an organization to reach new customers with ease. According to Gummesson (1994), sometimes real customers are not found in the market and, therefore, organizations form relationships in order to reach out to these consumers. 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.
Establishing customer networks begins with connection with establishing connection. This is where marketing strategies and technology are required (Maxim, 2009). Organizations need to make certain that it is connected to customers in order to promote network marketing. Promotional strategies enable the organization to communicate with clients concerning availability of the product (Hill, Provost & Volinsky, 2006). The organization also informs the customers concerning the value that the products present. Organizations also need to establish a connection between its clients in order to promote network marketing. The organization need to ensure that customers are able to cooperate and share information. This is possible through investment in technology. Technologies such as online social networks enable organizations to create spiraling networks of consumers.
Establishing customer networks also requires business to establish strong relationships among consumers and between consumers and the organization. Network marketing places emphasis on establishing relationships with customers. Network marketing recognizes the existence of multiple and intricate relationship with the market place(Dubois & Gadde, 2002). In network marketing, firms seek to create multiple relationships with suppliers, distributors, customers and other firms(Doraszelski & Markovich, 2007). Organization can establish strong relationships with customers and other stakeholders through various ways. One way is by delivering the brand promise. Fulfilling the firms promise to the customers establishes a relationship of trust. Organization can also establish strong relationships through regular communication with the customers (Maxim, 2009). Firms need to establish personalized communication with their clients. Relationship leads to duplication within the network. It easier from new customers to join the organization when they are introduced to the company by someone who is close them. Customers not only introduce new clients into the business, but they also coach these new clients on how to derive maximum benefits from the company’s products.
H3: Establishing networks is a key ingredient in 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 three essential factors that firms need to implement in order to enhance network marketing. These factors include; building strong brands, investing in technology and establishing expansive networks.
References
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