featured, GENERAL — March 7, 2013 at 11:57 am

Network Marketing

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By Aarash Syed

Network marketing entails marketing to customers and firms through interpersonal and inter-organizational relationships between firms within an industry or across a market sector, where the parties involved are active and participative. Network-based marketing employs a range of marketing techniques by leveraging existing links between consumers and firms to raise sales revenue and product awareness. The term network-based marketing is also synonymously used with the terms viral marketing, buzz marketing, or word-of-mouth marketing, where networks formed on the Internet have become the basis for experimenting with a range of online marketing techniques. Social networks on the Web converge through users who want to publish their profile, share content, and form links with other users. This network provides the basis for maintaining social ties, finding others with similar interests, and sharing information that may be personally endorsed by users.

Marketing in the Networked Economy:
The ability of users to influence each other through their endorsements and reviews in networks provide mechanisms for marketers to both test and comprehend group behaviour.  Social network theorists contend that the behaviour of individuals and groups is mediated by the social ties and the networks in which the actors are involved, rather than the particular attributes of any one person. Ravi Achrol and Philip Kolter, in their study of the networked economy, perceive networks to be comprised of specialized entities bound through loose, dense, and lateral associations where there is both mutuality and reciprocity, which adhSeres members through common values and in turn delineates roles and responsibilities to such a coalition. Alternatively, networks can also be defined by the relationship between businesses and consumers in marketing high-involvement products. Beyond these two perspectives, markets have been conceived as networks to interweave business-to-business (B2B) interactions as multidirectional and embedded within social exchange theory, where resources, activities, and actors become basic analytical components.
In marketing literature, network theory has been closely studied for more than 30 years, with social network analysis emerging from sociology and providing the initial premise of inquiry. The field today is multidisciplinary, drawing from other disciplines such as mathematics, physics, economics, and social sciences. With the availability of data on the Internet, it is possible to study both large and small networks. Initial study in this area tended to concentrate on the interpersonal relationships of actors and networks between and within organizations where these ties emerged through the existence of formal organizations. Networks have been studied both as conceptual devices and documented through empirical analysis.  Recent studies have looked at networks as alternatives to markets and organizational hegemony. Unlike hierarchical structures, networks are more amenable to adaptation and are characterized by dense but weak ties.
In the field of marketing, there is a general recognition that marketing in the networked economy has gone through a transformation, where hierarchical organizational flows are replaced by a multitude of networks that capture the complex interactions that can happen between and within communities. Such networks are not new, but their occurrence, fluidity, formation, and complexity have been mediated by new media and interactive technologies that enable communities to be organized through communication links. With the Industrial Revolution, technology was used to organize production and impose new forms of order and division of labor. In contrast, information technology has facilitated the emergence of different forms of networks. In the digital economy, knowledge has become an important economic resource; hence, knowledge-processing capability is a distinct part of such networks and their organizational ethos. The extent to which ideas are adopted and diffused among networks has always been a source of interest, and in the domain of marketing, it is seen as an added value possessed by these networks.