1.1 Background and Motivation
Relationship marketing is an approach which aims at retaining customers. Throughout history, people have used relationship marketing to expand their businesses. Moreover, some producers began to sell their products without intermediary trade directly to final consumers with the help of sales representatives. In order to gain a
competitive and strategic cost advantage, the producers dispensed with traditional advertising. This procedure shows the positive aspects of relationship marketing. The original concept of NWM is based upon trust amongst people and the importance of personal recommendations. Moreover, network marketing is a marketing approach
which benefits from relationships. The objective of this approach is to create a positive image of NWM through customer satisfaction. This procedure ensures the economic success of any network marketing company. NWM, in general, is conceived of a constantly growing business. Nevertheless, an ambivalent societal perception of network marketing exists. “The problem, in general, is that the activity of recruiting people […] is socially and psychologically unacceptable to
most people in our society (Bloch, 1996, p. 18).” It cannot be concluded if the success of NWM is due to relationship marketing.
Within this thesis, I analyse if network marketing is enrichment for people - this means how the perception of network marketing is in the society as well as from people within NMO and further, whether NMO deceives people in order to achieve profit.
1.2 Problem
According to Bhattacharya and Mehta (2000, p. 361), “Network Marketing Organisations (NMO) [...] has grown in importance over the last few decades.” For example, Avon, a well-known network marketing company, is ranked number 67 in the Best Global Brands 2009 (Interbrand, 2009). Furthermore, over “70 % of direct-sales
revenues are generated by network marketing organizations (Bhattacharya and Mehta (2000, p. 361).” Network marketing is a huge global industry, “a personal selling away from fixed retail locations (Muncy, 2004, p.47),” where strong social networks and relationships are the basis for the success. The estimated worldwide sales resulting from network marketing approaches is $90 billion (Muncy, 2004, p.47). The focus of NWM is on people and congenial and trustful encounters. Relationships between people are one reason why network marketing is a growing business in recent years.
Table of Contents
1 INTRODUCTION
1.1 Background and Motivation
1.2 Problem
1.3 Purpose of the Study
1.4 Limitations
2 THEORETICAL FRAMEWORK
2.1 Economical Perspective
2.1.1 Current Situation of German Retail Trade
2.1.2 Current Trends in the Retail Industry
2.1.3 Future Trends
2.1.3.1 Future Developments in Retail Industry
2.1.3.2 Future Developments in the Wholesale Industry
2.1.3.3 Future Trade Strategies
2.2 Channels of Trade
2.2.1 Trade function
2.2.2 Development of Trade
2.2.3 Retail Industry
2.2.3.1 Definition
2.2.3.2 Types of retailers
2.2.4 Wholesale
2.2.4.1 Definition
2.2.4.2 Types of wholesalers
2.2.5 Direct Marketing
2.2.5.1 Definition
2.2.5.2 Objectives and Advantages
2.2.5.3 Types of Direct Marketing
2.2.5.4 Facts about Direct Marketing
2.2.5.5 Future Development of Direct Marketing
2.3 Network or Multi-Level Marketing
2.3.1 Definition
2.3.2 The History of Network Marketing
2.3.3 Facts about Network Marketing
2.3.3.1 From a company’s perspective
2.3.3.2 Customers
2.3.3.3 Sales Partners
2.3.3.4 Selection of Network Marketing Companies
2.3.3.5 Demarcation of Direct Marketing
2.3.3.6 Delineation of Franchise
2.3.3.7 Delineation of Pyramid Scheme
2.3.3.8 Difference of NWM from Traditional Sales channels
2.3.4 Differentiation of ethical and unethical companies
2.3.5 Opportunities and Risks
2.3.5.1 Opportunity in Network Marketing
2.3.5.2 Risks in Network Marketing
2.3.5.3 Relationship in NWM
2.3.6 Strategies in Network Marketing
2.3.6.1 Internet Usage
2.3.6.2 Industry-choice
2.3.6.3 Customer retention
2.3.6.4 Business Ethics
2.4 Relationships—the Core of Network Marketing
3 METHODOLOGY
3.1 Literature Search
3.2 Research Approach
3.3 Data Collection
3.4 Data Analysis
3.5 Methodological Problems
4 RESULTS
4.1 Web based Questionnaire
4.1.1 Respondents
4.1.2 Results
4.1.2.1 First part - general questions
4.1.2.2 Second part – people working for network marketing business
4.1.2.3 Third part – people who left the network marketing business
4.2 Personal interview
4.2.1 Introduction
4.2.2 Results
5 ANALYSIS AND DISCUSSION
5.1 Web based-questionnaire
5.1.1 First part – general questions
5.1.2 Second part – people within a network marketing business
5.1.3 Third part – people who left the network marketing business
5.2 Personal Interview
5.3 Combined Analysis
6 SUMMARY AND CONCLUSION
7 REFERENCES
7.1 Literature
7.2 Websites
Research Objectives and Themes
The thesis explores the nature of Network Marketing (NWM), investigating whether it serves as a legitimate opportunity for personal enrichment or as a deceptive system. The primary research question centers on the societal perception of NWM and whether Network Marketing Organizations (NMOs) employ deceptive practices to generate profit.
- The economic importance and evolution of the direct marketing and network marketing industries.
- Theoretical differentiation between ethical NMOs, unethical operations, and illegal pyramid schemes.
- Analysis of the role of social networks and interpersonal relationships as the foundation for NWM success.
- Empirical evaluation of market acceptance, participants' motivations, and satisfaction levels using surveys and interviews.
Excerpt from the Book
1.1 Background and Motivation
Relationship marketing is an approach which aims at retaining customers. Throughout history, people have used relationship marketing to expand their businesses. Moreover, some producers began to sell their products without intermediary trade directly to final consumers with the help of sales representatives. In order to gain a competitive and strategic cost advantage, the producers dispensed with traditional advertising. This procedure shows the positive aspects of relationship marketing.
The original concept of NWM is based upon trust amongst people and the importance of personal recommendations. Moreover, network marketing is a marketing approach which benefits from relationships. The objective of this approach is to create a positive image of NWM through customer satisfaction. This procedure ensures the economic success of any network marketing company.
NWM, in general, is conceived of a constantly growing business. Nevertheless, an ambivalent societal perception of network marketing exists. “The problem, in general, is that the activity of recruiting people […] is socially and psychologically unacceptable to most people in our society (Bloch, 1996, p. 18).” It cannot be concluded if the success of NWM is due to relationship marketing.
Within this thesis, I analyse if network marketing is enrichment for people - this means how the perception of network marketing is in the society as well as from people within NMO and further, whether NMO deceives people in order to achieve profit.
Summary of Chapters
1 INTRODUCTION: This chapter provides the background and motivation for the thesis, clearly outlining the problem statement, the research purpose, and the limitations of the study.
2 THEORETICAL FRAMEWORK: This section reviews the German economic environment, discusses major trade channels including wholesale and retail, and provides a comprehensive deep dive into the history, definitions, and strategies of network marketing.
3 METHODOLOGY: This chapter describes the research design, including the literature review process, the utilization of web-based questionnaires, and the execution of structured personal interviews to gather empirical data.
4 RESULTS: This section presents the findings from the empirical studies, documenting participant demographics and responses from both the web-based survey and the personal interviews.
5 ANALYSIS AND DISCUSSION: This chapter evaluates the gathered data, comparing empirical findings with existing theoretical frameworks and discussing the implications of the results regarding NWM.
6 SUMMARY AND CONCLUSION: This final chapter synthesizes the main findings, addressing the core research question about whether NWM constitutes a legitimate system or a deceptive practice.
Keywords
Network Marketing, NWM, Multi-Level Marketing, Direct Marketing, Relationship Marketing, Consumer Behavior, Pyramid Scheme, Ethics, Sales Partners, Social Networks, Customer Retention, Compensation Plans, Economic Growth, Germany, Empirical Study
Frequently Asked Questions
What is the core subject of this master thesis?
The thesis investigates the business model of Network Marketing (NWM) to determine if it is a legitimate source of personal enrichment or a potentially deceptive and unethical practice.
What are the central thematic areas covered in the work?
The work covers economic perspectives on trade, the structural evolution of retail and wholesale, the mechanics of NWM, relationship marketing strategies, and the legal and ethical boundaries between legitimate NMOs and pyramid schemes.
What is the primary research goal?
The goal is to evaluate the importance of social relationships in NWM and to analyze societal perceptions and the likelihood of deceptive practices within the industry.
Which scientific methodology is applied?
The research uses a dual approach: a comprehensive literature review for the theoretical framework and an empirical study involving web-based questionnaires and personal interviews to collect primary data.
What topics are discussed in the main body of the work?
The main body examines historical developments, organizational structures of NMOs, compensation plans, participant motivations, the role of internet usage, and the core function of social networks in sales.
Which keywords best characterize this research?
Key terms include Network Marketing, Multi-Level Marketing, Direct Marketing, Relationship Marketing, Ethics, Pyramid Schemes, and Consumer Behavior.
How does the author distinguish between an ethical NMO and an illegal pyramid scheme?
The thesis highlights five factors: profits, product value, entry costs, required work, and the length of time the company has been active, noting that unethical companies often prioritize recruitment over product sales.
What is the significance of the "social circle" in the findings?
The author identifies the social circle as the primary engine for recruitment and initial sales in NWM, noting that while it leverages existing trust, it also poses risks of social isolation and conflicts of interest.
What are the primary conclusions regarding the perception of NWM?
The conclusion suggests that while NWM is an established and growing business, it suffers from a negative reputation due to its frequent conflation with pyramid schemes and the inherent pressure to monetize social relationships.
- Quote paper
- Gunnar Schuster (Author), 2010, Network Marketing - Enrichment or deception?, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/182520
