Direct Selling
Direct Selling
Direct Selling
1, February 2017
doi: 10.18178/ijtef.2017.8.1.535 32
International Journal of Trade, Economics and Finance, Vol. 8, No. 1, February 2017
the company employs a network of distributors to sell its their sales force through “recruitment” and “training” of
products to the user. The distributors sell the products to the other participants in order to sell products [3], [10]. The
final user not at a fixed retail store but through interpersonal literature review of network marketing has provided in
communication. They are also allowed to make and manage Table I.
TABLE I: LITERATURE REVIEW OF NETWORK MARKETING
Concept Researcher Year The Emphasized aspects and Variables
[3] Behavioral Growth and potential revenue aspects in both single-level and binary structure
2008
of the network assessment
[2] Behavioral Growth and potential revenue aspects in both single-level and binary structure
2008
of the network assessment
Network Marketing
[9] Attracting customers to their interested products and giving representative ship through
2007
online-based marketing expert system.
[12] Attracting more customers using the network marketing and the development of previous
2007 models by using data on the network, and Ranking network neighbors into smaller
groups.
Social Network or Social Capital can be described as complex networks of the society capable
Social networks consist of powerful interpersonal of guiding and screening information based on cultural
communication such as friendship, kinship, and long-term identity. Social capital also addresses the control of
cooperation with members of other groups or companies allocation of scarce resources available to entrepreneurs.
based on social communication [13]. The Literature review Social capital forms behavior based on cultural values, so
of social capital has provided in Table II. that the more powerful the social capital, the richer the
Sociological studies of native entrepreneurs confirm that cultural values [14].
social capital is the very social networks. Network capital
TABLE II: LITERATURE REVIEW OF SOCIAL CAPITAL
Concept Researcher Year The Emphasized aspects and Variables
[15] 2010 Positive and negative effects and impact of structural dimensions of social capital or
dense and sparse networks in creating incremental and fundamental innovations.
Capital
Social
[16] 2008 Mutual trust in social capital plays an important role in the acquisition of knowledge,
companies success and facilitation of knowledge flow compromise between companies,
and social capital plays and strategic role in building sustainable competitive
advantages
Marketing in Small and Medium Companies The operation of marketing is restricted in small and
Small and medium companies are one of the most medium companies for many reasons. The reasons include
important parts of job creation in the economy. It is very low resources (like financial and human), conception of
important, therefore, to increase conception of the key operation, skills, and insight [24], weak money supply, lack
factors effective on their success. Review of the literature of marketing skills, company size, tactical and strategic
demonstrates that in order to achieve their goals, small and problems concerning the customer [25], [26]. The Literature
medium companies pursue marketing differently from the review of small enterprises has provided in Table III.
way in which large companies do it [17], [18], [19], [20].
Researchers all agree that marketing is different in small
and medium companies than in large ones [21], [22], [23].
TABLE III: LITERATURE REVIEW OF SMALL ENTERPRISES
Concept Researcher Year The Emphasized aspects and Variables
Small [27] 2006 Small businesses have an inappropriate working physical condition, and organizational
Enterprises health and safety management systems than large businesses, but on the other hand have
better psychological conditions.
[28] 2002 In terms of internationalization and market development, small businesses have some
major difficulties. Complementary assets are considered a threat to them. Marketing
skills, distribution and access to financial resources and mechanisms are some of their
main weaknesses and pricing level is one of their main strengths.
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International Journal of Trade, Economics and Finance, Vol. 8, No. 1, February 2017
investment of the research and development sector, high effects on the market, customers’ great expectations, and
workforce cost, high product prices, obtaining premature lack of effective resources. The network marketing strategy
benefit, their short lifetimes, high risk-taking, and also has functions such as cost reduction, sale rate increase,
innovation. On the other hand, marketing these products is branding, job creation, networking power, high innovation
also affected by factors such as centralized decision-making power, and money supply increase resulting from sale
on the part of the manager or owner, dynamic environment, growth, made by viral marketing and its extension into a
presence of greater competitors with higher resources and social network through social capital exchange.
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International Journal of Trade, Economics and Finance, Vol. 8, No. 1, February 2017
the results obtained from the research, network marketing sale and provide information on new products using a
can have the following functions and solutions in marketing network of independent vendors. Subsequently, [5] believes
and sale of new products based on advanced technology in that products are presented in this strategy directly by the
microenterprises, which have been included in the case independent distributors to the final users, and they charge a
study obtained from the theoretical foundations and field commission in return for selling the products. Each of these
study of the companies under investigation: distributors can also introduce other distributors, and the
primary distributor also charges an amount as commission
A. Functions of Network Marketing
in return for the secondary distributor’s sale, and value
The functions of network marketing based on the added will be made for the sale network and users by the
theoretical foundations and qualitative research in this commissions paid, and will lead to job creation.
project include:
5) Viral marketing
1) Cost reduction
Based on the researcher’s findings from the interviews
One of the issues involved in microenterprises is their made according to Coded Table and the theoretical
high costs. Analysis of the data obtained from the foundations, face-to-face selling and marketing to family
theoretical foundations and interviews in Coded Table members, relatives, and acquaintances in man-to-man
demonstrates that man-to-man or network marketing leads marketing, suggesting the function of viral marketing in
to reduction of advertisement, distribution, and market network marketing, which has led to advertisement for the
research costs, costs concerning test of goods, sale unit
above users’ knowledge and goods sale and distribution.
training costs, costs concerning embellishment and
which is in complete accordance with [31] belief, who
decoration of the store showcase, and human force costs,
hold that in network marketing, people provide their friends
which has been significantly effective on reduction of their
and acquaintances with information concerning products or
costs and increase in their money supply.
services by verbally supporting them, and recommend that
2) Sale Increase they use the products. This state of affairs is also referred to
Based on the researcher’s findings from the interviews as viral marketing.
made according to Coded Table and the theoretical 6) Networking
foundations, sale volume and rate increased through further
Based on the researcher’s findings from the interviews
attraction of independent vendors and the value added made
made according to Coded Table and the theoretical
for users.
Confirming the above statements, [30] hold that actual foundations, network marketing leads to relations made
products are used in the network marketing strategy, where among family members and relatives and independent
the purpose is to increase sale and provide information on vendors, and these relations can result in networking.
new products using a network of independent vendors. [5] Ref. [5] also believes that products are presented in this
also believes that products are presented in this strategy strategy directly by the independent distributors to the final
directly by the independent distributors to the final users, users, and they charge a commission in return for selling the
and they charge a commission in return for selling the products. Each of these distributors can also introduce other
products. Each of these distributors can also introduce other distributors, and the primary distributor also charges an
distributors, and the primary distributor also charges an amount as commission in return for the secondary
amount as commission in return for the secondary distributor’s sale.
distributor’s sale, and value added is made for the sale 7) Innovation
network and users by the commissions paid. Based on the researcher’s findings from the interviews
3) Product branding made according to Coded Table and the theoretical
Based on the data obtained from this research according foundations, network marketing helps facilitate market
to Coded Table and the theoretical foundations, everybody research from the operational as well as cost reduction
agrees that network marketing proved very useful in aspect through permanent, continuous relations between
identifying and introducing goods and their quality and independent vendors and identify customers’ instant and
efficiency to users. future needs, and finally helps the business innovate in the
Ref. [12] also hold that in network marketing, people products. This is in line with [31] research, focused on the
provide their friends and acquaintances with information efficiency of network marketing in research on marketing
concerning products or services by verbally supporting them, and reduction of its costs.
and recommend that they use the products. B. Money Supply Increase
4) Job creation Based on the researcher’s findings from the interviews
Based on the researcher’s findings from interviews made made according to Coded Table and the theoretical
with cleaning industry companies with products based on foundations, network marketing causes sale to increase, and
modern technology, according to Coded Table and the seeks to charge the users for the sold goods so that the
theoretical foundations, network marketing will cause independent vendors obtain their commissions faster. On the
motivation and attraction of independent vendors and, other hand, cost reduction is also one of the functions of
finally, job creation by attracting independent vendors network marketing. The sale increase and cost reduction
further and paying desirable commissions. functions lead to increase in the money supply of the
Ref. [30] Also hold that actual products are used in the company.
network marketing strategy, where the purpose is to increase
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International Journal of Trade, Economics and Finance, Vol. 8, No. 1, February 2017
C. Use of Social Networks along with Social Capital relational dimension (development of trust and sympathy),
Exchange and structural dimension (communication), which is in line
Based on the researcher’s findings from the interviews with the researcher’s findings.
made according to Coded Table and the theoretical
foundations, it is communication that makes the social
VI. CONCLUSION
network in network marketing, and it is social capital
exchange that develops trust and sympathy in the network, As shown in Table IV, the functions which are found in
and the common values and goals, such as higher product the research have been provided in nine groups that have
sale, are finally created. been extracted and interpreted through the interview coding
Furthermore, [32] consider three dimension for intra- program.
organizational social capital with an organizational
approach: the cognitive dimension (creation of common
values, which is one of the social capital concepts),
TABLE IV: NETWORK MARKETING FUNCTIONS FOUND IN RESEARCH
No. Network Marketing Functions Found in Research
Reducing the cost of advertising
Reducing distribution costs
1 Reducing cost Reducing the cost of market research
Reducing the cost of product testing
Reducing the unit cost of sales training
Reducing or eliminating the shop’s decoration
Reducing human resource cost
2 Attract more independent retailers
Sale Increase
The added value created for independent dealers and distributors
3 Branding Product and brand recognition
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International Journal of Trade, Economics and Finance, Vol. 8, No. 1, February 2017
[14] D. Foley, “Does culture and social capital impact on networking Technology of University of Tehran in 2014; Acknowledgement for the
attributes of indigenous entrepreneurs?” Journal of Enterprising student thesis selection under the guidance of research at the university
Communities, no. 3, pp. 204-224, 2008. level in twenty third festival of University of Tehran, Written by Mr.
[15] A. Filieri, “Investigating the role of social capital in innovation: Morteza Khazaeipool, confirmed by the head of University of Tehran in
sparse versus dense network,” Journal of Knowledge Management, 2014; Certificate from the Deputy of the Ministry of Science, Research and
vol. 14, no. 6, pp. 891-909, 2010. Technology for being the scientific secretary of First National Brand and
[16] Mu et al., “Interfirm networks, social capital, and knowledge flow,” Knowledge-based Enterprises Conference on Science and Technology Park
Journal of knowledge management, vol. 12, no. 4, pp. 86-100, 2008. of Qazvin in 2013, etc.
[17] M. L. Bell and E. C. William, “The faltering marketing concept,”
Journal of Marketing, vol. 35, pp. 37-42, 2008.
[18] R. Brooksbank, D. A. Kirby, D. Taylor, and D. Evans-Jones, Shahram Ghahramani graduated from Institute for
“Marketing in medium sized manufacturing firms: The state-of-the- Management and Planning Studies (IMPS) in Business
art in Britain,” European Journal of Marketing, vol. 33, no. 1/2, pp. administration field in 2015. He’s a Ph.D. candidate of
103-120, 1999. Marketing at University of Tehran.
[19] H. Liu, “Market orientation and firm size: An empirical examination His got the diploma of Project Management from
in UK firms,” European Journal of Marketing, vol. 29, no. 1, pp. 57- KASKERT/Germany. His areas of specialization are in
71, 1995. marketing, export and import, international payments
[20] D. J. Pollard and M. W. Jemicz, “Marketing deficiencies and the methods, international banking, brand management, SME’s, international
internationalization of Czech SME’s,” International Journal of entrepreneurship.
Entrepreneurship and Small Business, vol. 3, no. 3/4, pp. 400- 416. He is Expert of International Department at City Bank (Shahr Bank) from
[21] N. E. Coviello, R. J. Brodie, and H. J. Munro “An investigation of Sep. 1, 2015 to Now.
marketing practice by firm size,” Journal of Business Venturing, vol. He has published some papers such as: M. Aghaei, A. Asadollahi et al.,
15, pp. 523-545, 2000. "The impact of store brand price –image on retailer equity dimensions
[22] G. Audrey, D. Carson, and K. Grant, “SME Marketing in practice,” among the customers of Etka chain stores of Tehran," J. Basic. Appl. Sci.
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effective SME marketing activity: Part 2,” International Journal of equity in mobile market," Middle-East Journal of Scientific Research, vol.
Entrepreneurial Behaviour and Research, vol. 7, no. 6, pp. 211-235, 18, no. 3, pp. 376-381, 2013.
2001b.
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A model and some empirical evidence,” The Journal of Consumer Ramin Haddadi has graduated in Entrepreneurship
Marketing, vol. 7, no. 3, pp. 5-18, 1990. Management from University of Tehran, Faculty of
[25] I. Doole, T. Grimes, and S. Demack, “An exploration of the Entrepreneurship (Iran) in 2013.
management practices and processes most closely associated with He was commercial manager and member of the Board of
highlevelsofexportcapabilityinSMEs,” MarketingIntelligenceand Triko Ramin Manufactoring and Export Company from
Planning,vol.24no.6,pp.632-47, 2006. 1992-1994; commercial manager of Triko Ramin
[26] J. D. Weinrauch, O. K. Mann, P. A. Robinson, and J. Pharr, Manufactoring and Export Company from 1994 to 1997;
“Dealing with limited financial resources: a marketing challenge for sales and marketing manager and member of the Board of
small business,” Journal of Small Business Management, vol. 29, no. Payam Peik Sadra from 1997 to 1999; The CEO and member of the board
4, pp.33-45, 1991. of Sorena Gostar Art & Cultural Institute from 2005 to 2008 And He is
[27] Sorensen et al., “Working in small enterprises — Is there a special commercial manager and member of the board of Sita Tejarat from 2008 to
risk?” Safety science, vol. 45, pp. 1044-1059, 2006. Now.
[28] Bernoider, “Factors in SWOT analysis applied to micro, small-to-
medium, and large software enterprises: An Austrian study,”
European Management Journal, vol. 20, no. 5, pp. 562-573, 2002.
[29] J. W. Creswell, Research Design: Qualitative, Quantitative, and
Mixed Methods Approaches, Sage Publications, Thousand Oaks, USA,
2009.
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management practices on competitive advantage and organizational
performance,” Omega The International Journal of Management
Science, vol. 34, no. 2, pp. 107-124, 2006.
[31] A. Jamshid, “Faghihsedighehsadat; scientific and leagal consideration
of network marketing,” Publication of Majd, 2008.
[32] J. Nahapiet and S. Ghoshal, “Social Capital, Intellectual capital and
the organizational advantage,” Academy of management Review, vol.
23, no. 2, pp. 242-260, 1998.
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