The dynamic world of business has emerged several business models which have been deployed and applied to varied business types. The oldest model is the Direct Sales model which employs the salesman as a middle man between the organisation and the customer, the Franchise model which leases the proprietary rights of a company is more popular with the fast food industry. The Fremium model which gives a service for free and later charges for an advanced and upgraded version of that service is more common with online companies such as Jobberman and LinkedIn while the Subscription model bills the customer on a periodic basis for services rendered as with the pay TV industry.
However, we find that a particular business model seems shrouded in mystery and is prone to misunderstanding but remains relevant to and adaptible by many businesses today. The Network Marketing model was founded in the 1930 by Carl Rehnborg who while in China was first introduced to the benefits of dietary supplements. On getting back to the US, he set up a company called The California Vitamin Company (which he re-branded to Nutrilite in 1939) and employed direct sales as the salient business model up on till the 40’s. In time, it was discovered that the company was making more sales when distributors referred their friends and acquaintances to the business opportunities in Nutralite hence the company created a system of rewarding referring distributors by paying 2% bonus to the sponsor distributor on the sales that were achieved by the distributor and the network that he built. Thus, network marketing as we know it today was born.
Though not a new concept, network marketing has assumed immense proportions in the last few years. Also known as multi level marketing, network marketing is a 170 Billion pound industry with over 90 Million people and more people getting involved yearly. It is basically a revamped way of selling products to the end user, unlike with the traditional model which has the producer – middleman – distributor strategy, network marketing avails the product directly to the end user cutting out the middleman. The company then uses the resources that would have been spent on advertising to pay their customers for recommending and referring the products.
It is curious however that the same business model which seeks to by-pass and cut -off all promotional activities in a bid to use promotional resources as reward for referring customers thrives strongly on PR to achieve its aims.
Let us remember that PR at its simplest seeks to garner goodwill for an organisation/product/idea/cause from the varied publics of this organisation, (publics being the operational word) while network marketing aims at increasing patronage and sales using goodwill in relationships as a basis for growth, hence we can say that while PR aims at enabling and creating this goodwill, network marketing uses this good will created by PR to foster patronage and sales of its products while going ahead to tell compelling stories via testimonials and word of mouth. In essence, an effective way to measure if an organization enjoys good will could be to adapt a network marketing strategy into the workings of that organization and see how well this will be accepted by the publics of that organization.
Again, network marketing is totally dependent upon the image and reputation of the patron organisation and a well managed and sterling reputation are one of the proceeds of a good PR strategy. Also PR through viral marketing and word of mouth can provide a soft landing to implement network marketing initiatives thereby creating an enhanced visibility for the organisation. As par media relations, PR can provide a credible 3rd party endorsement for network marketing initiatives to enhance a much needed credibility and believability for this initiative.
Though other elements of the marketing mix such as personal selling are needed to implement a successful network marketing initiative, the apparent relationship between PR and network marketing cannot be ignored as they play complementary roles to each other.