O2O model and Network Marketing

Summarized by: Asmita Maharjan (1921021015)

Purpose of the study

The purpose of this study is to analyze the concept and current development of O2O business
models and network marketing globally. It also is to extensively discuss the characteristic of
these models including advantages and existing problems. The purpose of this study is to find out
more about critical factors that influence consumer’s trust to do the transaction in online media,
as well as to measure the effectiveness of O2O strategy on e-commerce worldwide. The
possibility and key aspects of both the marketing techniques are briefly discussed in this study.

Theory
O2O model
Online-to-offline (O2O) is a strategy to direct online users to do offline activities in physical
stores. With O2O, customers can buy products from the store after researching online, paying
online, and picking up product from the store to save shipping costs, and checking product stocks
that may not be displayed or marketed in physical stores. As the name suggests, Online-to-
Offline, is a method in moving customers from interacting online (through websites, emails,
advertisements and mobile apps) to engaging offline (by getting in a car and heading to a store).
O2O features and services provided by online media provider also influence the consumer to do
online purchasing through online media that have such service and feature. O2O can bridge the
problems that have occurred so far in the e-commerce world where there is no physical
involvement of the products to be purchased.
China is spearheading the O2O category with 98% of Chinese consumers connecting to the
internet via a mobile device. China has more than 695 million social media users and millions of
consumers shop online using sites such as TaoBao, Tmall, and JD. Mobile payment systems like
Wechat Pay and Alipay make online shopping even more convenient. Along with mobile internet
usage, China has the highest rate of QR code adoption, mobile commerce, and mobile payment.
59% of Chinese shoppers use their mobile device to check or compare prices in-store, and
retailers adjust to this trend by integrating QR codes in their price tags or by giving out free Wi-
Fi access. Millennials make up a sizable portion of O2O consumers who have the highest income
level and the highest willingness to spend. Females are embracing O2O, making up 73% of the
O2O restaurant and dinning users, and are 38% more likely to use O2O travel related services.
China’s O2O start-ups also are using their investment capital to subsidize and incentivize
Chinese consumers to join their services, which creates a lot market potential in the industry.
There are numerous ways to enhance the customer experience by utilizing digital technology on
site to make shopping a more enjoyable time for consumers—and a more profitable campaign for
marketers. These are 7 ways that businesses can optimize their online and offline marketing
activities:
 1. Permit Online Activities to Happen Offline
2. Harness the Potential of Immersive Technology
3. Improve Personalization with Data Insights
4. Prioritize Mobile-First
5. Link KPIs for Online and Offline Marketing
6. Be Flexible with Your Campaign
7. Develop Offline and Online SEO

Network Marketing
Network marketing means selling products or services via a trading plan which works on more
than one level. Network marketing is a marketing activity that a company has to sell products
through irregular distribution channel. A company usually sells products through independent
salespeople who further have the responsibility to find new members and expand the market,
then gets reward such as bonus in return. It is a marketing approach which benefits from
relationships. The objective of this approach is to create a positive image of network marketing
through customer satisfaction. This procedure ensures the economic success of any network
marketing company.
It is a business model in which a distributor network is needed to build the business. Network
marketing is a type of business opportunity that is very popular with people looking for part-
time, flexible businesses. Some of the best-known companies in America, including Mary Kay
Cosmetics, Tupperware, AdvoCare, Agel Enterprises, Ambit Energy, Amway, Amway Global,
previously known as Quixtar, Avon Products, Nu Skin Enterprises, Oriflame, Telecom Plus etc.
fall under the network marketing umbrella. Network marketing programs feature a low upfront
investment; usually only a few hundred dollars for the purchase of a product sample kit-and the
opportunity to sell a product line directly to friend, family and other personal contacts. Network
marketing is a form of direct sales in which independent distributors sell products, usually in
their customers' home or by telephone. In theory, distributors can make money not only from
their own sales but also from those of the people they recruit.
In typical networking model, individual associates (often referred to as distributors) essentially
contract or act like a franchisee to the parent company and are paid a commission based on the
volume of product or services that are sold as a result of their own organization's efforts.
Although the history of network marketing dates back to the 1940’s, it is only now that the
industry has come of age. Network marketing has now grown to the point where it is creating
more millionaires today than the dot com boom industry did before the bubble burst.

Conclusion
To conclude, consumers choose to purchase goods by online because the online media that
performs its function on the Internet has the advantage regarding the flexibility accessing, both
time and place, as long as it is connecting to the Internet network. O2O features and services
provided by online media provider also influence the consumer to do online purchasing through
online media that have such service and feature which can provide a positive impact on
consumers to do online shopping transactions. This research illustrates how O2O can bridge the
problems that have occurred so far in the e-commerce world where there is no physical
involvement of the products to be purchased. Also, instead of using the traditional method of
manufacturing and delivering their products, network marketing companies choose to bypass the
middleman, selling direct to the customer. They use referrals and a word-of-mouth approach to
develop their customer base as opposed to a large advertising budget and as such the money that
would normally go to the middleman and advertising can now be used to reward business
operators (distributors) a commission for helping the company to make a sale.
REFERENCES / BIBLIOGRAPHY:
 https://en.wikipedia.org/wiki/Online_to_offline
 Diao, Y. (2015). Online shopping behavior among Chinese university student.
International Journal of Scientific and Research Publications.
 Fruhling, A. L., & Digman, L. A. (2000). The impact of electronic commerce on business
level strategies. Journal of Electronic Commerce Research.
 http://en.wikipedia.org/wiki/Multi-level_marketing
 http://onlinemlmcommunity.com/top-21-qualities-of-successful-network-marketers-and-
mlm-distributors/

Discussion Questions:
1. How can we protect the data obtained from online to offline marketing model?
2. What is the impact of social network marketing on online buying behavior?