Summary Brief

Shades of Embeddedness: Tie Strength and Obligations in

Direct Selling Parties

Scott D. Johnson, University of Louisville Patrick Migliore, University of Louisville

Abstract

Direct selling is the term that describes non-store transactions based on personal encounters
between sellers and buyers. A popular group-based direct selling approach is the "party plan"
where distributors/consultants facilitate retail transactions in the home. One direct selling
company suggests that "one of your best sources for building a customer base is a group of
people you already know. These acquaintances try Amway products and become your customers
as they use and reorder various Amway items" (Amway, 2001).

Literature Review
Direct Selling

Tne party plan has been identified as a good setting to study market embeddedness since such
parties are generally conceived in the context of bringing together family, friends, neighbors, and
co-workers (Davis, 1973). Such a party plan may also be construed as a network, defined as "a
composite of a larger number of actors and the pattern of relationship that ties them together"
(Iacobucci and Hopkins, 1992). Davis (1973) further describes party plans as "concentrated,
condensed nodes of sociability."

Taylor (1978) notes that such direct selling approaches depend on the ability to take advantage of
the pre-existing relations that may exist between a host/hostess and guests. That is, there exists
an "everyday sociability and reciprocity of friends, neighbors, and kin."

Embedded Markets

Markets with such social ties have also been called embedded markets" (Granovetter 1985;
Frenzen and Davis 1990). These markets operate by assumed or embedded rules that differ from
the common market assumptions where buyers and sellers are thought of as anonymous and
where social relationships are inconsequential.

Tie Strength

According to Granovetter (1973), tie strength is "a (probably linear) combination of the amount
of time, the emotional intensity (mutual confiding), and the reciprocal services which
characterize the tie." Various studies have developed scales to measure tie strength using some
combination of the characteristics in Granovetter's definition (Brown and Reingen, 1987;
Frenzen and Davis, 1990).

Tie strength has been shown to affect purchasing behavior in ernbedded markets. By definition,
an embedded market is one in which economic and social exchange are intermingled
(Granovetter, 1985). Futher, Frenzen and Davis (1990) have shown that the degree of
embeddedness is a reflection of the degree of tie strength between parties. It is suggested that
"the stronger the rights and obligations associated with a social tie ... the greater the impact of the
rights on the flow of resources across the tie when the rights are exercised or when actions are
taken to fulfill obligations" (Frenzen and Davis, 1990).

Findings

Empirical findings reveal that while tie strength is positively correlated with both obligation to
attend and obligation to buy, the correlation is stronger between tie strength and obligation to
attend compared to tie strength and obligation to buy.

References

Amway, Business Opportunity: Forming Your Customer Base, Amway web site view date: April
3, 2001.

Brown, Jacqueline J., and Peter H. Reingen, Social Ties and Word-of-Mouth Referral Behavior,
Journal of Consumer Research, Vol. 14 (December 1987): 350-362.

Davis, James, Forms and Norms: The Economy of Social Relations, Man, Vol. 8, (June 1973):
159-176.

Frenzen, Jonathan K. and Harry L. Davis, Purchasing Behavior in Embedded Markets, Journal
of Consumer Research, Vol. 17 (June 1990): 1-12.

Granovetter, Mark, The Strength of Weak Ties, American Journal of Sociology, Vol. 78 (May
1973): 1360-1380.

Granovetter, Mark, Economic Action and Social Structure: Ile Problem of Embeddedness,
American Journal of Sociology, Vol. 91 (November 1985): 481-510.

Iacobucci Dawn and Nigel Hopkins, "Modeling Dyadic Interactions and Networks in
Marketing," Journal of Marketing Research, Vol. 29 (February 1992): 5-17.

Taylor, Rex, Marilyn's Friends and Rita's Customers: A Study of Party-Selling as Play and as
Work, Sociological Review, Vol. 26 (3 1978): 573-611.