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Chapter 16
Direct Selling & Direct Marketing
Channel Systems
Objective 1:
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Alternative Channels
Growing in importance
1. Direct Selling
2. Direct Marketing
Objective 2:
Direct Selling
Direct selling is the sale of a consumer product or service
person-to-person, away from a fixed retail location
Three key points:
• Goes directly to consumers’ homes, offices, or other
locations
• Concerned with the sale of consumer products in
consumer markets rather than industrial products
in industrial markets
• Involves salespeople meeting fact-to-face with customers
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Objective 3:
Structure & Trends
in Direct Selling
Markets Served
Types of Products Sold
Firms Involved in Direct Selling
Problems & Prospects for Direct Selling
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Markets Served
Location of Direct Selling Channel Sales, 2001
Location
Percent of Sales
Home
64.4
Telephone
14.7
Workplace
8.7
Internet
5.5
Temporary locations
4.1
Other
2.6
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Types of Products Sold
Major Product Categories Sold through Direct Selling
Channels as a Percentage of Total Sales
Product Category
Percent of Total Sales
Personal Care Products
26.4
Home/Family Care
Products
Leisure/Educational
Products
33.7
Services/Miscellaneous/
Other
33.4
6.5
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Firms Involved in Direct Selling
Facts
•
•
Examples
Hundreds exist
Range in size from those with annual
sales over $1 billion to those with sales
well under $1 million
•
•
•
•
Tupperware Corp.
Avon Products, Inc.
Worldbook, Inc.
Amway Corporation
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Problems & Prospects
for Direct Selling
1. Many potential customers lack an awareness
of direct selling as an alternative.
2. A significant portion of potential customers have
a negative impression of direct selling in general.
3. There is a lower availability of consumers for at-home
sales calls and parties.
4. The perceived risk indicated by consumers toward
buying products through direct sales in the home is
high compared to other modes of shopping.
5. Recruitment of salespeople has become more difficult.
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Objective 4:
Rationale for Designing
Direct Selling Channels
A method of distribution for providing
products & services to customers
But:
The decision to choose the
direct selling channel or some other
channel should be based on an objective
analysis of the advantages or
disadvantages of each channel alternative.
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Categories of Variables
1) Market variables & the direct selling
channel
2) Product variables & the direct selling
channel
3) Company variables & the direct
selling channel
4) Intermediary variables & the direct
selling channel
5) Environmental variables & the direct
selling channel
6) Behavioral variables & the direct
selling channel
Market Variables
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Developments in consumer attitudes & behaviors
that could make direct selling more attractive:
1.
Increasing numbers of
consumers have less
time available for shopping
in traditional stores.
3.
Consumers are seeking
increased convenience
in all spheres of their lives,
including shopping.
2.
Consumers are becoming more sophisticated
& demanding more & better product information.
Product Variables
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Products that are high quality, that are unique, or
that require specialized information & advice are logical
choices for direct selling:
Product quality may become
apparent only when consumers
are informed about them
in conjunction with hands-on
demonstrations.
Consumer satisfaction may
depend on whether the
consumer has proper
information.
Product uniqueness may become apparent only through
the direct help of salespeople.
Company Variables
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Basic variables to consider:
1.
Size of the
company
2.
Financial capacity
of the company
4.
Basic objectives &
policies of the company
3.
Managerial expertise
in distribution
Intermediary Variables
Basic intermediary variables to consider:
1.
Availability of
alternatives
2.
Cost of
using channel
alternatives
3.
Services that
alternatives are
capable of or
willing to provide
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Environmental Variables
Major categories:
5.
Legal
1.
Economic
4.
Technological
2.
Competitive
3.
Sociocultural
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Behavioral Variables
The “people” side of the marketing channel:
Communications
processes
Conflict
Power
Role
Objective 5:
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Direct Marketing
An interactive system of marketing that uses
more advertising media to effect a measurable
response and/or transaction at any location
Key Points:
1. Direct marketing is a system or an approach to marketing.
2. Direct marketing relies on one or a combination of
advertising media to inform and stimulate customer
purchase responses.
3. Direct marketing includes the ability to measure responses.
Objective 6:
Structure & Trends
in Direct Marketing
Estimating total sales is tricky because
various estimates often include different categories
of products and/or services as well as different
market segments
Some sales data may be included
or excluded that may or may not
cover direct marketing sales
Challenges
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Structure & Trends
in Direct Marketing
Markets Served
Firms are increasingly targeting affluent
customers
Types of
Products Sold
Apparel, sporting goods, consumer
electronics, books, records, gourmet
foods, insurance, etc.
Firms Involved
Many are well-known retailers or
manufacturers that supplement their
conventional methods
Problems &
Prospects
Potential customers cannot examine or
touch product; high operating costs; low
response rates; intense competition;
image problem
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Objective 7:
Rationale for Designing a
Direct Marketing Channel
One of several alternative marketing channel structures
But:
When deciding whether to use direct
marketing, direct selling, conventional retail,
or some combination
of these, the channel manager should apply
objective analysis of relevant variables & circumstances.
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Categories of Variables
1) Market variables & the direct marketing
channel
2) Product variables & the direct marketing
channel
3) Company variables & the direct marketing
channel
4) Intermediary variables & the direct marketing
channel
5) Environmental variables & the direct
marketing channel
6) Behavioral variables & the direct marketing
channel
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