Download Direct Selling Direct selling is the sale of a consumer product or

Chapter 16
Direct Selling & Direct Marketing
Channel Systems
Alternative Channels
Growing in importance
1. Direct Selling
2. Direct Marketing
Includes catalog sales
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 rather
than industrial products
• Involves salespeople meeting face-to-face with
customers
Structure & Trends
in Direct Selling
Markets Served
Types of Products Sold
Firms Involved in Direct Selling
Problems & Prospects for Direct Selling
A Direct Selling Organization is
NOT the same as a pyramid
scheme which:
• Are fraudulent and illegal
• Require new recruits to pay a
nonrefundable fee to become a
distributor
• Pays distributors based on the
number of recruits they get rather
than for products sold
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.
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.
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
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
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
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
Environmental Variables
Major categories:
5.
Legal
1.
Economic
4.
Technological
2.
Competitive
3.
Sociocultural
Behavioral Variables
The “people” side of the marketing channel:
Communications
processes
Conflict
Power
Role
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
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
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
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.
Can Direct Marketing Channels
Be a Value-Adding Supply
Chain?
• Bulk breaking
– Can we be efficient shipping single units?
• Creating Assortments
– Trend toward specialty catalogs
• Spatial convenience
– Time poor society
– Is the customer willing to pay a delivery
fee?
Risks and Costs of the
Direct Marketing Operation
•
•
•
•
•
•
Where will we procure products?
Catalog creation
The Mailing list
TV time
Order fulfillment
Managing inventory
– Out of stocks
– returns