Chapter 16 Direct Selling & Direct Marketing Channel Systems

Alternative Channels 16 Growing in importance Direct Selling Objective 1: Alternative Channels 16 Growing in importance Direct Selling Direct Marketing

Objective 2: Direct Selling 16 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

Structure & Trends in Direct Selling Objective 3: 16 Markets Served Types of Products Sold Firms Involved in Direct Selling Problems & Prospects for Direct Selling

Markets Served 16 Location of Direct Selling Channel Sales, 2001 Percent of Sales Home 64.4 Telephone 14.7 Workplace 8.7 Internet 5.5 Temporary locations 4.1 Other 2.6

Types of Products Sold 16 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 33.7 Leisure/Educational 6.5 Services/Miscellaneous/ Other 33.4

Firms Involved in Direct Selling 16 • Hundreds exist • Range in size from those with annual sales over $1 billion to those with sales well under $1 million Facts • Tupperware Corp. • Avon Products, Inc. • Worldbook, Inc. • Amway Corporation Examples

Problems & Prospects for Direct Selling 16 Many potential customers lack an awareness of direct selling as an alternative. A significant portion of potential customers have a negative impression of direct selling in general. There is a lower availability of consumers for at-home sales calls and parties. 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 Objective 4: 16 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 16 Market variables & the direct selling channel 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 16 Developments in consumer attitudes & behaviors that could make direct selling more attractive: 3. Consumers are seeking increased convenience in all spheres of their lives, including shopping. 1. Increasing numbers of consumers have less time available for shopping in traditional stores. 2. Consumers are becoming more sophisticated & demanding more & better product information.

Product Variables 16 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.

policies of the company Company Variables 16 Basic variables to consider: 4. Basic objectives & policies of the company 1. Size of the company 2. Financial capacity of the company 3. Managerial expertise in distribution

Intermediary Variables 16 Basic intermediary variables to consider: 3. Services that alternatives are capable of or willing to provide 1. Availability of alternatives 2. Cost of using channel alternatives

Environmental Variables 16 Major categories: 5. Legal 1. Economic 4. Technological 2. Competitive 3. Sociocultural

The “people” side of the marketing channel: Behavioral Variables 16 The “people” side of the marketing channel: Communications processes Conflict Power Role

Direct Marketing 16 An interactive system of marketing that uses Objective 5: Direct Marketing 16 An interactive system of marketing that uses more advertising media to effect a measurable response and/or transaction at any location Key Points: Direct marketing is a system or an approach to marketing. Direct marketing relies on one or a combination of advertising media to inform and stimulate customer purchase responses. Direct marketing includes the ability to measure responses.

Structure & Trends in Direct Marketing Objective 6: Structure & Trends in Direct Marketing 16 Estimating total sales is tricky because various estimates often include different categories of products and/or services as well as different market segments Challenges Some sales data may be included or excluded that may or may not cover direct marketing sales

Structure & Trends in Direct Marketing 16 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 Objective 7: Rationale for Designing a Direct Marketing Channel 16 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.

Categories of Variables 16 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