Chapter 16Ch. 16 Major TopicsDirect SellingNon-intermediary Channels*Structure & Trends in Direct SellingMarkets ServedTypes of Products SoldFirms Involved in Direct SellingRationale for Designing Direct Selling ChannelsVariables To Consider for Direct Selling*1) Market Variables2) Product Variables3) Company Variables4) Intermediary Variables5) Behavioral VariablesProblems & Prospects for Direct Selling*Direct Marketing*Structure & Trends in Direct MarketingStructure & Trends in Direct MarketingChapter 16Chapter 16Direct Selling & Direct MarketingChannel SystemsCh. 16 Major Topics 1. What are Direct Marketing Channels? - Review on channel choices2.Structure and Trend of Direct Selling3. Variables to Consider for Direct Selling*4.Problems and Prospects of Direct Selling*5. Direct Marketing ChannelDirect SellingDirect SellingTopic 1Definition: the sale of a consumer product or service person-to-person, away from a fixed retail locationThree 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 • Involves salespeople meeting fact-to-face with customersNon-intermediary Channels*Non-intermediary Channels*Growing in importance1.Direct Selling (DS) (to consumers)•Compare with Direct Salesforce (to businesses)  Salesforce Management2.Direct Marketing (DM)Growing in importance1.Direct Selling (DS) (to consumers)•Compare with Direct Salesforce (to businesses)  Salesforce Management2.Direct Marketing (DM) Difference between DS and DM?Structure & Trends Structure & Trends in Direct Sellingin Direct SellingTopic 2- Markets Served- Types of Products Sold- Firms Involved in Direct Selling- Problems & Prospects for Direct SellingMarkets ServedMarkets ServedLocation Percent of SalesHome 64.4Telephone 14.7Workplace 8.7Internet 5.5Temporary locations 4.1Other 2.6Location of Direct Selling Channel SalesTypes of Products SoldTypes of Products SoldProduct Category Percent of Total SalesPersonal Care Products 26.4Home/Family CareProducts33.7Leisure/EducationalProducts6.5Services/Miscellaneous/Other33.4Major Product Categories Sold through Direct SellingChannels as a Percentage of Total SalesFirms Involved in Direct SellingFirms Involved in Direct Selling• 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.* http://www.avon.com/• Cutco Cutlery Corp.• Amway CorporationFactsExamplesRationale for DesigningRationale for DesigningDirect Selling ChannelsDirect Selling ChannelsTopic 3A method of distribution for providing products & services to customersThe decision should be based on an objective analysis of the advantages or disadvantages of each channel alternative.But:Variables To Consider for Direct Selling*Variables To Consider for Direct Selling*1) Market variables & DS channel*2) Product variables & DS channel*3) Company variables & DS channel4) Intermediary variables & DS channel5) Behavioral variables & DS channel1) Market Variables1) Market VariablesDevelopments in consumer attitudes & behaviorsthat could make direct selling more attractive:1.Consumers have lesstime available for shoppingin traditional stores.2. Consumers are becoming more sophisticatedand demand more & better product information.3. Consumers are seekingincreased conveniencein shopping.2) Product Variables2) Product VariablesProducts that are high quality, that are unique, orthat require specialized information & advice are logicalchoices for direct selling:Product quality may become apparent only when consumersare informed about themin conjunction with hands-ondemonstrations.Product uniqueness may become apparent only throughthe direct help of salespeople. Consumer satisfaction maydepend on whether the consumer has proper information.Basic variables to consider:2.Financial capacityof the company3) Company Variables3) Company Variables3. Managerial expertise in distribution*1.Size of the company4.Basic objectives &policies of the company4) Intermediary Variables4) Intermediary VariablesBasic intermediary variables to consider:1.Availability ofalternatives2. Cost of using channelalternatives3.Services thatalternatives arecapable of or willing to provideThe “people” side of the marketing channel:ConflictCommunicationsprocessesRolePower5) Behavioral Variables5) Behavioral VariablesProblems & ProspectsProblems & Prospectsfor Direct Selling*for Direct Selling*1. Lack an awareness of DS as an alternative.2. Negative impression on DS in general.*3. Lower availability of consumers for at-homesales calls and parties.*4. The perceived risk by consumers is high compared to other modes of shopping.5. Recruitment of salespeople has become difficult.*Topic 4Direct Marketing*Direct Marketing*Topic 5Definition: An interactive system of marketing that usesmore advertising media to effect a measurableresponse and/or transaction at any locationKey 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. (including order taking)3. Direct marketing includes the ability to measure responses.Ex) Dell, L.L. Bean, QVCKey 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. (including order taking)3. Direct marketing includes the ability to measure responses.Ex) Dell, L.L. Bean, QVCStructure & Trends Structure & Trends in Direct Marketingin Direct MarketingChallengesEstimating total sales is tricky because various estimates often include different categoriesof products and/or services as well as different market segmentsSome sales data may be included or excluded that may or may notcover direct marketing salesStructure & TrendsStructure & Trendsin Direct Marketingin Direct MarketingMarkets Served Firms are increasingly targeting affluent customersTypes of Products SoldApparel, sporting goods, consumer electronics, books, records, gourmet foods, insurance, etc.Firms Involved Many are well-known retailers or manufacturers that supplement their conventional methodsProblems &ProspectsPotential customers cannot examine or touch product; high operating costs; low response rates; intense competition;image