Direct Selling and Direct Marketing: Growing Importance, Structure, and Trends

1. Chapter 16 Direct Selling & Direct Marketing Channel Systems

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

3. Direct Selling Objective 2: 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

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

5. 16 Markets Served Location of Direct Selling Channel Sales, 2001

6. 16 Types of Products Sold Major Product Categories Sold through Direct Selling Channels as a Percentage of Total Sales

7. 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

8. Problems & Prospectsfor 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.

9. Rationale for DesigningDirect Selling Channels Objective 4: 16 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.

10. 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

11. 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.

12. 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.

13. 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

14. 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

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

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

17. Direct Marketing Objective 5: 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.

18. Structure & Trends in Direct Marketing Objective 6: 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

19. 16 Structure & Trendsin Direct Marketing

20. Rationale for Designing aDirect Marketing Channel Objective 7: 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.

21. 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