chapter 16 direct selling & direct marketing channel systems

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Chapter 16 Chapter 16 Direct Selling & Direct Marketing Channel Systems

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Chapter 16Chapter 16

Direct Selling & Direct MarketingChannel Systems

Alternative ChannelsAlternative Channels1166

Objective 1:

Growing in importance

1. Direct Selling

2. Direct Marketing

Growing in importance

1. Direct Selling

2. Direct Marketing

1616Direct SellingDirect Selling

Objective 2:

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

1616Structure & Trends Structure & Trends in Direct Sellingin Direct Selling

Objective 3:

Markets Served

Types of Products Sold

Firms Involved in Direct Selling

Problems & Prospects for Direct Selling

1616Markets ServedMarkets Served

Location Percent of Sales

Home 64.4

Telephone 14.7

Workplace 8.7

Internet 5.5

Temporary locations 4.1

Other 2.6

Location of Direct Selling Channel Sales, 2001

1616Types of Products SoldTypes of Products Sold

Product Category Percent of Total Sales

Personal Care Products 26.4

Home/Family Care

Products

33.7

Leisure/Educational

Products

6.5

Services/Miscellaneous/

Other

33.4

Major Product Categories Sold through Direct SellingChannels as a Percentage of Total Sales

1616Firms 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.• Worldbook, Inc.• Amway Corporation

Facts

Examples

Problems & ProspectsProblems & Prospectsfor Direct Sellingfor Direct Selling

1616

1. Many potential customers lack an awarenessof direct selling as an alternative.

2. A significant portion of potential customers havea negative impression of direct selling in general.

3. There is a lower availability of consumers for at-homesales calls and parties.

4. The perceived risk indicated by consumers towardbuying products through direct sales in the home is high compared to other modes of shopping.

5. Recruitment of salespeople has become more difficult.

1616Rationale for DesigningRationale for DesigningDirect Selling ChannelsDirect Selling Channels

Objective 4:

A method of distribution for providing products & services to customers

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.

But:

1616Categories of VariablesCategories of Variables

1) Market variables & the direct selling channel

2) Product variables & the direct sellingchannel

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

1616Market VariablesMarket Variables

Developments in consumer attitudes & behaviorsthat could make direct selling more attractive:

1.Increasing numbers of consumers have less

time available for shoppingin traditional stores.

2. Consumers are becoming more sophisticated

& demanding more & better product information.

3. Consumers are seekingincreased convenience

in all spheres of their lives,including shopping.

1616Product VariablesProduct Variables

Products that are high quality, that are unique, orthat require specialized information & advice are logical

choices for direct selling:

Product quality may become apparent only when consumers

are informed about themin conjunction with hands-on

demonstrations.

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:

1616

2.Financial capacityof the company

Company VariablesCompany Variables

3. Managerial expertise

in distribution

1.Size of the company

4.Basic objectives &

policies of the company

1616Intermediary VariablesIntermediary Variables

Basic intermediary variables to consider:

1.

Availability ofalternatives

2.

Cost of using channelalternatives

3.Services that

alternatives arecapable of or

willing to provide

Environmental VariablesEnvironmental Variables1166

Major categories:

1.Economic

5.Legal

4.Technological

3.Sociocultural

2.Competitive

1166

The “people” side of the marketing channel:

Conflict Communicationsprocesses

RolePower

Behavioral VariablesBehavioral Variables

Direct MarketingDirect Marketing1166

Objective 5:

An interactive system of marketing that usesmore 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.

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 Structure & Trends in Direct Marketingin Direct Marketing

1166

Objective 6:

Challenges

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

1616Structure & TrendsStructure & Trendsin Direct Marketingin 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

1616Rationale for Designing aRationale for Designing aDirect Marketing ChannelDirect Marketing Channel

Objective 7:

One of several alternative marketing channel structures

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.

But:

1616Categories of VariablesCategories 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