What Is Direct Selling

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What Is Direct Selling?
Definition, Perspectives, and Research Agenda
- Robert A. Peterson and Thomas R. Wotruba
Reporter ??? (M934012015)
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Before the Paper

• Published in 1996.
• Data from Paper summary.
• Define Direct Selling.
• Operational/Tactical/Strategic perspectives.
• Suggest Research Agenda.

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A Definition of Direct Selling

• A form of selling without retail outlets,
  distributors, wholesalers or any type of
  middlemen.
• The establishment of an immediate exchange
  relationship with a customer in which the usual
  intermediaries in the distribution chain are
  omitted.
• A marketing approach that involves direct sales
  of goods and services to consumers through
  personal explanation and demonstrations,
  primarily in their homes.
• Direct selling is the technique of approaching a
  customer on a person-to person basis, wither with
  a group approach (as in in-home party plan) or
  individually, one-on-one, to offer products
  conveniently with a personal service emphasis.
• A sales approach characterized by personal
  product explanations and demonstrations, often in
  the consumers home or retails establishment.
• The marketing of consumer goods and services
  directly to consumers in their homes by way of
  explanation and/or demonstration through a
  salesperson. The location can also be a friends
  home, the workplace of the customer during breaks
  or other places away from shops.
• Selling without the use of a retail outlet,
  distributor, broker or wholesaler or any other
  form of middleperson.
• Direct selling commonly refers to such activities
  as telephone sales, door-to-door selling, or
  in-home parties.

Direct Selling is face-to-face selling away from
a fixed retail location.
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Operational Perspective (I)

• Face-to-face is what differentiates direct
  selling from direct marketing.
• Location characteristic differentiates direct
  selling from personal selling.

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Operational Perspective (II)

• Flexible place, time.
• Communication senses can be utilized.
  customized, demonstration, personal involvement.
• Relationship marketing.
• Generate repeat business.

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Tactical Perspective (I)

• Type of salesperson.
• employees vs. contractors (99). For cost
  reason.
• Part-time or full-time selling agent?
• Two jobs (50), part time (42), full time
  (8).
• Selling effort occurs in a home?
• Home (73), Workplace (12), Others (15).
• Transaction or relationship oriented?
• Immediate, expensive, durable vs. Long-term,
  customer retention.

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Tactical Perspective (II)

• Party plan format?
• Demonstration, entertainment-oriented.
• Pre-notification?
• vs. cold-call.
• Multi-level?
• Selling and recruiting.

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Tactical Perspective (III)

• Selling agents are customers.
• Consumable products, repeat selling.
• Selling agents take physical possession.
• Products are directly delivered to end user?
• Purchase are delivered and payment is obtained.
• By party host, selling agent? Payment before
  shipment?

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Tactical Perspective (IV)

• Combine 10 characteristics to form a unique
  tactics.
• No guarantee for success or failure.
• Christmas gifts, summer vacations.

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Strategic Perspective (I)

• Direct selling as a distribution channel.
• Direct selling as a means of gaining access to a
  market.
• Direct selling as a way of doing business.
• What is known about direct selling?
• What can be sold through direct selling?
• Who buys from direct selling?
• What are the characteristics of direct sellers?

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Direct selling as a distribution channel
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Direct selling as a means of gaining access to a
market

• Push marketing strategy.
• Vs. traditional 4P
• face to face, away from fixed retail location.
• Low capital access in the beginning.
• wholesaler, fixed retail locations,
  advertisement.
• Distribution system is attractive.
• China, South Korea.

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Direct selling as a way of doing business

• Preferred channel of distribution.
• Invisible, nothing competitors can monitor.
• Relatively little start-up capital.
• Retail outlets, large inventory, advertising.

• But spend on recruiting, training, compensating.

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What is known about direct selling?

• Lack of knowledge.
• Invisibility characteristics, firms are
  privately and small.
• Direct salespeople.
• 6.2m in USA, 2m in Japan, 2m in Taiwan.
• Most productive direct salespeople.
• Switzerland US34,386.

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What can be sold through direct selling?

• Successfully marketed - Distinctiveness, require
  demonstration, repeat sales.

Albaum and Peterson, 1987
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Who buys from direct selling?

• 57 purchase at least one in 12 months.
• Female, younger, higher education and higher
  income.

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What are the characteristics of direct sellers?
(I)

• 95 are women in 1992 USA.
• Most with high school diploma.
• 56 have at least one other paying job.
• Tend to be more outgoing, aggressive,
  enthusiastic, venturesome. Desire to be their own
  boss.

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What are the characteristics of direct sellers?
(II, successful)

• Good communicator, highly motivated.
• Higher levels of effort led to higher levels of
  performance and satisfaction.
• Persistence and initiative.

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A Research Agenda for Direct Selling

• Scope of Direct Selling.
• Practice of Direct Selling.

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Scope of Direct Selling

• Begin with some type of census.
• How many firms, whats the volume, magnitude..
• Seller and Buyers in Direct Selling.
• Motivation of direct salespeople and customer.
• International and comparative analysis

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Practice of Direct Selling

• Operational perspective.
• Communication process negotiation, listening,
  trust-building
• Tactical perspective.
• in the throes of change, compensation and reward
  design, part-time contractor vs. full-time
  employee.
• Strategic perspective.
• direct selling channel vs. alternative marketing
  method, what about direct selling in the future?

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Conclusion

• Direct selling is not well understood.
• Face-to-face selling away from a fixed retail
  location.
• Extend the research out of U.S.
• General, large-scale programmatic, systematic,
  internal research.