What Is Direct Selling?

Definition, Perspectives, and Research Agenda- Robert A. Peterson and Thomas R. Wotruba

Reporter: 蔡璋賢 (M934012015)

Before the Paper

• Published in 1996.

• Data from Paper summary.

• Define Direct Selling.

• Operational/Tactical/Strategic perspectives.

• Suggest Research Agenda.

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

consumer’s home or retail’s 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 friend’s 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.

Operational Perspective – (I)

• Face-to-face is what differentiates direct

selling from direct marketing.

• Location characteristic differentiates direct

selling from personal selling.

Operational Perspective – (II)

• Flexible – place, time.

• Communication senses can be utilized. –

customized, demonstration, personal

involvement.

• Relationship marketing.

• Generate repeat business.

Tactical Perspective – (I)

• Type of salesperson.o employees vs. contractors (99+%). For cost reason.

• Part-time or full-time selling agent?o Two jobs (50+%), part time (42%), full time (8%).

• Selling effort occurs in a home?o Home (73%), Workplace (12%), Others (15%).

• Transaction or relationship oriented?o Immediate, expensive, durable vs. Long-term, customer retention.

•Party plan format?o Demonstration, entertainment-oriented.

• Pre-notification?o vs. cold-call.

• Multi-level?o Selling and recruiting.

Tactical Perspective – (II)

• Selling agents are customers.o Consumable products, repeat selling.

• Selling agents take physical possession.o Products are directly delivered to end user?

• Purchase are delivered and payment is

obtained.o By party host, selling agent? Payment before shipment?

Tactical Perspective – (III)

Tactical Perspective – (IV)

• Combine 10 characteristics to form a

unique tactics.

• No guarantee for success or failure.

• Christmas gifts, summer vacations.

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?

Direct selling as a distribution channel

Traditional Retail Channels Direct Selling Channels

(A) (B) (C) (D)

Producer Producer Producer Producer

↓ ↓ ↓ ↓

↓ ↓ ↓ ↓

Wholesaler ↓ ↓ Direct Selling Firm

↓ ↓ ↓ ↓

↓ ↓ ↓ ↓

Retailer Retailer Independent Contractor Independent Contractor

↓ ↓ ↓ ↓

Consumer Consumer Consumer Consumer

Direct selling as a means of gaining access to a market

• Push marketing strategy.

• Vs. traditional 4P o face to face, away from fixed retail location.

• Low capital access in the beginning.o wholesaler, fixed retail locations, advertisement.

• Distribution system is attractive.o China, South Korea.

Direct selling as a way of doing business

• Preferred channel of distribution.o Invisible, nothing competitors can monitor.

• Relatively little start-up capital.o Retail outlets, large inventory, advertising.

o But spend on recruiting, training, compensating.

What is known about direct selling?

• Lack of knowledge.o Invisibility characteristics, firms are privately and small.

• Direct salespeople.o 6.2m in USA, 2m in Japan, 2m in Taiwan.

• Most productive direct salespeople.o Switzerland: US$34,386.

What can be sold through direct selling?

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

Product Category My homeMy

workplace

SalesParty at

someone'sHome

Sales partyat Church,

etc.RankOrder

Cosmetics/skin care 54 16 36 16 1Kitchenware/storage containers 36 12 44 19 2Toys/crafts/hobbies 34 14 36 22 3Household cleaning product 44 12 33 14 4Insurance 59 14 3 1 5Cutlery 26 10 22 12 6Reference book/encyclopedia 40 9 12 8 7Hand tools 25 15 13 8 8Vacuum cleaner 40 5 11 4 9Vitamins/nutritional products 27 8 17 8 10

Albaum and Peterson, 1987

Who buys from direct selling?

• 57% purchase at least one in 12 months.

• Female, younger, higher education and

higher income.

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.

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.

A Research Agenda for Direct Selling

• Scope of Direct Selling.

• Practice of Direct Selling.

Scope of Direct Selling

• Begin with some type of census.o How many firms, what’s the volume, magnitude…..

• Seller and Buyers in Direct Selling.

• Motivation of direct salespeople and

customer.

• International and comparative analysis

Practice of Direct Selling

• Operational perspective.o Communication process – negotiation, listening, trust-building…

• Tactical perspective.o in the throes of change, compensation and reward design, part-time

contractor vs. full-time employee….

• Strategic perspective.o direct selling channel vs. alternative marketing method, what about

direct selling in the future?

Conclusion

• Direct selling is not well understood.o Face-to-face selling away from a fixed retail location.

• Extend the research out of U.S.o General, large-scale programmatic, systematic, internal research.