Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

11. Place and Development
    of Channel Systems

Text © The McGraw−Hill

Companies, 2002

Place and Development of Channel Systems 309

Of course, some consumer products are sold direct to consumers’ homes. Tupper-

ware, Mary Kay and Avon cosmetics, Electrolux vacuum cleaners, Amway household

products, and Fuller Brush products are examples. Most of these firms rely on direct

selling, which involves personal sales contact between a representative of the com-

pany and an individual consumer. However, most of these “salespeople” are not

company employees. Rather, they usually work as independent middlemen, and the

companies that they sell for refer to them as dealers, distributors, agents, or some sim-

ilar term. So in a strict technical sense, this is not really direct producer-to-consumer

distribution. That does not mean, however, that this approach is unimportant. It has

grown both in the U.S. and in international markets. In fact, many U.S. firms are

finding that it’s the best way to crack open international markets. Some of the dis-

tribution arrangements might surprise you. For example, Mattel has teamed up with

Avon door-to-door representatives to sell its Barbie dolls in China.^5

An increasing number of firms now rely on direct marketing—direct communi-

cation between a seller and an individual customer using a promotion method other

than face-to-face personal selling. Sometimes direct marketing promotion is coupled

with direct distribution from a producer to consumers. Park Seed Company, for

example, sells the seeds it grows directly to consumers with a mail catalog. How-

ever, many firms that use direct marketing promotion distribute their products

through middlemen. So the term direct marketingis primarily concerned with the

Promotion area, not Place decisions. We’ll talk about direct marketing promotion

in more detail in Chapter 14.^6

Even if a producer wants to handle the whole distribution job, sometimes it’s sim-

ply not possible. Customers often have established buying patterns. For example,

Square D, a producer of electrical supplies, might want to sell directly to electrical

contractors. It can certainly set up a website for online orders or even open sales

offices in key markets. But if contractors like to make all of their purchases in one

convenient stop—at a local electrical wholesaler—the only practical way to reach

them is through a wholesaler.

Consumers want convenience

Similarly, consumers are spread throughout many geographic areas and often pre-

fer to shop for certain products at specific places. Some consumers, for instance, see

Sears as theplace to shop for tires, so they’ll only buy the brands that Sears carries.

Similarly, a consumer may see a Walgreens drugstore as theplace to shop for emer-

gency items—because it’s conveniently located in the neighborhood. Moreover, if

retailers who serve target customers make most of their purchases from specific

wholesalers, the producer may have to work with these wholesalers. This is one rea-

son why most firms that produce consumer products rely so heavily on indirect

channels (see Exhibit 2-10).^7

Middlemen may invest in inventory

Direct distribution usually requires a significant investment in facilities, people,

and information technology. A new company, one that has limited financial

resources, or one that wants to retain flexibility, may want to avoid that investment

by working with established middlemen.

Internet

Internet Exercise Gateway is a computer company that uses direct distribu-

tion to its customers in the U.S. Go to the Gateway website (www.gateway.com)

and think about how it is organized. Is the website organized well to help Gate-

way reach different segments of customers in the U.S.?

Don’t be confused by

the term direct

marketing

When indirect channels

are best