Direct Selling Channels

Bert Rosenbloom

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136586132
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Here is the first book to examine direct selling--the distribution of consumer products and services through personal, face-to-face sales away from fixed business locations. Direct selling has long been a major marketing channel for companies around the world. In the U.S. alone, by the start of the present decade, direct selling accounted for $12 billion in sales volume produced by almost five million independent direct salespeople. In this fundamental resource, leading authorities who have spent years studying direct selling channels provide in-depth insights, analyses, and research findings on such key topics as customer response patterns, sales motivation, personal selling methods, minority participation, multinational direct selling, and directions for future research in direct selling.This marketing channel continues to thrive and grow and Direct Selling Channels prepares readers for the challenges of the twenty-first century by providing the latest and most in-depth thought, analysis, and research on direct selling that is not available from any other source. The breadth and depth of coverage of direct selling found in this volume will help readers gain knowledge, insight, and practical wisdom about an area of marketing where superficial, stereotypical myths have so often been passed off as truth. The material presented is directly relevant to both long-range strategic planning and day-to-day management issues so it can be put to immediate use for managing direct selling channels more effectively.Direct Selling Channels represents the state-of-the-art thought and research in this area. Reader's understanding of direct selling channels will be enriched by chapters that explore:

• the salient issues facing direct selling today
• research findings on consumers'attitudes toward direct selling methods
• the reasons why people become direct salespeople
• innovative concepts such as trust-based relationship selling
• the relationship between sex-role self concept and sales performance
• how to identify international markets for new products sold through direct selling channels

Direct Selling Channels: An Appraisal of Key Strategic Issues

Ben ML Enis

SUMMARY. Direct selling channels are changing. Throughout the world, customers, sales representatives, direct selling companies, and the societies in which they exist are changing rapidly. This paper examines changes in each of the above-mentioned major “players” in direct selling channels, and offers recommendations for strategies for managing these changes.

INTRODUCTION

To say that the world is changing is to voice a truism. For the Direct Selling industry, these changes can best be discussed in terms of four “players”: customers, sales representatives, companies, and society in general. The challenge to senior executives and managers of firms in the direct selling industry is to (1) recognize significant change, (2) assess the impact of such change upon his/her company and industry, and (3) formulate strategic plans that take maximum advantage of such change.

This is no easy task. Indeed, assessing change and formulating appropriate long-range strategic plans is likely to be the single-most important determinant of executive success in direct selling over the next decade. The purpose of this article is to raise questions and provoke discussion about these issues.

The article summarizes a study based on a careful review of relevant literature and data, as well as interviews in person and by telephone with more than thirty direct selling executives and officials of the Direct Selling Association and the Direct Selling Education Foundation. The article also examines major trends on the demand side (changing consumer demographics, lifestyles and buying patterns) and the supply side (the role of the independent sales representative) in the industry and the economy generally. Then possible strategic responses by direct selling executives are suggested. Issues and opportunities in social responsibility are stressed throughout.

THE DEMAND SIDE: THE DIRECT SELLING CUSTOMER

People-markets, consumers-are changing. Fewer and fewer households are of the “traditional” mold: father works, mother keeps house, children at home. The traditional family accounts for less than 18 percent of U.S. households today, and the rate is dropping (Statistical Abstract, 1991). Consequently, the traditional direct selling market: home-dwellers, essentially waiting for direct sellers to knock on their doors, is changing. These changes can be documented in terms of demographics, life-styles, and buying habits.

Changing Demographics

Three characteristics of consumer demographics in the U.S. are changing: people are getting older, households are smaller, and income patterns are diverging from the middle class norm.

The median age in the U.S. today is 31 years of age, and it is rising-perhaps to 40 by the year 2000 (Statistical Abstract, 1991). Older people generally have more consumption experience, and they have different wants and desires than do younger people. For example, most have opinions about, and many have dealt with, direct selling companies. They know basically how these companies operate, and have rather firm ideas, positive or negative, about them. Thus, the direct seller must more often change attitudes than form them. This is almost always more difficult to accomplish.

U.S. households are shrinking in size. The average number of children living at home is a bit less than 1.1 per household, and is decreasing (Statistical Abstract, 1991). Over 1/3 of all children are single-parented (most of these female), and over 22% of all U.S. adults live alone. Consequently, average purchase per household is much less than it used to be-both in amount, and in range of goods and services demanded. For example, if there are no children at home, there may be no demand for children’s books or encyclopedias. On the other hand, there are more households in total, and demands require more sophisticated analysis. The childless household, for example may consist of grandparents who may be excellent candidates for books for the grandchildren. The point is that relying upon simple demographic data may produce misleading estimates of sales potential.

Income patterns of U.S. households are diverging from the middle class norm. According to the 1990 census (Statistical Abstract, 1991), the proportion of U.S. families in that category $15,000 and $49,999-the middle class-shrank, after adjustment for inflation, from 65.1% in 1970 to 57.1% in 1989. Families with incomes of $50,000 or more-considered the gateway to the upper class-increased from 13% of the population to 19.1% during the 1970–85 period. At the same time, the proportion of families below $15,000 grew from 21.9% to 24.2%.

Moreover, people’s perceptions exaggerate the differences. Thus, people increasingly identify with one of two broad income classes: (1) those who see themselves as money-poor and (2) an affluent, but time-poor, perceived segment.

Obviously, the consumption patterns of these groups will be quite different. The money-poor will want satisfactory-quality goods and services at low prices, while the affluent will want high quality goods/services efficiently delivered. Direct selling strategies must be designed and implemented accordingly. Both points are developed in more depth in succeeding sections of this paper.

Changing Lifestyles

As a result of these demographics, and other factors (advancing technology, increasing urbanization and household mobility, changing religious and moral values, to cite just a few), consumers’ lifestyles are changing. More specifically, effective understanding of direct selling customers requires a more sophisticated analysis than simple demographics. One potentially useful approach is the Values and Lifestyles (VALS) work of the Stanford Research Institute (Mitchell, 1984).

Based on considerable empirical research, VALS classifies the U.S. population in terms of nine categories

Survivors-Old, intensely poor, fearful, far removed from the cultural mainstream (four percent of the U.S. adult population).

Sustainers-Angry, resentful, street-wise, living on the edge of poverty, involved in the underground economy (7%).

I-Am-Me-Very young, narcissistic, impulsive, exhibitionist (5%).

Socially Conscious-SucctssM influential, involved in single-issue politics, seeking simplicity in life (9%).

Belongers-Aging, conventional, content, intensely patriotic, traditional Middle Americans (35%).

Emulators-Young, ambitious, flashy, trying to break into the system (9%).

Achievers-Middle-aged, prosperous, self-assured, the leaders and builders of the American dream (22%).

Integrated-Psychologically mature, tolerant, flexible, able to see “the big picture” (2%).

These classifications provide information beyond simple demographics. The first two categories (Survivors and Sustainers) are “need-driven” that is, their incomes are so low that much consumption is denied them. And yet, they do consume many of the basic items offered by direct sellers, e.g., cosmetics, crafts and games, and they sometimes splurge on luxuries like fancy cars or television sets.

The next three groups (I-Am-Me, Experiential and Socially Conscious) are termed “inner-directed,” that is, their values and life-styles are guided by an internal compass. They may be excellent potential direct selling customers, since they value direct experience (e.g., a home or party demonstration) and seek to simplify their lives (less time spent shopping, perhaps).

The third group (Belongers, Emulators, Achievers) is termed “outer-directed,” that is, they are guided by the values and life-styles of others. Perhaps direct selling companies could best serve these people by identifying opinion leaders for each group, researching their demands carefully, and meeting them fully.

There are other classifications and other studies. The purpose here is not to tout one approach or another, but rather to emphasize the point that the direct selling industry must look carefully and systematically at its customers. Effective marketing strategies can only be founded upon a sophisticated knowledge of consumer behavior.

Changing Buying Habits

Obviously, the changes in customer demographics and lifestyles discussed above (and many others not discussed here) are reflected in changing buying habits. To avoid becoming mired in detail, examples of differences in buying habits are discussed in terms of two demographic segments: the money-poor and the time-poor.

The money-poor segment must budget spending on discretionary or impulse items, which most small-ticket direct sales products are, and certainly must carefully buy big-ticket items. These people are driving the explosive growth in price-oriented mass merchandisers such as Wal-Mart, the nation’s largest retailer. At the same time, these people are increasingly wary of being duped by marketers (including direct sellers). Indeed most consumer legislation has been enacted in the name of protecting members of this class of society.

Thus, considerable potential exists for direct sellers who can provide both (1) good value (inexpensive yet not poor quality) goods, and at the same time (2) trustworthy, reliable, caring service. Again, Wal-Mart’s national growth is testimony to this. Defining quality goods and caring service, however, will require focused research by specific companies. Different products will be demanded by different VALS groups within the money-poor demographic segment.

The time-poor, on the other hand, seek quality goods and hassle-free service. They demand the best, with little effort required on their part. This segment is growing, both in terms of numbers of households, and in purchasing power per household.

Consequently, the type and number of companies competing to serve this group is large and growing-discount department stores, mass merchandisers, specialty stores, direct mail operations, etc. The challenge here for the direct seller is twofold. First, competition to serve this segment will be intense. Second, traditionally, DS sales representatives have come from the other income/lifestyle class, and therefore might not relate well to the affluent time-poor. More extensive training, and/or recruiting from the affluent class, might be advantageous.

The above comments have focused on changing consumers in the United States, yet direct sellers are increasingly interested in international markets as well. Thus, analyses such as the above would also need to be conducted separately for each market under consideration. Demographic, lifestyle and buying habit characteristics will differ, perhaps markedly, in different countries and markets. In some regions and countries, notably Europe, Japan and Australia, information rivals that available in the U.S. in terms of quantity, accuracy and timeliness. Even in such countries, primary research into consumer behavior is likely to be required. And the need for primary data collection is even more intense in potentially-lucrative, but under-studied societies, such as Indonesia.

Consumers and Social Responsibility

A comment needs to be made about social responsibility. Too much has been made of the few companies, sales representatives, and consumers who do not enter into exchange transactions in good faith. Most consumers want to deal honestly and fairly with those who sell to them. Much of the resentment of, and charges of “rip-off” by direct sellers results therefore from lack of understanding of direct selling.

Perhaps time is ripe for an educational campaign about the industry to consumers. There may be a role here for the Direct Selling Association, the Direct Selling Education Foundation, and/or other industry associations. If consumers understand the nature of the industry and the way it operates, perhaps there would be less need for restrictive legislation.

THE SUPPLY SIDE: THE DIRECT SELLING REPRESENTATIVE

Just like the demand side (consumers), the supply side (the sales representative) of direct selling is changing, too. Following is an analysis of the people, the technology and the capital needed for direct sales representatives.

The Direct Sales Person

The people who consume direct sales products also form the pool from which direct sales people are drawn. Thus, comments above about changing demographics, lifestyles and buying habits are relevant to the recruiting, traini...

Table of contents

• Covers
• Full Title
• Copyright
• Contents
• About the Editor
• Introduction
• Direct Selling Channels: An Appraisal of Key Strategic Issues
• Consumer Responses to Direct Selling: Love, Hate … Buy?
• Motivation to Become a Direct Salesperson and Its Relationship with Work Outcomes
• The Role of Personal Selling in Direct Sales Organizations
• Sex-Role Self-Concept and Direct Sales Success in Minority Saleswomen
• Direct Selling: A Multinational Strategy
• Current Status and Future Directions for Research on Direct Selling Channels