Direct selling/home selling, also known as door-to-door selling is one of the major non-store retailing methods. Of course, it is the most ancient method of marketing known to man. Before marketing channels came into being, the producer was selling his product to the user directly: However, direct selling in the context of modern mass marketing of branded products needs to be explained specifically:
Direct selling and home selling are almost synonymous: Let us first clarify the terminology: The two terms direct selling and home selling, which have emerged concurrently, denote the same thing. Both of them are person-to-person selling and both take place away from and without the help of any retail store.
Some experts make out a minor distinction between the two, by referring to direct selling by employee-salespersons as home selling, and direct selling by independent salespersons-cum- distributors as direct selling. There does not seem to be any logic in this approach. On the contrary; we can think of one or two more meaningful distinctions between the two. While home selling invariably takes place at customer’s home, direct selling can take place either at the customer’s home or her work place. Second, while home selling is always one-to-one, direct selling can at times be to a group. The latter method is referred to as party selling or one- to-many direct selling. It is, however, safer and more logical to treat them as one and the same.
Direct Selling Catches up in India: In recent years, direct selling has been catching up in India rapidly: Avon, Amway, Oriflame are all now present in India. So is Tupperware, which is in the business of plastics food containers Medicare has been using the method for quite some time now for selling its homecare and personal care products, treat them as one and the same.
Multi-level Marketing (MLM) Multi-level Marketing (MLM) is a modified version of direct selling. Only a few firms, who do not mind experimenting in reaching out to the consumers, practice it.
Avon, Amway, Oriflame, ModiCare: Avon, Amway, Orif1ame International are among the largest MLM outfits in the world. The Indian firm, ModiCare of the K.K. Modi Group also sells its range of household and personal care products through a large MLM network.
MLM utilises a multi-tiered, non-employee sales persons-cum- distributors to sell the products. We have seen the process to an extent in the Amway exhibit. The process begins with the recruitment of a core group of sales persons-room-distributors, who have to be introduced to the company by a sponsor.
Each of these distributors picks up products worth a certain sum, say Rs 1,000 at a time, and sells them directly to the consumers. After they have sold their first consignment they are allowed to pick up their next lot.
No distributor is expected to make all sales on her own. Instead, the system envisages the distributor recruiting a second rung of distributors. The distributor earns commissions at two levels. The first is the commission that accrues to her on what she sells by herself, and is made up of the difference between the distributor price and the consumer price. The second is the share that accrues to her out of the commissions earned by the distributors at the next lower level, whom she has recruited and trained. The value of the products a distributor has sold is worked out in the form of point value (PV). Supposing a first- level distributor sells products worth 100 PV on her own and has recruited six second-rung distributors, each of whom sells products worth 100 PV; she gets a commission that corresponds to 700 PV. The distributor can, if she so wishes, charge a lower price than the one suggested by the company, foregoing a part of her commission.
MLM’s plus points: The plus points of direct selling in general discussed earlier, are plus points of MLM as well. Because of the unique multi-level nature of the distribution, an MLM distribution network grows rapidly; continuously; and automatically Multiplication and growth are inherent to network marketing. MLM is, therefore, a quick, and cost-effective, method of marketing. It is specially suited to fast-moving consumer products such as special cosmetic or premium fragrances, targeted at niche markets.
MLM’s drawbacks: Being basically a direct selling model, MLM shares all its drawbacks. It s suffers some additional drawbacks on account of its peculiarity. First, like the classic chain letter, MLM is a winner while the network keeps growing unbroken. But, should the link snap at many a place, the entire distribution-cum-sales pyramid will suffer a setback. Second, in the MLM system, the distributors are quite often perceived as an irritant by the prospect. Third, distributors are also customers in most cases; losing distributors will amount to shrink-age of the customer base.
One specific minus point is that in the MLM system, the seller cannot have control over the sales persons to the desired extent as they are not employees of the company Moreover, in the MLM system; the sales persons-cum-distributors often reduce prices arbitrarily in order to meet their sales targets. As a result, the equity of the brand suffers.
Sometimes, some sales people use ‘high-pressure’ tactics. It spoils the reputation of brand. Many who joined Amway Network are buying Rs 1,500 worth of products just to reach the required level and keep the Network going. They may be just storing them.
MLM lays excessive emphasis on meeting people and making friends, which creates an artificial behaviour.
Sales forecasting is usually more difficult in the MLM method. So, incidence of mismatch between supplies and sales, and consequent piling up of inventories will be more in MLM. Finally, in India, the government too does not seem to be so favorably disposed towards the MLM concept.
Network Marketing: The student may often come across the term network marketing in the direct selling context. It needs to be clarified that the term is used in two different senses. Some use it to denote MLM; others use it to denote independent direct selling by third-party outfits, which direct sell others’ products for a commission. To avoid confusion, we shall call the former MLM and the latter as ‘independent direct selling’.
Independent Direct Selling Outfits: Here, a third party-an external independent agency/service provider-enters the picture as direct selling service provider. There are many manufacturing firms, who prefer to keep away from the marketing task. They entrust their marketing task with a suitable outside marketing agency; some among such firms are also particular that their products should be marketed by the direct selling method. In recent years, some help has become available to such firms in the form of independent direct-selling outfits. These outfits direct sell products of different companies to consumers.
The ET Bazaar
- In recent years, the economic Times has been sponsoring and organizing the ET bazaars which are basically consumer fairs.
- The first ET bazaar organized in 1994 in Mumbai Manufactures of many leading brands of consumer products participated in it.
- The sellers were able to access thousand of consumers in an enclosed. Carpeted area of over 1 lakh sq.ft.
- Discounts premiums and other promos were an integral part of the bazaar. In fact, ‘Good Prices, Great Prizes’ was the theme of the bazaar.
- Prize given at an hourly contests boosted consumer participation. Over 2 lakh consumers have visited the bazaar and sales worth Rs. 10 crore have taken place.
- The second ET Bazaar was organized in Mumbai and Ahmedabad by the close of 1995 for four days each
- ET and Mudra Diversified, the direct marketing and promotion arm of Mudra communication, jointly organized the fair. They gave extensive publicity to the fair through the local media.
Fresh Force: The Bangalore-based Fresh Force is an example of an independent direct selling outfit. It has established a commercial, direct selling network, with a team of salespersons of its own and functions as a direct selling service provider to any company that wishes to sell its products through direct selling but is wary of establishing a direct selling system of its own. Fresh Force compensates its sales persons with commission, which increases geometrically as the sales goes up. A tie-up with outfits like Fresh Force confers some advantages on the firms hiring their services. Without maintaining a direct selling system of their own, they are able to direct-sell their products. They also get the benefit of quicker sales and faster cash recovery, as they can instantly offload their products on the direct selling service provider. For the consumer too there is some benefit in this arrangement. She enjoys the convenience of shop- ping at home, getting several products from the same direct seller in this case.
Marketing by Vending Machines (Automatic Vending) Retailing through vending machines also belongs to the category of channel-less marketing, a non store retailing techniques. It enables the principals to have the benefit of intensive and extensive retailing without any manned retail stores at all. This method also has been catching up of late in India, especially in urban centres and is bound to acquire increased importance in the coming years. Usually; products which belong to the ‘buy on impulse’ category like soft drinks, cigarettes, candy, etc., and select articles of daily consumption such as milk, edible oils, etc., lend themselves to be marketed by this method.
Consumer Fairs: Selling through consumer fairs also belongs to the non-store retailing category; Exhibition- cum-sales is what happens here. Marketers often use this as an additional tool of retailing. Usually; independent promoters and trade associations organize these fairs in which various manufacturers participate and sell their products.
