Question

A direct marketing channel typically involves a producer and a consumer. In contrast, an indirect channel is a channel which includes one or more intermediaries (distributor, broker or agent). Companies usually employ multiple channels to reach more customers and improve sales. Some organizations may improve sales is by forging strategic channel unions while other firms may seek methods to trim middlemen within the channel. This process is known as disintermediation. Some of the channels through which companies make efforts to gain entrance into foreign markets include exporting, direct foreign investment, franchising, joint ventures, and licensing. With this in mind, write a short paper which provides answers to the questions below: Are direct marketing channels possible for some products and not others? Why or why not? Explain the value middlemen can add to products sales and marketing success. Think of the products you currently use. Are there any of them you would prefer to buy through different marketing channels? Why?

Answer 1

There are certain products that we see and experience in our lives on regular basis which comes through direct marketing and some through channel marketing. The key that drives this differentiation in strategy is the type of product.

In certain products direct marketing is the best approach. This is particularly true in products which are comparatively low volume and high customization. Consider purchasing furniture. While it is possible to buy a ready-made furniture from a store, in many cases the furniture in our house is customized to our liking (at least till the last generation). This is where direct marketing is suitable, mainly because channel marketing is nearly impossible. On the other hand, products which are mass produced, sold in high volume, it is nearly impossible to meet the customers directly by the companies and thus channel marketing is applied. Consider a bag of flour in the house. They are sold in large volumes across various geographies. Thus more number of outlets are required in order to reach the desired volume of sale and achieve economies of scale. In this cases we use channel marketing and middlemen adds values.

In case of channel marketing or indirect marketing middlemen acts as a buffer between the final consumers and the producer of the product. They help in building distribution network, they help in generating sales, they help with in-store and local promotions, and finally they contribute in inventory management. If the number of consumers is extremely high, then they provide a much needed helping hand in the distribution and supply chain network of the system.

As mentioned before, there are many products that we would consider purchasing through direct channel and through indirect channels. Whenever we purchase regular and mundane products that are low involvement (requires little to none decision making), we generally prefer indirect channels. This is because indirect channels make it easier for goods and services to be acquired quickly. Consider going to supermarket and picking a bag of green peas. This is a low involvement product and the speed of acquisition matters.

On the other hand, if we are making a high involvement purchase (thorough decision making is required) then we may prefer a direct marketing channel. For example, purchasing a yacht will likely require a lot of decision making and we will likely want to purchase it directly from the manufacturer as we may have customization request, color, etc. to be specific.