BUS203: Principles of Marketing

There are basically 4 types of marketing channels: direct selling; selling through intermediaries; dual distribution; and reverse channels.

Learning Objective

• Define direct selling, indirect channels, dual distribution, and reverse channels

Key Points

• Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location.
• An intermediary (or go-between) is a third party that offers intermediation services between two trading parties.
• Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or wholesalers use more than one channel simultaneously to reach the end-user.
• A reverse channel may go from consumer to intermediary to beneficiary.

Terms

• intermediaries

  An intermediary is a third party that offers an intermediation service between two trading parties.

• marketing channels

  A marketing channel is a set of practices or activities necessary to transfer the ownership of goods and to move goods from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process.

Example

• A reverse channel can be used to refurbish products such as circuit boards and computers.

Introduction

There are basically four types of marketing channels:

• Direct selling;
• Selling through intermediaries;
• Dual distribution; and
• Reverse channels.

Essentially, a channel might be a retail store, a website, a mail-order catalog, or direct personal communications by a letter, email, or text message. Here's a bit of information about each one.

Direct Selling

Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.

Modern direct selling includes sales made through the party plan, one-on-one demonstrations, personal contact arrangements as well as internet sales.

A textbook definition is: "The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs".

Industry representative, the World Federation of Direct Selling Associations (WFDSA), reports that its 59 regional member associations accounted for more than US$114 Billion in retail sales in 2007, through the activities of more than 62 million independent sales representatives.

The United States Direct Selling Association (DSA) reported that in 2000, 55% of adult Americans had at some time purchased goods or services from a direct selling representative and 20% reported that they were currently(6%) or had been in the past(14%) a direct selling representative.

According to the WFDSA, consumers benefit from direct selling because of the convenience and service benefits it provides, including personal demonstration and explanation of products, home delivery, and generous satisfaction guarantees. In contrast to franchising, the cost for an individual to start an independent direct selling business is typically very low, with little or no required inventory or cash commitments to begin.

Most direct selling associations, including the Bundesverband Direktvertrieb Deutschland, the direct selling association of Germany, and the WFDSA and DSA require their members to abide by a code of conduct towards a fair partnership both with customers and salespeople. Most national direct selling associations are represented in the World Federation of Direct Selling Associations (WFDSA).

Direct selling is different from direct marketing in that it is about individual sales agents reaching and dealing directly with clients while direct marketing is about business organizations seeking a relationship with their customers without going through an agent/consultant or retail outlet.

Direct selling often, but not always, uses multi-level marketing (a salesperson is paid for selling and for sales made by people they recruit or sponsor) rather than single-level marketing (salesperson is paid only for the sales they make themselves).

Selling Through Intermediaries

A marketing channel where intermediaries such as wholesalers and retailers are utilized to make a product available to the customer is called an indirect channel.

The most indirect channel you can use (Producer/manufacturer --> agent --> wholesaler --> retailer --> consumer) is used when there are many small manufacturers and many small retailers and an agent is used to help coordinate a large supply of the product.

Dual Distribution

Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or wholesalers uses more than one channel simultaneously to reach the end-user. They may sell directly to the end-users as well as sell to other companies for resale. Using two or more channels to attract the same target market can sometimes lead to channel conflict.

An example of dual distribution is business format franchising, where the franchisors, license the operation of some of its units to franchisees while simultaneously owning and operating some units themselves.

Reverse Channels

If you've read about the other three channels, you would have noticed that they have one thing in common – the flow. Each one flows from producer to intermediary (if there is one) to consumer.

Technology, however, has made another flow possible. This one goes in the reverse direction and may go – from consumer to intermediary to beneficiary. Think of making money from the resale of a product or recycling.

Trash Recycling Containers
Recycling is an example of a reverse marketing channel.

There is another distinction between reverse channels and the more traditional ones – the introduction of a beneficiary. In a reverse flow, you won't find a producer. You'll only find a User or a Beneficiary.

Source: Boundless
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 License.