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Direct Marketing Strategy (Dell vs. HP Model)

PROBLEM SCENARIO: Your recently submitted a report to the Vice President of Marketing recommending that the computer manufacturer company establish a direct-marketing channel for its products. As a result of that report, the VP has decided to promote you and place you in charge of establishing a direct-marketing system where customers can purchase products directly from the company web site.

Several major retailers in your existing distribution network aren't happy about the company's plans. They argue that disintermediation will deprive them of customers and have even threatened to drop your company's product lines. These retailers account for about 60% of sales.

You have called a meeting of your associates to discuss this problem.

1. What answer can you offer to your retail partners?

2a. Should the company adopt a direct-marketing model like the one used by DellTM Computer

or

2.b. adopt a system similar to the one used by Hewlett-PackardTM in which web orders are forwarded to local retailers who complete the orders, ship the products and get the 8% sales commissions?

Solution Preview

1) What can you say to the retail partner?

You have to reassure them that even though customers might be able to purchase directly from the company, a large chunk of resources would be dedicated to them. In other words, the manufacturer will not abandon there retail customers. This segment represents 60% of all sales which is a large proportion of all sales - and to loose these customers would be detrimental.

The manufacturer could perhaps offer to the retail partners products which are different then those that would be offered directly from the manufacturer. For example, Wal-Mart will get computers from the manufacturer that is specific to Wal-Mart. No where else will you be able to find that same model. This means that there is no direct competition ...

Solution Summary

This posting looks at the issues revolving around direct marketing. You will learn how to deal with retail partners, what type of direct-marketing model would work the best (Dell vs. HP model). This solution is 523 words.

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