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Recommending Direct-Marketing Channel for Products

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You recently submitted a report to the Vice President of Marketing recommending that the 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 are not happy about the company's plans. They argue that disintermediation will deprive them of customers, and they have even threatened to drop your company's product lines. These retailers account for about 65% of sales.

You have called a meeting of your associates to discuss this problem. Share your thoughts with them on these issues:

What answer can you offer to your retail partners?
Should the company adopt a direct-marketing model like the one used by Dell Computers or adopt a system similar to the one used by Hewlett-Packard in which in which web orders are forwarded to local retailers who complete the orders, ship the products and get a sales commissions?

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Solution Summary

The solution examines a direct-marketing channel for products. The answers that can be afforded in the retail partner are examined.

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Hello,
I think the key element here is that 65% of sales are conducted through retailers. This could account for a large chunk of your sales, and you do not want to mess with that.

Now, often people will frequent a store, spend a significant amount of time with the sales rep, ask all of their questions, clarify any issues... and then if possible, they will then search for an identical product online and purchase it there since it is cheaper. This is not really fair for the sales reps who then waste their time catering to customers who will not purchase the product, depriving the sales associate of their commission.

Not everyone will purchase the product online (especially elderly people who are not computer savvy), but individuals who are comfortable shopping online and who will save money will not hesitate to do ...

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