What is Direct Selling? Types, Advantages, Disadvantages and Tips
What is Direct Selling? Direct selling is a “sales process” which is considered effective for increasing revenue and lowering marketing costs. Check what direct selling is, its types, advantages, disadvantages, and direct selling tips in this discussion!
What is Direct Selling?
Direct selling is a way of selling products directly to consumers in non-retail business environments, such as online stalls, homes/housings, offices, and other locations that are not in official stores or shops.
That is, direct sales from producers to selling companies, then to distributors, and finally to consumers. There are no sales intermediaries such as grocery stores or regional distribution centers.
Wholesale stores usually do not sell products that are directly distributed. This type of B2B (business to business) company usually uses direct sales to target and sell to end consumers.
The direct selling process occurs when the salesperson reaches out/sells the product directly. Meanwhile, direct marketing means marketing products/services directly to consumers.
Types of Direct Selling
There are various ways a business owner can take advantage of direct selling to improve his or her business, including:
1. Single-Level Direct Sales
Level one direct selling is a sales technique that is carried out in person, either face-to-face or online meetings.
For example, offering products through door-to-door, one-on-one presentations, and also using product catalogs with live demos.
They were done by a salesperson who will get sales and commission (perhaps a bonus too) from their office every time they sell the product in accordance with the agreed terms. They may also have different target consumers and sales targets.
2. Host or Party-Plan Sales
Sales are planned by holding certain events so that many targeted audiences and potential consumers gather in the same place. The goal, of course, is to generate sales prospects.
For example, a company holds a product launch event, bazaar, social event, meeting party, promotional event, and so on. The organizers will make sales presentations to communities, groups, invitees, or other visitors.
3. Multi-level marketing (MLM)
Multi-level marketing or multi-level marketing has a bad image in the Indonesian market and consumers, even though this is indeed a type of direct selling.
Multi-level marketing is a sales system whose main focus is on recruiting members (not selling the main product). Revenue (in the form of commission) from MLM sales comes from sales made by other business partners recruited by distributors into companies in the network.
In single-tier direct selling, the salesperson only receives a commission from the sales made themselves—no hiring and sales or commissions from other members.
Advantages of Direct Selling
In 2019, direct selling has generated sales of more than $193 billion. The direct selling industry covers more than 118.4 million worldwide. 59% in Asia, 26% in North and South America, and 12% in Europe.
The following are the advantages of direct selling:
1. Establish Good Relationships with Consumers
Direct selling uses a personal approach with consumers directly. This allows the salesperson to build a long-term relationship with the consumer.
2. Higher Margins
All profits from the sale go to the parent company, without the need for commissions to the vendor or wholesaler as a third party.
3. Promising Business Model
Direct sales are claimed to be quite promising. According to data from the World Direct Sales Association, direct sales underpinned sustainable economic growth over the past few years.
Between 2015 and 2018, at least direct sales generated a compound annual growth rate of 1.7%.
4. Adjusting Products and Consumer Needs
Direct selling companies internally control the entire sales cycle, from manufacturing to the final sales stage. That way, the parent company can customize products according to consumer demand, in order to meet consumer needs.
5. Personalized Approach
A direct selling approach so that sellers can understand consumer needs and offer products that are relevant and useful to them. 91% of potential customers tend to make purchasing decisions from recommendations that suit their needs.
6. More Controlled Sales Analysis
The parent company can have full control to adjust consumer needs, selling prices, and review consumer shopping experience and customer satisfaction. Ensure there are no bad testimonials from consumers because of the personalized approach.
7. Product Presentation
Sellers can win the hearts of target consumers with direct product presentations. Starting from a demonstration of the benefits, advantages, how to use, and other product details.
Consumers will understand the use of the product and make the right purchase decision.
8. Reduce Marketing Costs
The marketing function is to introduce products and companies usually spend quite a lot of money. On the other hand, with a direct selling strategy, a salesperson acts as a direct marketing medium.
Disadvantages of Direct Selling
The following are some of the disadvantages of the direct selling method:
- Does not reach a wider consumer.
- There is a risk of rejection from potential customers.
- Less practical and there is a risk of failure to reach consumers or meet sales targets.
Tips for Doing Effective Direct Selling
Here are some ways to do direct selling:
- Set targets with specific and measurable measures of success. For example, “increased revenue by 20% in the third quarter”.
- Determine the target audience so that they can offer relevant products to the right potential customers.
- Identify buyer personas, including occupation, lifestyle, habits, interests, etc. You can more easily sell products according to their needs.
- Create a mutually supportive sales and marketing strategy.
- Focus on the customer relationship approach before focusing on sales.
- Understand the product properly.
- Improve sales skills and expand the network.
That’s a complete discussion of direct sales. Another way to optimize your business is by marketing and selling through online merchants.