Management Thesis II Guided by: M/s. Moumita Sammadder Presented by: Debajyoti Bhattacharya 1
Management Thesis II
Guided by: M/s. Moumita Sammadder
Presented by: Debajyoti Bhattacharya
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A study on the consumer perception on the strategies adopted in channel marketing vis-à-vis direct marketing.
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Contents
Topic Page
1. Acknowledgement………………………4
2. Abbreviation…………………………….5
3. Summary…………………………………6-7
4. Introduction…………………………….8-14
5. Research Methodology………………..15-17
6. Literature Review………………………18-32
7. Empirical Analysis……………………..33-39
8. Findings and Suggestions……………..40-44
9. Recommendations……………………...45-46
10. Appendices………………………………47-48
11. References………………………………..49
12. Glossary
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Acknowledgement
My respect and thanks goes to our faculty M/s. Moumita Sammader
who assigned to me such work from which I learned different aspects.
She was patiently co-operative while guiding me in this work. My
friends has always been ideating and helping me with innovative
ideas.
I hope I have done justice to their views. Further I hope I am able to
properly complete the assignment given to me by my faculty, within
my capabilities.
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AbbreviationHUL – Hindusthan Uniliver Limited
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Summary
The study deals with the customer perception about the distribution and
marketing strategies adopted by companies. Two unique distribution
strategies upon which the study entails are Channel distribution and
Network marketing. Further two major companies are identified for the
theses are Hindusthan Unilever Limited (channel distribution) and
Amway India Corporation (network marketing). The various processes
to progress in the thesis are as follows:
Understanding the subject matter thoroughly.
Reading articles and magazines on the topic.
Primary data collection was the process decided.
Hypothesis was set.
Statistical tools have been chosen, such as co-relation and Z-
test.
To find the result of the hypothesis and get sample for it, a
questionnaire was made.
The questionnaire was made upon specific parameters.
The parameters were set to fulfill the requirements of the
hypothesis.
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Data have been collected.
Collected data have been tabulated and analysed.
With the recommendation and further scope of research the
project has been concluded.
The project is a big learning to the researcher. It helps a lot to apply the
theoretical knowledge in the practical field which makes the
understanding of the issue more clear. The project indulges the
researcher to know the whereabouts of the topic as well as the sector
and the company as well.
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Introduction
Continuous technological advancement has ushered in a new era of
direct marketing. Varied intermediaries have augmented the distance
between the manufacturer and the ultimate consumer. In this research
the major aim is to analyze the consumer perception of the two such
intermediary marketing paradigms. Modernization of living and search
for new source of earning has given eminence to Direct Marketing.
Advent of Amway in 1997 has magnified the avenues open for a middle
class Indian to leverage on the concept and earn a sufficient income for
himself/herself. This study thrives on the acceptability of such concept
vis-à-vis traditional historical channel of marketing. This study revolves
around the strategies involved and its effect on consumer perception.
The competition from Direct Marketing is piling upon the traditional
marketers as the Direct Marketing companies are luring and satisfying
the consumers with high quality world standard products. The rise in
living consciousness amongst normal Indians and the influence of the
western culture is accentuating their desire to live life differently. Thus
the traditional marketer’s product that till few years back was a
monopoly is now operating under a competitive scenario. Its ripe time to
study the consumer perception of the two strategies. The study will throw
some light on which mode of marketing has more probability of
sustaining itself in the long run on the basis of customer acceptability or
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it will be a scenario where every strategy will be formulated with a
scavenging eye on the market share thus on the consumer’s pocket. Or
else both the strategies will operate within its share of niche segment.
The research is spaced for a period of two months. Being a type of
consumer behavior and perception study it is primary research. The
study will base its conclusions on the information generated from a
questionnaire. Sample for this study is set at 50 individuals. The method
of sampling will be qualified random sampling. The qualification will be
on the basis of consumers who are in terms with direct marketing
company like Amway (the company chosen as a sample for the study)
and Hindusthan Unilever Limited (the company chosen as a sample for
the study).The hypothesis will be set on the questions in the
questionnaire and will be tested with specific statistical tools.
Overview of the company:
Amway- Amway is a multi-level marketing, or network marketing
company founded in 1959 by Jay Van Andel and Rich DeVos. Based
in Ada, Michigan, the company and family of companies under
Alticor reported sales of US$7.2 billion for the year ending
December 31, 2007, marking the company’s sixth straight year of
growth. Its product lines include home care products, personal care
products, jewelry, electronics, Nutrilite dietary supplements, water
purifiers, air purifiers, insurance and cosmetics. Amway conducts
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business through a number of affiliated companies in more than
ninety countries and territories around the world. Since 1999 it has
operated in the United States and Canada as Quixtar, though the
North American organization is to merge into a Amway Global
brand.
Jay Van Andel and Richard DeVos were introduced to the Nutrilite
Products Corporation, a California-based direct sales company founded
Dr. Carl Rhenborg, inventor of the multivitamin. Telephoning first to
check interest, Neil Maaskant, a distant relative and second cousin to
Jay traveled from Chicago, Illinois to Grand Rapids, Michigan to talk
about a new business he started. In August, 1949,[2] after a long talk past
2:00 am the next morning, Richard DeVos and Jay Van Andel signed up
and became distributors of a line of food supplements called Nutrilite
Products with all the related rights, honors, and privileges. The next
day, they sold their first box, for $19.50, and then did not do a thing for
the next two weeks. Shortly after, at the urging of Jay's cousin and
sponsor, they travelled to Chicago to find out exactly what they had got
into. The meeting was at a downtown hotel, with over 100 people in
attendance. They heard Lee Mytinger speak, watched an educational
film on Nutrilite, and met and talked to people who had been distributors
for several years. Eventually they decided to go all the way and put all
their effort into the opportunity. They stopped at a gas station along the
way, and sold their second box of supplements.
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Ja-Ri Corporation was the original multi-level marketing distributorship
for Nutrilite nutritional products, founded by Jay Van Andel and Richard
DeVos in 1959. Ja-Ri's name comes from the founders' first names, Jay
and Richard. Friends since childhood, Van Andel and DeVos became
business partners in endeavors such as a hamburger stand, air charter
service, and a sailing business.
Ja-Ri was incorporated in 1959, and changed its name to "Amway" in
1963 which was a deliberate abbreviation of "American Way". The
intent of Amway's founders was to create a business using a novel means
of product distribution that facilitates entrepreneurship, understanding
of economic management, and economic independence among its
associates (i.e. distributors; the term currently in use is Independent
Business Owners, or IBOs).
Their first product was the cleaner L.O.C. (Liquid Organic Cleaner).
Originally sold by its inventor under the name Frisk, it was noticed by
Nutrilite distributor Fred Hansen who brought it to Rich DeVos and Jay
Van Andel as a product that they could use to launch their own
company. Van Andel and DeVos and some of their distributors including
Hansen were getting frustrated by the seemingly inconsistent way
Nutrilite founder Dr. Rehnborg wanted his products to be sold. DeVos
and Van Andel bought the rights to make and distribute Frisk and
changed the name to L.O.C. thereby beginning Amway. In 1964 the
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Amway Sales Corporation, Amway Services Corporation, and Amway
Manufacturing Corporation, merged to form a single company.
Amway bought the Mutual Broadcasting System radio network in 1977
and sold it in 1985.
Amway expanded overseas to Australia in 1971, to Europe in 1973, to
parts of Asia in 1974, to Japan in 1979, to Latin America in 1985, to
China in 1995, to Africa in 1997, to India in 1998, to Russia in 2005,
and to Vietnam in 2008.
The product line grew, with a new detergent SA8 added in 1960, and
later the hair care range Satinique (1965) and Artistry(1968). Amway
bought control of Nutrilite in 1972 and full ownership in 1994.
In 1999 the founders of the Amway corporation established a new
holding company, named Alticor, and launched three new companies, 1)
a sister (and separate) Internet-based company named Quixtar, 2)
Access Business Group, and 3) Pyxis Innovations. Quixtar replaced the
North American business of Amway in 2001, with Amway operating in
the rest of the world; however, in June 2007 it was announced that the
Quixtar brand would be phased out over an 18 to 24 month period in
favor of a unified Amway brand worldwide. The other two companies,
Pyxis Innovations (since dissolved) and Access Business Group, were
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established to help take Alticor into new strategic directions. Amway's
internet sales in Europe are conducted via their Amivo website.
Later additions to the core product range included water filters and
cookware. The eSpring water filter, introduced in 2000 and developed by
Alticor, includes eCoupled wireless power induction technology. Alticor
subsidiary Fulton Innovation introduced the technology in other
consumer electronic products at the 2007 International Consumer
Electronics Show. Companies licensing the technology include General
Motors, Motorola and Visteon.
HUL - Hindustan Unilever Limited (HUL) is India's largest fast moving
consumer goods company, with leadership in Home & Personal Care
Products and Foods & Beverages. HUL's brands, spread across 20
distinct consumer categories, touch the lives of two out of three Indians.
They endow the company with a scale of combined volumes of about 4
million tonnes and sales of Rs.13,718 crores.
The mission that inspires HUL's over 15,000 employees is to "add
vitality to life". With 35 Power Brands, HUL meets everyday needs for
nutrition, hygiene, and personal care with brands that help people feel
good, look good and get more out of life.
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It is a mission HUL shares with its parent company, Unilever, which
holds 52.10% of the equity. A Fortune 500 transnational, Unilever sells
Foods and Home and Personal Care brands in about 100 countries
worldwide.
The fast moving consumer goods (FMCG) industry is an unforgiving
one. “If a retailer’s shelves are empty of a
manufacturer’s product, he will simply fill them with a competing
product,” says KS Arunkumar, IT Group Manager, Hindustan Unilever
Limited (HUL). This challenge of ensuring that the business is optimised
to cater to ever- changing market demands is an issue that HUL is
deeply familiar with. Established in 1931, this stalwart of the India
FMCG market is a subsidiary of the world-renowned Unilever Group.
Behind HUL’s vast business footprint that spans 4,000 distributors is an
entity consisting of 15,000 staff as well as multiple factories, warehouses
and branches.
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Research Design
Modern day market dynamics are as never before. Such dynamics are
the results of polished consumer behaviour and inculcated knowledge by
them. Thus the current scenario is also changing in the industry to
satisfy all and sundry need of the consumer. Different marketers are
differentiating their strategies with respect to the 4Ps of marketing. This
study revolves around analyzing the strategies involved and its effect on
the ultimate consumers, which in the long run modulate their buying
pattern and behaviour.
As already mentioned Hindusthan Unilever Limited and Amway India
Corporation has been randomly chosen for the study. Such sampling can
be justified on the basis of their market share in their core competency
sector. HUL is the major channel distributing company while Amway
India Corporation has revolutionized network marketing with their
unique strategies. Primary research as the main research mode has been
chosen so as to have a fair idea of the population. Various secondary
data has also enabled the study. Such references are given in the
respective section. To find out the relevance of their strategy and analyse
customer perception a questionnaire has been framed as an interface
tool to collect the information. The questionnaire has been framed
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keeping in mind the requirements of the study. The sample for the study
is set at 100 people by simple random sampling.
After the collection of the data co-relation between Question-7 and
Question 3,4,5,6 is to be calculated, (please refer to the questionnaire).
Further to have a clear idea of the sample separate hypothesis has been
set for every question from Question 8 (a) to Question 8 (g). Such
hypotheses are:
8a. HO == (a) I DO NOT prefer to receive extensive training programme
about product utility before using it.
8b. H0 = DO NOT prefer to buy products from nearest kirana shop/
retail outlet.
8c. H0 = DO NOT Prefer to know the utility from direct selling agent.
8d. H0 = DO NOT prefer getting commissions for using a product.
8e. H0 = Not ready to buy medium quality products at cheap price.
8f. H0 = DO NOT prefer to use products only if given a commission. 8g.
H0 = Purchase of a product is not made easier by
celebrity endorsements.
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Such hypotheses are set so as to have a fair idea of the population.
Hypothesis has been tested by Z-test. Hypothesis testing has helped
enable the study to conclude on customer perception about the strategies
involved in the separate distribution process.
After that, was the work of tabulation of data which helped a lot to reach
to the conclusion.
This is the following process which has been followed for completion of
the project:
Define research problem
Review concepts and theory
Review previous research finding
Formulate hypothesis
Design research (including sample design)
Collect data (execution)
analyze data
Interpret and report
Feed forward
Feed forward
Feed back
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Review of Literature
The effectiveness of any promotional strategy depends, in part, on how
accurately channel members predict consumers' perceptions of their
promotional activity. However, empirical research on channel member
predictions and their accuracy is virtually nonexistent. In this article we
examine manufacturer and retailer beliefs about consumers' (and each
others') perceptions of sales promotions and assess the accuracy of these
predictions. Our findings indicate that manufacturers and retailers hold
similar, but equally inaccurate views of consumers' industry knowledge.
When assessing consumers' specific beliefs about different types of
promotions, these channel members underestimate consumer knowledge.
Their motivational knowledge, however, appears quite accurate
-whether predicting consumer or other channel member perceptions of
motivations. The similarity of supplier and retailer knowledge bodes well
for channel efficiency, yet limitations in their understanding of consumer
knowledge about promotions may lead to weakness in channel marketing
strategies.
When making strategic decisions regarding price promotions,
manufacturers and retailers rely on their expectations of consumer
reactions to the promotion.,
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Dickson & Key, 1990). However, consumer reactions often depend on
their beliefs about channel member motives for offering the promotions.
Given this inherent interdependence, the effectiveness of channel
promotional strategy may depend on how accurately channel members
understand consumer perceptions of their promotional activity.
For example, on seeing Heinz ketchup on sale at Kroger's, a consumer
may believe that the savings are provided by the manufacturer,
potentially creating goodwill for this supplier. Conversely, consumers
may believe that Kroger's is providing the savings. This perception may
create goodwill for Kroger's, but have little effect on Heinz brand equity.
When deciding whether to reinforce or modify their promotional
strategy, Kroger's and Heinz may benefit from an accurate
understanding of the perceptions held by their consumers.
Similarly, Heinz may believe that consumers think that the price cuts on
its brands are offered to encourage the purchase of the Heinz brand.
Consumers, however, may actually think that the price cuts are offered
to get rid of excess inventory. If consumers make this latter inference,
price promotions may not be an optimal strategy for encouraging sales
of a popular brand because of the potential for damage to brand equity.
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An accurate understanding of consumer inferences related to store
brands could also influence the promotional mix strategies employed by
retailers and manufacturers. For example, the majority of consumers
may believe that national manufacturers produce store brands. If
retailers incorrectly believe that consumers think that retailers makes
their own store brands, then the retailers may not price or promote their
labels effectively, charging a lower price than consumers are willing to
pay.
These examples highlight the importance of understanding consumers'
perceptions of retailer and manufacturer pricing strategies. These are
policies that (Friestad & Wright, 1994) call persuasion knowledge.
However, empirical research documenting the beliefs that channel
members use when developing their own goals and tactics is virtually
nonexistent (Friestad & Wright, 1994). While some prior empirical
research has focused on the content of consumers' persuasion knowledge
(Dickson & Sawyer, 1986; Krishna, Currim & Shoemaker, 1991;
Raghubir, 1994; Raghubir & Corfman 1994), little work has focused on
channel member predictions of this knowledge.
Multi channel consumer perception – The researcher presents a
structural model of consumer trust in a multi Channel retailer. The
model was developed on a sample of 1048 consumers who responded to
a questionnaire linked to the website of a large German multi-channel
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retailer. The study identifies perceived privacy concerns as the strongest
influence on trust in the e-shop, followed by perceived reputation and
perceived size of the offline stores. We further differentiate between
respondent groups based on their familiarity with the retailer’s e-shop
and stores. In general, trust increases over familiarity with the
Retailer whereas the influence of perceived privacy has the same
importance over different levels of familiarity. This research may be of
interest to multi-channel retailers, who could use the findings to better
align their offline and online marketing strategy. In particular, the
results could be used to improve the website design and the delivery
options of a multi-channel retailer. Internet-only retailers may consider
an increase of marketing efforts in the offline domain.
The distribution of products across multiple sales channels — often
referred to as multi-channel retailing — is the norm today. According to
a recent survey, multi-channel retailers in the US increased their online
market share from 52 % in 1999 to 75 % in 2003 — in contrast to
Internet-only retailers, who lost market share correspondingly[Shop.org
and Forrester Research 2004]. For some pure Internet retailers,
changes towards multi-channel retailing
can be observed
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. The increasing prevalence of multi-channel retailing calls for empirical
research on the reasons for consumers’ appreciation of that business
model. The main research question of this paper is to find out whether
the perception of a retailer's physical stores has an influence on
consumers' trust in the retailer's e-shop, which may ultimately lead to
increased sales. Moreover, this paper aims at quantifying the strength of
influence of the three antecedents of consumer trust perceived store size,
perceived store reputation and perceived privacy of the e-shop.
A number of surveys suggest that the Internet has a distinct influence on
offline sales. In a series of studies conducted by the research consultancy
Forrester, retailers claimed that about 24 % of their offline sales in 2003
were influenced by the Web, which is up from 15 % in 2002 [Shop.org
and Forrester Research 2004]. A further study
estimates that about half of the 60 million consumers in Europe with an
Internet connection bought products offline after having investigated
prices and details online [Markillie 2004]. A study by Doyle et al.
[2003] analyzed the influence of store perception on online sales.
Distribution (or place) is one of the four elements of marketing mix. An
organization or set of organizations (go-betweens) involved in the
process of making a product or service available for use or consumption
by a consumer or business user. Frequently there may be a chain of
intermediaries, each passing the product down the chain to the next
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organization, before it finally reaches the consumer or end-user. This
process is known as the 'distribution chain' or the 'channel.' Each of the
elements in these chains will have their own specific needs, which the
producer must take into account, along with those of the all-important
end-user.
A number of alternate 'channels' of distribution may be available:
• Selling direct, such as with an outbound salesforce or via mail
order, Internet and telephone sales
• Agent, who typically sells direct on behalf of the producer
• Distributor (also called wholesaler), who sells to retailers
• Retailer (also called dealer or reseller), who sells to end customers
• Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alone.
They may be just as important for moving a service from producer to
consumer in certain sectors, since both direct and indirect channels may
be used. Hotels, for example, may sell their services (typically rooms)
directly or through travel agents, tour operators, airlines, tourist boards,
centralized reservation systems, etc.
There have also been some innovations in the distribution of services.
For example, there has been an increase in franchising and in rental
services - the latter offering anything from televisions through tools.
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There has also been some evidence of service integration, with services
linking together, particularly in the travel and tourism sectors. For
example, links now exist between airlines, hotels and car rental services.
In addition, there has been a significant increase in retail outlets for the
service sector. Outlets such as estate agencies and building society
offices are crowding out traditional grocers from major shopping areas.
Distribution channels can thus have a number of levels. Kotler defined
the simplest level that of a direct contact with no intermediaries
involved, as the 'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor. In small
markets (such as small countries) it is practical to reach the whole
market using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler
for example, is now mainly used to extend distribution to the large
number of small, neighborhood retailers or dealers.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of consumer goods.
In Bangladesh Telecom Operators are using different Chains of
Distribution, especially 'second level'.
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In IT and Telecom industry levels are named "tiers". A one tier channel
means that vendors IT product manufacturers (or software publishers)
work directly with the dealers. A one tier / two tier channel means that
vendors work directly with dealers and with distributors who sell to
dealers. But the most important is the distributor or wholesaler.
Direct marketing is a sub-discipline and type of marketing. There are
two main definitional characteristics which distinguish it from other
types of marketing. The first is that it attempts to send its messages
directly to consumers, without the use of intervening media. This
involves commercial communication (direct mail, e-mail, telemarketing)
with consumers or businesses, usually unsolicited. The second
characteristic is that it is focused on driving purchases that can be
attributed to a specific "call-to-action." This aspect of direct marketing
involves an emphasis on trackable, measurable positive (but not
negative) responses from consumers (known simply as "response" in the
industry) regardless of medium.
If the advertisement asks the prospect to take a specific action, for
instance call a free phone number or visit a website, then the effort is
considered to be direct response advertising.
Some direct marketers also use media such as door hangers, package
inserts, magazines, newspapers, radio, television, email, internet banner
ads, digital campaigns, pay-per-click ads, billboards, transit ads. And
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according to Ad Age, "In 2005, U.S. agencies generated more revenue
from marketing services (which include direct marketing) than from
traditional advertising and media. The most common form of direct
marketing is direct mail, sometimes called junk mail, used by
advertisers who send paper mail to all postal customers in an area or to
all customers on a list. Any low-budget medium that can be used to
deliver a communication to a customer can be employed in direct
marketing. Probably the most commonly used medium for direct
marketing is mail, in which marketing communications are sent to
customers using the postal service. The term direct mail is used in the
direct marketing industry to refer to communication deliveries by the
Post Office, which may also be referred to as "junk mail" or "admail"
and may involve bulk mail.
Junk mail includes advertising circulars, catalogs, free trial CDs, pre-
approved credit card applications, and other unsolicited merchandising
invitations delivered by mail or to homes and businesses, or delivered to
consumers' mailboxes by delivery services other than the Post Office.
Bulk mailings are a particularly popular method of promotion for
businesses operating in the financial services, home computer, and
travel and tourism industries.
In many developed countries, direct mail represents such a significant
amount of the total volume of mail that special rate classes have been
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established. In the United States and United Kingdom, for example,
there are bulk mail rates that enable marketers to send mail at rates that
are substantially lower than regular first-class rates. In order to qualify
for these rates, marketers must format and sort the mail in particular
ways - which reduces the handling (and therefore costs) required by the
postal service.
Advertisers often refine direct mail practices into targeted mailing, in
which mail is sent out following database analysis to select recipients
considered most likely to respond positively. For example a person who
has demonstrated an interest in golf may receive direct mail for golf
related products or perhaps for goods and services that are appropriate
for golfers. This use of database analysis is a type of database
marketing. The United States Postal Service calls this form of mail
"advertising mail"
The second most common form of direct marketing is telemarketing, in
which marketers contact consumers by phone. The unpopularity of cold
call telemarketing (in which the consumer does not expect or invite the
sales call) has led some US states and the US federal government to
create "no-call lists" and legislation including heavy fines. This process
may be outsourced to specialist call centres.
In the US, a national do-not-call list went into effect on October 1, 2003.
Under the law, it is illegal for telemarketers to call anyone who has
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registered themselves on the list. After the list had operated for one year,
over 62 million people had signed up. The telemarketing industry
opposed the creation of the list, but most telemarketers have complied
with the law and refrained from calling people who are on the list.
Email Marketing may have passed telemarketing in frequency at this
point, and is a third type of direct marketing. A major concern is spam,
which actually predates legitimate email marketing. As a result of the
proliferation of mass spamming, ISPs and email service providers have
developed increasingly effective E-Mail Filtering programs. These filters
can interfere with the delivery of email marketing campaigns, even if the
person has subscribed to receive them, as legitimate email marketing
can possess the same hallmarks as spam.
Leaflet Distribution services are used extensively by the fast food
industries, and many other business focusing on a local catchments
Business to consumer business model, similar to direct mail marketing,
this method is targeted purely by area, and costs a fraction of the
amount of a mails hot due to not having to purchase stamps, envelopes
or having to buy address lists and the names of home occupants.
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A fourth type of direct marketing, broadcast faxing, is now less common
than the other forms. This is partly due to laws in the United States and
elsewhere which make it illegal.
A fifth type of direct marketing has emerged out of the market prevalence
of personal voice mailboxes, and business voicemail systems. Due to the
ubiquity of email marketing, and the expense of direct mail and
telemarketing, voicemail marketing presented a cost effective means by
which to reach people with the warmth of a human voice.
Abuse of consumer marketing applications of voicemail marketing
resulted in an abundance of "voice-spam", and prompted many
jurisdictions to pass laws regulating consumer voicemail marketing.
More recently, businesses have utilized guided voicemail (an application
where pre-recorded voicemails are guided by live callers) to accomplish
personalized business-to-business marketing formerly reserved for
telemarketing. Because guided voicemail is used to contact only
businesses, it is exempt from Do Not Call regulations in place for other
forms of voicemail marketing.
Couponing is used in print media to elicit a response from the reader. An
example is a coupon which the reader cuts out and presents to a super-
store check-out counter to avail of a discount. Coupons in newspapers
and magazines cannot be considered direct marketing, since the
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marketer incurs the cost of supporting a third-party medium (the
newspaper or magazine); direct marketing aims to circumvent that
balance, paring the costs down to solely delivering their unsolicited
sales message to the consumer, without supporting the newspaper that
the consumer seeks and welcomes.
Direct marketing on TV (commonly referred to as DRTV) has two basic
forms: long form (usually half-hour or hour-long segments that explain a
product in detail and are commonly referred to as infomercials) and
short form which refers to typical 0:30 second or 0:60 second
commercials that ask viewers for an immediate response (typically to
call a phone number on screen or go to a website).
TV-response marketing—i.e. infomercials—can be considered a form of
direct marketing, since responses are in the form of calls to telephone
numbers given on-air. These both allows marketers to reasonably
conclude that the calls are due to a particular campaign, and allows the
marketers to obtain customers' phone numbers as targets for
telemarketing. Under the Federal Do-Not-Call List rules in the US, if the
caller buys anything, the marketer would be exempt from Do-Not-Call
List restrictions for a period of time due to having a prior business
relationship with the caller. Major players are firms like QVC, Thane
Direct, and Interwood Marketing Group then cross-sell, and up-sell to
these respondents.
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One of the most famous DRTV commercials was for Ginsu Knives by
Ginsu Products, Inc. of RI. Several aspects of ad, such as it's use of
adding items to the offer and the guarantee of satisfaction were much
copied and came to be considered part of the formula for success with
short form direct response TV ads (DRTV)
Direct selling is the sale of products by face-to-face contact with the
customer, either by having salespeople approach potential customers in
person, through indirect means such as Tupperware parties.
For many marketers, a comprehensive direct marketing campaign
employs a mix of channels. It is not unusual for a large campaign to
combine direct mail, telemarketing, radio and broadcast TV, as well as
online channels such as email, search marketing, social networking and
video. In a report conducted by the Direct Marketing Association, it was
found that 57% of the campaigns studied were employing integrated
strategies .Of those, almost half (47%) launched with a direct mail
campaign, typically followed by e-mail and then telemarketing.
The need to explore consumer reactions to any form of marketing is
central to the marketing concept and this paper reports part of an
industry-funded project to investigate how consumers interact with
direct marketing. The programme was qualitative, based on both
individual depth interviews and group discussions. A theme of
“paradox” emerged from the research in a variety of ways. Consumers
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generally take a pragmatic view of marketing activity, but at the same
time they are sceptical of much direct marketing. The research identifies
consumers’ key concerns with direct marketing as: privacy, control and
relevance. The resulting “gaps” between direct marketing practice and
consumer expectations and desires produce clearer areas for the direct
marketer to address.
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Empirical Analysis1. HO = proportion of the people are accepting that they prefer to receive extensive training programme about product utility before using it is 50%
H0 : (P = 0.5)
H1 = More than 50% of people are accepting that they prefer to receive extensive training programme about product utility before using it
(>50%)
H1: (P>0.5)
Observed value – Expected value Z= ------------------------------------------------------- S.E.
Expected value 0.5(P)Observed value = 74/100 =0.74(Q) = 1-0.5 = 0.5
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S.E.(Standard error) = √PQ/n [n=sample size] =√0.5∗ 0.5/100 = 0.05
Z = (0.74- 0.5)/ 0.05 = 4.8
At 5% level of significance z= 1.645As z=4.8, so, we reject the null hypothesis and accept the alternative hypothesis i.e. more than 50% of people are accepting that they prefer to receive extensive training programme about product utility before using it
2. H0 = proportion of the people are accepting that they prefer to buy
products from nearest kirana shop/ retail outlet is 50%
H0 : (P = 0.5)
H1 = More than 50% of people are accepting that they prefer to buy products from nearest kirana shop/ retail outlet
(>50%)
H1: (P>0.5)
Observed value – Expected value Z= ------------------------------------------------------- S.E.
Expected value 0.5(P)Observed value = 94/100 =0.94(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size]
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=√0.5∗ 0.5/100 = 0.05
Z = (0.94- 0.5)/ 0.05 = 8.8
At 5% level of significance z= 1.645As z=8.8, so, we reject the null hypothesis and accept the alternative hypothesis i.e. more than 50% of people are accepting that they prefer to buy products from nearest kirana shop/ retail outlet
3. H0 = proportion of the people are accepting that they prefer to know the utility from the direct selling agent is 50%
H0 : (P = 0.5)
H1 = More than 50% of people are accepting that they prefer to know the utility from the direct selling agent.
(>50%)
H1: (P>0.5)
Observed value – Expected value Z= ------------------------------------------------------- S.E.
Expected value 0.5(P)Observed value = 61/100 =0.61(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size] =√0.5∗ 0.5/100
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= 0.05
Z = (0.61- 0.5)/ 0.05 = 2.2
At 5% level of significance z= 1.645As z=2.2, so, we reject the null hypothesis and accept the alternative hypothesis i.e. more than 50% of people are accepting that they prefer to know the utility from the direct selling agent.
4. H0 = proportion of the people are accepting that they prefer to get
commissions for using a product is 50%
H0 : (P = 0.5)
H1 = More than 50% of people are accepting that they prefer to get
commissions for using a product (>50%)
H1: (P>0.5)
Observed value – Expected value Z= ------------------------------------------------------- S.E.
Expected value 0.5(P)Observed value = 79/100 =0.79(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size] =√0.5∗ 0.5/100
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= 0.05
Z = (0.79- 0.5)/ 0.05 = 5.8
At 5% level of significance z= 1.645As z=5.8, so, we reject the null hypothesis and accept the alternative hypothesis i.e. more than 50% of people are accepting that they prefer to get commissions for using a product.
5. H0 = proportion of the people are accepting that they prefer to buy
medium quality products at cheap price is 50%
H0 : (P = 0.5)
H1 = More than 50% of people are accepting that they prefer to buy
medium quality products at cheap price (>50%)
H1: (P>0.5)
Observed value – Expected value Z= ------------------------------------------------------- S.E.
Expected value 0.5(P)Observed value = 67/100 =0.67(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size] =√0.5∗ 0.5/100 = 0.05
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Z = (0.67- 0.5)/ 0.05 = 3.4
At 5% level of significance z= 1.645As z=3.4, so, we reject the null hypothesis and accept the alternative hypothesis i.e. more than 50% of people are accepting that they prefer to get commissions for using a product.
6. H0 = proportion of the people are accepting that they prefer to use products only if given a commission is 50%
H0 : (P = 0.5)
H1 = Less than 50% of people are accepting the fact that they prefer to
use products only if given a commission (<50%)
H1: (P<0.5)
Observed value – Expected value
Z= -------------------------------------------------------
S.E.
Expected value 0.5(P)
Observed value = 29/100 =0.29
(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size]
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=√0.5∗ 0.5/100
= 0.05
Z = (0.29- 0.5)/ 0.05 = -4.2
At 5% level of significance z= - 1.645
As z= - 4.2, so, we reject the null hypothesis and accept the alternative hypothesis i.e.less than 50% of people are accepting that they prefer to use products only if given a commission
7. H0 = proportion of the people are accepting that Purchase of a product is not made easier by celebrity endorsements is 50%
H0 : (P = 0.5)
H1 = Less than 50% of people are accepting the fact that Purchase of a
product is not made easier by celebrity endorsements (<50%)
H1: (P<0.5)
Observed value – Expected value
Z= -------------------------------------------------------
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S.E.
Expected value 0.5(P)
Observed value = 37/100 =0.37
(Q) = 1-0.5 = 0.5
S.E.(Standard error) = √PQ/n [n=sample size]
=√0.5∗ 0.5/100
= 0.05
Z = (0.37- 0.5)/ 0.05 = -4.2
At 5% level of significance z= - 1.645
As z= - 2.6, so, we reject the null hypothesis and accept the alternative hypothesis i.e. less than 50% of people are accepting that Purchase of a product is not made easier by celebrity endorsements
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Findings and suggestions
From the set hypothesis the following had been found:8a. Total sample 100 Yes 74
yes
no
So, we can say that 74% people prefer to receive extensive training programme about product utility before using it.
8b. Total sample 100 Yes94
yes
no
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So, we can say that94% of people is accepting that they prefer to buy products from nearest kirana shop/ retail outlet. They do not prefer to go direct sales agent and this is the reason today also HUL is more popular than AMWAY in spite of delivering better quality product.
8c. Total sample 100 Yes61
yes
no
So, we can say that 61% of people are accepting that they prefer to know the utility from the direct selling agent. They are of this idea that a direct selling agent will know the nitty-gritty of product usage specially technical product better than simple retailer. They are not expert in this way.
8d. Total sample 100 Yes79
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yes
no
So, we can say that79% of people is accepting that they prefer to get commissions for using a product.
8e. Total sample 100
Yes67
yes
no
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So, we can say that 67% they prefer to they prefer to buy medium quality products at cheap price. This is also the reason for HUL getting more leverage than AMWAY, because sometimes people are sacrificing the excellent quality for cheaper price.
8f. Total sample 100
Yes29
yes
no
So, we can say that 29% they prefer to they prefer to use products only if given a commission/ scheme/ discount. People buy product especially FMCG for their need. So the commission or discount does not motivate them to buy product, but for impulse buying this factor do help to increase the sale.
8g. Total sample 100
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Yes37
yes
no
So, we can say that37% of people is accepting that Purchase of a product is not made easier by celebrity endorsements. People buy product especially FMCG for their need .Celebrity endorsement cannot help them to buy more product; it can enhance the instinct but also to a certain extent.
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Recommendation
The project with the charts and calculation had told that the perception of people about channel marketing is more convincing than the same of direct marketing. If a person buys a product from the local sore he already has a good rapport with the person, so if he faces any problem he believes that he will get more help from that shop .people are interested to know about the product usage and they want to know this from the direct selling agent because they think that the direct selling agent are with direct link with the company, so the customers consider them as more liable.
According to the report 74% people want to get training before using any technical product or general product like medicine, beauty care etc. So, companies should give more emphasis on this matter.
Maximum sample told that they want to buy product from nearest kirana shop. So, companies like AMWAY etc should communicate the value of the product and benefit to the customers most so that they will become aware of the product and the added value. As they do not have proper information they prefer medium quality product also in cheap price.
The direct channel marketer should give more emphasis on the number of agents and their availability. If customers feel the agents of direct
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selling product also as available as kirana store they may change their preference.
As the research shows that customers wants to proper information from the direct selling agent, so if the company give extraneous training to the agents that will obviously help to serve the customer in better way .
The project also says that people are buying product when more commissions or discounts are given. So, if companies can focus on this aspect that again enhances its profitability. But it again incurs more cost. Then if the company can identify any sphere where it can make cost-cutting and invest that money for giving more offers it surely helps to ensure profitability for the company.
The research tells that customers do not have the belief that only celebrity endorsement can help them to buy a product. A product mainly sells for its quality. So, the excessive money of advertisement can be invested for the quality improvement of the product and giving some added benefit to the customers.
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Appendices
Name:…………………………………………………………………….Age: …………………………(years)Gender:…………………….
1. Do you use HUL* or Amway products? YES [ ] NO [ ]
2. Which company’s goods suits your likings more?
HUL [ ] Amway[ ]
3. Which company’s PRODUCT do you think is better? HUL [ ] Amway [ ]
4. Which company’s PROMOTIONAL strategy do you think is better? HUL [ ] Amway [ ]
5. Which company’s PRICING strategy do you think is better? HUL [ ] Amway [ ]
6. Which company’s products you get it anywhere easily? HUL [ ] Amway [ ]
7. Keeping ALL the parameters same which company’s goods will you buy? HUL [ ] Amway [ ]
8. Please mark your preferences: [ ]
(a) I prefer to receive extensive training programme about product utility before using it. YES [ ] NO [ ] (b) I prefer to buy products from: [ ] Nearest kirana shop/ retail outlet. [ ] Direct selling agent. (c) Prefer to know the utility from: [ ] Direct selling agent. [ ] Advertisements. (d) I prefer getting commissions for using a product. YES [ ] NO [ ]
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(e) Ready to buy. [ ] Medium quality products at cheap price. [ ] Only high quality products irrespective of price.
(f) Prefer to use products: [ ] Only if given a commission. [ ] Just to serve my purpose.
(g) Purchase of a product is made easier by celebrity endorsements. YES [ ] NO [ ]
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References
Article:Multi channel Consumer Perception – authored by Maximilian Teltzrow
Internet :http://wps.pearsoned.com.au/au_be_schiffman_consbehav_3/0,10002,1793222-,00.htmlhttp://en.wikipedia.org/wiki/Direct_marketinghttp://www.direct-marketing.net/http://en.wikipedia.org/wiki/Distribution_(business)www.csulb.edu/journals/jecr/issues/20071/paper2.pdf
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Glossary
Channel Marketing - Active management of a sales channel from a marketing perspective, with the aim of making that channel attractive, customer friendly and efficient. Meaning: marketing communication, product marketing and e.g. buying incentives.
Direct Marketing – Direct marketing is a sub-discipline and type of marketing. There are two main definitional characteristics which distinguish it from other types of marketing. The first is that it attempts to send its messages directly to consumers, without the use of intervening media. This involves commercial communication (direct mail, e-mail, and telemarketing) with consumers or businesses, usually unsolicited. The second characteristic is that it is focused on driving purchases that can be attributed to a specific "call-to-action." This aspect of direct marketing involves an emphasis on traceable, measurable positive (but not negative) responses from consumers (known simply as "response" in the industry) regardless of medium.
Multi channel marketing system - a system in which a producer uses more that one channel of distribution.
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