Pattern description

Direct selling refers to a scenario whereby a company's products are not sold through intermediary channels, but are available directly from the manufacturer or service provider. In this way, the company skips the retail margin or any additional costs associated with the intermediates. These savings can be forwarded to the customer and a standardized sales experience established. Additionally, such close contact can improve customer relationships.

Inventive problems

Application examples

Hilti, which is headquartered in Liechtenstein and specialises in anchoring systems in the construction industry, is one of the most successful B2B direct vendors in the construction industry. Three-quarters of the company’s 22,000 employees are occupied with sales and deal personally with customers on a daily basis. The company’s high profile in construction has helped it to secure a seemingly unassailable competitive advantage over its competitors. Hilti is best known for its Hilti Centres and especially for its expert sales consultants.

Amway is an American marketing corporation specialising in the direct sale of beauty, healthcare and homecare products, marketing a wide variety of brands including Artistry, Beautycycle, eSpring, Bioquest Formula and iCook. The products are made available to Amway’s customers via a worldwide network of affiliates and individuals. People sign up as Independent Business Owners (IBOs). This enables them to sell Amway’s products directly to customers and recruit and train other IBOs (who then become part of their ‘downline’ network). Amway reduces HR costs by providing CDs, DVDs, website material, and seminars to support the IBOs’ independent recruitment and training activities. The broad network of affiliates and IBOs reduces distribution and advertising overheads, thus increasing the company’s profits.

The PC manufacturer Dell is well known for its successful application of the Direct Selling principle. Since the company’s foundation in 1984, it has focused exclusively on direct sales by taking orders for new PCs by phone and later online. Dell furnishes each ad directed to specific target customer groups with an individual phone number. Sales representatives are immediately able to identify which ad led the customer to call Dell. This means they can cater more accurately to customer wishes. Dell has been able to effectively differentiate itself from its competitors who predominantly sold computers through retailers.

References

The Business Model Navigator: 55 Models That Will Revolutionise Your Business