Thursday, October 21, 2004
Channel Marketing: In Home Parties Crash Retail
Forbes had a great article on a channel often ignored by the technology industry--The In-Home Sales Channel, The Party That Crashed Retail. (I only linked to Forbes.com. You have to be a member to see articles. Membership s free, then you can search by article name.) The article is about Pure Romance, a company that sells sex toys to women. According to the Direct Selling Association direct sales exceeded $30 billion in 2003 with 28.5% of that coming from party sales.
I have long used Tupperware to explain channels, channel conflict and channel strategy to people. I like the Tupperware example because it not only is a company everyone knows but also shows how a company struggles to adapt to changes in its market and the consequences of its choices. As women entered the job market, many had less time for the Tupperware parties. Convenience made more sense than socializing at the party. Rubbermaid, with it products in grocery stores cleaned up on market share. Tupperware has made half-hearted retail attempts, usually retreating in the face of channel conflict and lackluster sales. Forbes cites that Tupperware "recently pulled its plastic wares from Target."
Two questions that occurred to me when I read the article are:
1. How can a company built on one channel (e.g. Tupperware with a multi-level marketing (MLM) party channel or Cisco with a telco/solution provider channel?) adapt to market changes and transition from one channel to another?
Making the transition from one channel to another is one of the hardest things a company can attempt. It is often a complete change for the company impacting the entire go-to-market strategy that made the company successful in the first place. First, the change is usually crisis induced. A competitor takes huge amounts of market share Then sales level off or plummet, creating a sales crisis. This is compounded by what I call incumbent disease. Internally, the existing channel fights the change and reductions to its budget. Externally, conflict existing dealers can decimate sales as they fight to retain exclusivity. It is no wonder that most companies make ill-planned, poorly-executed attempts and fail to make the transition a la Tupperware.
2. What makes the MLM party channel appropriate?
Many companies use MLM party channels to sell their products. In addition to adult products, Forbes states "pate, pet food, saws, cosmetics, scrapbooks, air filters, legal services, expensive appeal, wine and golf clubs are sold the same way as Mary Kay Cosmetics." Clearly it is not just a gimmick to sell products to women. Although often explained as best suited for products that need explanation, that is not usually the case. Do people really need to be shown how to put a lid on a Tupperware container? The real reasons are usually convenience, socializing, privacy or emotional safety.
The only way I know to make channel marketing work without conflict is to get clear on your objectives, the channel requirements and the customer. By linking all of these together you get sell through.
The Channel Pro
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Forbes had a great article on a channel often ignored by the technology industry--The In-Home Sales Channel, The Party That Crashed Retail. (I only linked to Forbes.com. You have to be a member to see articles. Membership s free, then you can search by article name.) The article is about Pure Romance, a company that sells sex toys to women. According to the Direct Selling Association direct sales exceeded $30 billion in 2003 with 28.5% of that coming from party sales.
I have long used Tupperware to explain channels, channel conflict and channel strategy to people. I like the Tupperware example because it not only is a company everyone knows but also shows how a company struggles to adapt to changes in its market and the consequences of its choices. As women entered the job market, many had less time for the Tupperware parties. Convenience made more sense than socializing at the party. Rubbermaid, with it products in grocery stores cleaned up on market share. Tupperware has made half-hearted retail attempts, usually retreating in the face of channel conflict and lackluster sales. Forbes cites that Tupperware "recently pulled its plastic wares from Target."
Two questions that occurred to me when I read the article are:
1. How can a company built on one channel (e.g. Tupperware with a multi-level marketing (MLM) party channel or Cisco with a telco/solution provider channel?) adapt to market changes and transition from one channel to another?
Making the transition from one channel to another is one of the hardest things a company can attempt. It is often a complete change for the company impacting the entire go-to-market strategy that made the company successful in the first place. First, the change is usually crisis induced. A competitor takes huge amounts of market share Then sales level off or plummet, creating a sales crisis. This is compounded by what I call incumbent disease. Internally, the existing channel fights the change and reductions to its budget. Externally, conflict existing dealers can decimate sales as they fight to retain exclusivity. It is no wonder that most companies make ill-planned, poorly-executed attempts and fail to make the transition a la Tupperware.
2. What makes the MLM party channel appropriate?
Many companies use MLM party channels to sell their products. In addition to adult products, Forbes states "pate, pet food, saws, cosmetics, scrapbooks, air filters, legal services, expensive appeal, wine and golf clubs are sold the same way as Mary Kay Cosmetics." Clearly it is not just a gimmick to sell products to women. Although often explained as best suited for products that need explanation, that is not usually the case. Do people really need to be shown how to put a lid on a Tupperware container? The real reasons are usually convenience, socializing, privacy or emotional safety.
The only way I know to make channel marketing work without conflict is to get clear on your objectives, the channel requirements and the customer. By linking all of these together you get sell through.
The Channel Pro
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