This article is about one of the most commonly used channels of distribution such as a zero-level channel of distribution which is about direct selling to customer.
A zero-level channel of distribution, or direct marketing channel, consists of a manufacturer selling directly to consumers. This process is achieved through various methods of direct marketing such as selling in manufacturer-owned retail stores, conducting door-to-door personal selling or through specialty channels including telesales, E-Commerce, vending machines as well as mail-order direct mail.
The growth of the Internet has increased the popularity of this channel of distribution by making it easier for businesses to promote products through direct marketing. Direct marketing is any promotional activity that involves making direct contact with existing or potential customers without the use of other business organizations.
Main feature of direct selling to customer
Type and main features of zero-level channel of distribution:
Producer -> Consumer
A zero-level channel is the fastest growing means of distribution. It does not have any intermediaries such as wholesalers, agents or retailers. Direct sale to customers is made without any intermediaries along the route.
When is a zero-level channel of distribution used?
This channel of distribution is mainly used when the producer wishes to keep complete control over the marketing strategy selling purpose-built products for a particular customer. To use direct routes, producers such as Apple or IKEA often establish their own retail stores where they sell their own products. A zero-level channel of distribution can also be used for selling specialist goods that are bought infrequently but in large quantity, or when they are bulky and expensive to transport.
Examples of direct selling to customer
Let’s take a look at examples of goods or services using zero-level channel of distribution.
Farmers sell fruits and vegetables on the farmers’ markets directly to consumers.
Dell, an American technology company, develops and sells computers directly to customers by controlling the whole process of customer relationship. The company knows exactly who the final customer is, what they have bought from Dell, and what problems customers at are having.
Direct sales are also used in direct distribution in services industry where customers can book their hotel rooms or make restaurant reservations without using any intermediaries. Airline tickets are also sold over the internet directly by airlines.
Advantages of a zero-level channel of distribution
Advantages of direct selling to customer include:
- No need to share profit. Because there are no intermediaries which add a mark-up, or profit margin, profits do not have to be shared. All of the profit from selling products is earned by the producer. As this channel cuts out profit margins for middlemen, the producer can offer lower prices for consumers, or earn higher profits for the business.
- Control over Marketing Mix. It is the manufacturer who controls all parts of the Marketing Mix. Producers are able to directly control their own marketing how the product is sold, promoted and priced to consumers.
- Quicker than other channels. Zero-level channel of distribution is the quickest method of getting the product from the producer to the consumer. This is especially important for goods that need to be consumed as soon as possible after production, e.g. fresh seafood, meat, fruits and vegetables.
- Direct contact with customers. Direct contact with consumers offers useful market research. When the producer has direct contact with customers, it can offer useful market research information leading to gaining useful marketing research opportunities and wasting less of the marketing budget.
- Increase competitiveness. As E-commerce is easier now, manufacturers can sell directly to potential customers who can shop from home more conveniently. People can get online what local retail stores do not sell. Also, direct selling increases price competitiveness because it is usually cheaper than using expensive Above-The-Line Promotion (ATL) methods.
Disadvantages of a zero-level channel of distribution
Disadvantages of direct selling to customer include:
- Higher storage costs. In zero-level channel of distribution, all storage and stocks costs must be paid for by the producer. The manufacturer must hold all stocks of the product at its own premises or pay for outside storage which can prove to be very costly.
- Inconvenience. Buying directly from producers may not be convenient for consumer. First of all, few retail outlets limit the chances for consumers to see the product before purchasing. Secondly, consumers are unlikely to be able to try the product before they buy it, hence increased risk for the customer that the product will not meet their expectation. Finally, when shopping online, the real product might be different than what was advertised.
- Higher delivery costs. When lots of customers are spread over a wide geographical area, it will be very expensive to deliver each product sold to customers. Hence, the delivery costs per unit are perhaps the highest in zero-level channel of distribution among all channels of distribution.
- Limited after-sale services. Due to remoteness of manufacturers from their customers, it is quite difficult to provide effective after-sales service when products break down or need to be updated. As no other intermediaries are used in the channel, no after-sales service offered by other retail shops.
- Problems with promotion. All promotional activities must be designed, carried out and financed by the producer itself. It is because no promotion spending are paid for by intermediaries. Additionally, direct marketing promotions are unpopular with consumers who consider them as junk mail. Direct mail requires adding buyers’ addresses which poses the problem how to get customers’ names and home addresses.
In summary, a zero-level channel of distribution is all about direct selling to customer without the use of any other businesses. Sales of products are made without direct intermediaries being involved in the sales process.
