Specialty Channels of Distribution — Super Business Manager

To start with, specialty channels of distribution refer to using any direct way to distribute products to customers that does not involve using retailers, i.e. distribution without the use of intermediaries.

Examples of a specialty channel of distribution include:

Telemarketing.
Mail order.
E-Commerce.
Vending machines.

Let’s take a more detailed look at all of those four specialty channels of distribution.

1. Specialty Channels of Distribution: Telemarketing

Telemarketing aims to promote and sell a product directly to a potential customer by making telephone calls rather than using an intermediary.

This one of the direct marketing techniques promotes a firm’s goods and services by using sales people to call customers. It is mainly used by satellite TV companies, mobile phone companies, insurance companies, banks, etc. to inform customers about a new special offer, persuade to upgrade the package or remind to renew the service for another year.

In fact, telemarketing as the channel of distribution mainly targets existing customers and is used by businesses that have already had a database of existing clients.

Advantages of telemarketing:

Very personal. Telemarketing as a type of direct marketing involves making phone calls to customers in an attempt to persuade them to buy a firm’s products. Talking to other people on the phone can establish a very personal relationship.
Process can be automated. Can be done through automated voice or text messages. Increasingly, personal phone calls are being replaced by automated voice messages, text message or even social media posts communicated via various social media websites.

Disadvantages of telemarketing:

Can be very costly. Making mass telephone calls to hundreds or thousands of customers can be very costly, especially if the sales employees are paid per phone call to make these calls.
Public annoyance. Most people hate receiving ‘cold calls’, annoying voice messages or unsolicited text messages. It often happens that customers are bombarded with phone calls and messages from marketers desperately trying to make a sale. This can cause resentment at ‘junk calls’ that have not been specifically requested leading to a poor image.

2. Specialty Channels of Distribution: Mail Order

Mail order is a method of buying products that are received by mail. It relies on sending direct mail by post to clients’ homes or businesses’ offices aiming to promote and sell a product directly to a potential customer

Direct mail is a Below-The-Line Promotion (BTL) promotion method. It uses unsolicited printed promotional materials such as leaflets or catalogues that are sent to prospective clients via the postal system. These mail shots can contain a great deal of detailed information about the business and its products to entice customers to buy a firm’s products.

The customers, who represent a large market over a wide geographical area, have been identified through market research as having a potential interest in the type of product that the company offers.

Advantages of mail order:

Aims at specific market segment. Detailed information about the product aimed at different specific market segments can be used to boost sales.
Cost-effective. Direct mail can be well-focused on potential consumers as it usually uses databases that filter out non-target consumer groups. These campaigns can be very cost-effective as they increase the chance that the right customer will purchase the right product.

Disadvantages of mail order:

Considered as junk mail. As large volume of direct mail is sent every day by the postal system, people often regard much of the correspondence sent through the post as junk mail and tend to throw it away. So, there is a low response rate because people do not bother even reading the mail.
Goes out of date quickly. The information in a customer database can often go out of date very quickly. Also, a lot of people move home or change the phone number without necessarily informing the business about it. This will result in a large amount of direct mail being sent to the wrong home or office address.
Waste of resources. When direct mail does not target the right audience while the costs of producing comprehensive and up-to-date advertising materials, it represents a waste of resources. For instance, people with children receive promotions of products targeting single people, or when product shelf-life is short caused new products being added to the market.

3. Specialty Channels of Distribution: E-Commerce

Place is the key element of Marketing Mix that is being transformed by technological change. Businesses use those new technologies to both promote and sell their products to customers.

E-Commerce means the trading of goods and services online with customers using computers, smart phones and tablets linked to the Internet. It has developed as a result of technological development, especially the widespread appearance of the Internet, growth of social networks. The Internet has had a profound impact on marketing activities for many businesses around the world.

E-Commerce continues to be an increasingly important distribution channel for many businesses as more and more people have access to the internet. Also, the growth in the number of credit cards issued around the world and online payments have also propelled companies to establish online presence.

Advantages of E-Commerce:

Suitable for many products. E-Commerce is an increasingly suitable distribution channel for many different products including both tangible goods and intangible services. More and more businesses worldwide now use dedicated websites and apps to provide product information and payment options encouraging customers from around the world to buy their products.
Convenient for customers. Customers can purchase goods online from the convenience of their home or office. The Internet has caused exponential growth of E-Commerce affected many areas of business activity and changing the way how many companies around the world produce, market and sell their products. These days, selling through websites and apps is now the fastest growing sales method worldwide as more and more customers purchase products entirely online over the Internet.
Enables low overheads. Trading via the Internet is a very effective way to reduce Fixed Costs (FC) and allows lowering prices. The increasing use of electronic means of communication and direct marketing have supported the shortening of the distribution chain and encouraged firms to sell directly to consumers. It is because the business does not need to invest substantial amounts of money in physical premises such as retails shops or own transportation network.
Suitable for small businesses. The growth of the Internet has encouraged even small businesses to sell their products directly to the customer via E-commerce. Both small businesses such as sole traders and partnerships as well as large multinational companies sell their goods and services online.

Disadvantages of E-Commerce:

Not suitable for all products. Not all products are suitable for online distribution. This especially applies to non-standard products, large industrial goods or highly-advanced technologies. Customers buying goods such as expensive cars or luxury jewelry prefer to have direct contact with sales personnel who can offer professional customer service.
Cannot replace traditional distribution. While sales are increasingly being made to the customer using methods which pass by the traditional shops, for most retailers the Internet is not a replacement for traditional distribution activities. But, it can complement and support the marketing strategies of those businesses. This especially applies to large supermarkets and hypermarkets, car dealers or producers of globally-recognized products.

4. Specialty Channels of Distribution: Vending Machines

Vending machines are specialist automated machines that stock products for sale, e.g. cigarettes, soft drinks, bottled water, snacks, toys, umbrellas, magazines, hot meals, etc.

Products are provided to consumers after the payment is made. A product may become available by the vending machine releasing it (usually falling in an open compartment at the bottom), or put in by the customer, or the unlocking of a door or drawer.

Due to their compact size, vending machines can be placed almost anywhere in areas where large number of people visits frequently. This may include public transportation stations, hospitals, schools, office buildings, shopping malls, car parks, etc. Additionally, manufacturing facilities, industrial parks and distribution centers are all great locations for installing vending machines.

Modern vending machines allow customers to pay by a range of smart methods such as cash (inserting coins and notes into the machine), a debit card or credit card, online payments such as Apple Pay, Alipay, WeChat Pay, etc., or other forms of payment.

Advantages of vending machines:

Convenience. Vending machines are usually located in busy public places such as subway stations, train stations, airports, public hospitals, public schools, shopping malls, etc. Also, wide range of payment options enhance their convenience.
Minimal operational costs. While vending machines typically need some maintenance from time to time, daily running costs are minimal as sales people are not needed to sell the products and rent fees are marginal.
Selling only own products. If the producer entirely owns the vending machines, it will stock only its own products. This will help to reduce the level of competition as competitors’ products will not be available to customers at all.

Disadvantages of vending machines:

Prone to vandalism. The dark side of using vending machines is that they can be prone to vandalism and break-ins during which both goods and cash might be stolen. The business will need to fix the machine which increases operational costs.
Prone to technical issues. From time to time, mechanical failures happen to machinery. And, when a vending machine stops working properly, it will halt sales completely impacting sales revenue. Regular maintenance and professional repairs can help prevent this issue.
Low capacity. Due to rather small size of any single vending machine, only a small range of products can be sold via this distribution channel. A standard vending machine can typically hold between 150-200 snacks at once. This amount of product is enough to last around week at most work places before products need to be physically replenished.

Benefits of using a specialty channel of distribution

There are several advantages of using a specialty channel of distribution to deliver products from producers to consumers:

No need to share profits. As there are no intermediaries, the business using specialty distribution channels does not have to share its profits with any other businesses as there are no intermediaries in the channel.
Total control over marketing. Businesses can have direct control over their marketing activities regarding pricing strategies and promotion activities rather than relying on retailers or wholesalers to market their products.
Can reach new customers. Specialty distribution channels can help reach those potential customers who do not have access to traditional retail outlets. With growing popularity of the Internet and improved online payment security, customers are more willing to use E-Commerce and mail order as distribution channels.

In summary, a specialty channel of distribution means using any way to distribute products to customers that does not involve using traditional wholesalers and retailers.

Or, distribution to final consumers without the use of any other intermediaries.