Business to Business marketing 12 2

Brief Summary

This video discusses non-store retailing, focusing on pyramid schemes, catalog retailing, and vending machines. It explains the fraudulent nature of pyramid schemes, the evolution and challenges of catalog retailing with examples of Sears and Lands' End, and the advantages and disadvantages of vending machines, including recent innovations.

• Pyramid schemes are fraudulent sales structures that rely on recruitment fees rather than product sales.
• Catalog retailing has evolved from targeting rural consumers to dual-income families, facing challenges from online shopping.
• Vending machines offer 24/7 self-service but are limited by product assortment and customer base.

Pyramid Schemes

A pyramid scheme is a fraudulent sales model that requires participants to pay a non-refundable fee or purchase goods to become distributors. Profits are primarily derived from recruiting new members rather than selling products to end consumers. This system is inherently unstable, as it relies on a continuous influx of new recruits, eventually leading to harm for those at the bottom. To combat this, multi-level marketing vendors are creating codes of ethics that emphasize income from product sales over recruitment. Legal multi-stage sales should have low joining costs and allow for the return of unsold products.

Catalog Retailing

Catalog retailers send catalogs to customers, who then order products by phone or mail. This method was initially successful in rural areas and is now popular among dual-income families. In Korea, catalog sales began in 1987 and boomed until the rise of online shopping in the mid-2000s. Some TV home shopping companies have tried to maintain catalog channels by targeting older demographics. Sears' catalog business failed due to outdated order processing and inability to personalize catalogs, while Lands' End succeeded by automating customer data and offering quick delivery and returns.

Catalog Retailing: Successes and Failures

Sears, once a successful catalog retailer, withdrew from the business due to failures in automated order processing and customer data analysis. This resulted in errors and generic catalogs. In contrast, Lands' End thrives with automated customer information, quick delivery, and easy returns. Sears acquired Lands' End despite its own catalog failures. Successful catalog retailers segment markets and provide tailored services to build long-term customer relationships.

Advantages and Disadvantages of Catalog Retailing

Catalog retailing offers advantages such as no need for a physical store, control over marketing, customized offers, and broad geographical reach. However, it also faces disadvantages like mailing and printing costs, high merchandise return rates, and tough regulations. A key issue is whether catalog retailing complements or replaces store retailing. Market research suggests that consumers who use both channels buy more products overall, indicating a complementary relationship.

Product Assortment and Pricing in Catalog Retailing

Product assortment issues arise regarding whether store retailers should sell the same products as catalog retailers. Catalog customers tend to be wealthier, making it desirable to offer high-end brands in catalogs. Pricing strategies involve deciding whether to sell products at the same or different prices in each channel. Since catalog customers are relatively affluent, supplying high-priced products through catalogs is generally preferred.

Vending Machines

Vending machines automate the purchase process, offering 24/7 self-service. They typically sell products less likely to be damaged, such as coffee, cigarettes, and beverages. In Korea, vending machines are advantageous due to high labor costs and land prices. However, their growth has been limited by product assortment, limited information, and a declining blue-collar customer base. Transaction failures and lack of compensation also hinder the sale of expensive products.

Innovations in Vending Machines

New vending machines are being introduced that accept credit cards and offer products like hamburgers and flowers. Video kiosk vending machines enable information searches via the internet. These innovations aim to overcome the shortcomings of traditional vending machines.