Producers of products or services selling directly to the consumer are by definition direct marketers (or more appropriately direct sellers using direct to consumer marketing).

These companies bypass the normal methods of distribution by using Facebooks ads, Google ads, email, direct-mail, newspaper, magazine, television and radio advertising as their primary performance-based marketing vehicles.

Usually a manufacturer or supplier of a product or service sells to distributors. The distributor resells to retailers. Finally, the retailer sells the product to the consumer.

Direct marketers sell to both consumers and businesses.

E-commerce merchants, who usually contract with several manufacturers to produce the goods sold in their e-commerce venture, are an exception since they don’t usually produce all of the products sold in their e-shops.

Other exceptions are companies that have a very large sales staff or contract through independent agents or manufacturers’ sales representatives to sell either to the consumer or distributor.

Some of these companies do use considerable performance-based advertising to produce leads for their sales staff. Also, many retailers now use performance / direct marketing to help track customer activity and build retail store traffic.

Because of all the possible exceptions I prefer to use the term performance marketing: the marketing which is 100% accountable and based on measurable results.

Advantages of Performance Marketing

What advantages does performance marketing have over traditional methods of doing marketing? Here are a few:

1. Performance marketing sales and expenses are 100% accountable to each specific Facebook or Google ad, mailing, phone call or space advertisement.
2. Performance marketing in direct to consumer businesses bypasses the distributor, agent and retailer. (A performance marketing-based sales lead or retail traffic building program may also be used to support the distributor, agent or retailer, however.) By doing so, management gains total control of all aspects of a company’s marketing program and, if properly administered, should also increase the company’s net profit.
3. Performance marketing helps avoid the necessity and expense of maintaining a large sales and service staff.
4. It may not be necessary to rent, staff or own retail outlets.
5. A performance marketer can quickly and efficiently achieve local, international distribution of its products or services.
6. Tighter control can be achieved on how, when and where the product or service is to be sold.
7. Greater flexibility is permitted in pricing, merchandising and distribution.
8. Distribution of products or services is not contingent upon dealer or distributor negotiations or acceptance.
9. There are no discounts or commissions to pay distributors or dealers.
10. Quality control can be maintained over all aspects of sales and service (all performance-based), thus building a stronger, more loyal customer base.

Possible Disadvantages of Performance Marketing

1. In true direct to consumer ventures employing performance marketing there is little or no personal contact with the customer except by email, online chat or phone. Very few such marketers operate retail outlets.
2. Regulatory problems must be overcome. When entering a performance marketing program a company needs to be aware of certain regulations (especially in regards to consumers) that may not have applied in a more traditional model of selling.
3. Deadbeats are customers who place orders using stolen credit cards, doing charge backs, asking for refunds having used the product for days or weeks, or refusing cash-on-delivery parcels for no reason (C.O.D. is still the way to do business throughout Europe and South-East Asia).
4. Shipping and order fulfillment problems can result in slow delivery, undelivered, stolen or damaged merchandise.
5. Companies must learn a whole new method of seeking out, finding and keeping new customers such as: running lead-generating ads, running and constantly optimizing Facebook ad campaigns or implementing chatbot tactics .
6. Internal conflict can occur. The most frequent problem that most B2B companies are likely to face is the conflict between the direct sales managers and their present performance marketing program. A field sales force will oppose any direct sales effort unless it can be demonstrated in no uncertain terms that such a program will not materially affect direct sales reps’ earnings. It will help to show the sales staff how the addition of a performance marketing program will actually help their present sales efforts.
7. Retailers’ concerns must be addressed. Retailers may object if the items being offered direct are the same ones that they are selling. The usual solution is to create another company and market your product line under a different name or label.
8. Distributors’ concerns will arise. Distributors will object to direct sales of a product that duplicates those they have agreements to sell or distribute.

Understanding these advantages and disadvantages inherent performance marketing is important to your company’s success.

Example: A company operating a very successful direct marketing program became interested in establishing retail outlets in large shopping malls. What had been a very lean, profitable and productive company was quickly overwhelmed by a multitude of operating problems.

The company was not prepared to hire and train the large number of additional personnel needed to operate retail outlets. Added to those problems were expensive leases, large utility bills and increased cost for insurance. There was also a substantial increase in advertising expenses. If you have retail outlets but no one knows they exist, your money and effort is wasted.