Introductory Scenario: Don’t Mess With Les Who was Les Wunderman? He created the Columbia House record club and “invented” the modern era of direct marketing. The genius of his idea was creating a dialogue (monthly response) with consumers which led to building a relationship with the brand. This “relationship” created through dialogue resulted in multiple purchases over time.
The Evolution of Direct Marketing An interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location. The scope of direct marketing: o An interactive dialogue with consumers o Pursues an immediate, measureable response (e.g. sale or inquiry) o Identify prospects for future contacts o Transactions can take place anywhere o Mail, telephone, Internet o Availability in the physical and virtual world
Direct Marketing: A Look Back L.L. Bean was founded in 1912 on $400.00 Fundamental strategy: o Commitment to quality o Descriptive copy that was informative, factual, and low-key o Satisfaction guarantee L.L. Bean built a good mailing list By 1990 L.L. Bean’s sales were $600 million; by 2009, over $1.4 billion
Direct Marketing: Milestones 1450Invention of movable type 1667First gardening catalog 1744Franklin formulates mail-order concept of “satisfaction guaranteed” 1872Montgomery Ward catalog 1886Sears starts mail-order business 1917Direct Marketing Advertising Association founded
Direct Marketing: Milestones 1928Third-class bulk mail introduced 1950First credit card 1951Lillian Vernon places first ad 1953Publishers Clearing House founded 1967AT&T introduces toll-free 800 service 1992Over 100 million in U.S. shop at home
Direct Marketing Today Rooted in, but much more than just mail-order. Many different activities using multiple media A complex, diverse tool used by organizations throughout the world. Three Principle Purposes: o Close a sale with a customer o ID prospects and develop customer database o Engage customers, seek their advice and generate brand loyalty—remember consumer generated content—how are new technologies being used to do this?
What’s Driving the Growth of Direct Marketing? CONVENIENCE for today’s dual income and single parent households. Still liberal attitudes toward using credit—despite the recent recession. Greater access to toll-free calling. Computer technology/new media facilitate online transactions and database management. More precise segmentation. Opportunity for relationship building. Cost per inquiry (CPI) and cost per order (CPO) advantages of direct marketing.
Marketers like the Adirondack Country Store, use catalogs, toll- free numbers, and the Web to take advantage of direct marketing opportunities. Courtesy Adirondack Country Store
Database Marketing Knowing who the best customers are as well as what and how often they buy. Mailing lists: o Internal lists (existing customers) o External lists
List Enhancement Internal lists can be augmented with externally provided lists Incorporating information from external databases o Demographic data o Geo-demographic data o Psychographic data o Behavioral data
The Marketing Database Includes data collected directly from individual customers Goal: Develop cyber intimacy Database marketing creates efficiencies –Targeted versions of catalogs: seasonal, age specific
Marketing Database Applications Includes data collected directly from individual customers o RFM Analysis of customers: recency, frequency, and monetary o Past behaviors can be used to predict future behavior Reinforcing and recognizing best customers o Frequency-marketing programs o Cross-selling Stronger position to cultivate new customers through more astute external list purchases
The Privacy Concern Privacy concerns result in: o Do not call registry o Spam blockers o Opt-out options Firms can overcome privacy concerns o Nurture the relationship with current customers with honest, effective service
The Internet has heighted consumer privacy concerns with respect to direct marketing Courtesy, Zero Knowledge Systems, Inc.
Media Applications in Direct Marketing Direct response advertising on TV Direct Mail Telemarketing Email/Mobile marketing Other media o Magazines o Newspapers o Infomercials
Direct Mail Advantages Selective, flexible, little waste, lends itself to testing, uses many formats Disadvantages Direct mail is expensive o May cost 15 to 20 times more to reach a person with a direct mail piece than with a TV commercial Mail lists can be plagued with bad addresses Mail delivery dates can be unpredictable
Telemarketing Telemarketing can be a potent tool. As with direct mail: o Contacts can be selectively targeted. o The impact of programs is easy to track. o Experimentation with different scripts and delivery formats is simple and practical. o Telemarketing involves live constructive dialogue. Telemarketing shares many of direct mail’s limitations: o Very expensive on a cost-per-contact basis. o Names and addresses go bad as people move, and wide spread use of cell phones has made directories nearly obsolete. o Telemarketing does not share direct mail’s flexibility in delivery options. When you reach people in their home or workplace, you have a limited span of time to convey information and request some response. o Telemarketing is becoming a highly maligned practice in consumers. o The FTC’s “Do Not Call” list has millions of subscribers
Email Bulk email is known as “spam” Fraudulent email know as “phishing” However email is an increasingly popular tool for marketers Advantages o Cheap o Good response rates—better than direct mail Netiquette suggests getting consumer permission to send product information (i.e. obtaining opt-in permission) Avoid bulk emailings
Direct Response Advertising in Other Media Magazines use bind-in insert cards Toll-free 800 numbers are vital to direct marketers using ads in newspapers and magazines Infomercial o Long television advertisement o Range in length from 3 to 60 minutes o Keys to success Testimonials, frequent call to actions, ensure same-day response New research shows that direct response ads are the least likely to be zapped by DVR users
Magazine ads are ideal for Direct Response Advertising. Courtesy, Oreck Corporation
Closing the Sale with Direct Marketing and/or Personal Selling Functional specialists across several media need to work together. Marketing databases can lead to interdepartmental rivalries. Growth of direct marketing often means cuts in other promotional budgets. One solution: the MARCOM manager
The Critical Role of Personal Selling The face-to-face communication and persuasion process Most effective with products or services that are: o Higher priced o Complicated to use o Tailored/customized to users’ needs o Offer a trade-in option o Judged at the point-of-purchase
Types of Personal Selling Order taking: Accepting orders for merchandise or scheduling services; deal with existing customers who are lucrative to a business due the low cost of generating additional revenues from them. Order taking is the least sophisticated of selling efforts. Creative selling: Selling where customers rely heavily on the salesperson for technical information, advice, and service. It is the most sophisticated and complex selling effort. System selling: Entails selling a set of interrelated components that fulfill all or a majority of a customer’s needs in a particular area. System selling is often executed by a “team” of sales people. The missionary salesperson: Calls on accounts with the purpose of monitoring the satisfaction of buyers and updating buyers’ needs. They may provide product information after a purchase.
Customer Relationship Management (CRM) Salespeople play a critical role in cultivating long-term relationships with customers—which often is referred to as a customer relationship management (CRM) program. CRM views the relationship with buyers as a partnership and a problem solving situation. Note, newer descriptions of this process use the phrase “customer experience management”