© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Chapter Fourteen Direct Marketing Direct Marketing © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Direct Marketing Defined The total of activities by which the seller directs efforts to a target audience using one or more media for the purpose of soliciting a response by phone, mail, or personal visit from a prospect or customer Radio Telemarketing TV Selling Direct Selling Magazine and Newspaper Direct Mail

ALSO “Direct marketing is an interactive system of marketing which uses one or more advertising media to affect a measurable response and/or transaction at any location.”

Growth of Direct Marketing Direct Marketing Syndicates Consumer Credit Cards Miscellaneous factors Changing Structure of Society Changing Structure of Markets Technological Advances

Direct Marketing Combines With . . . Advertising Public Relations Internet Direct Marketing Support Media Personal Selling Sales Promotions

DM Ads

How Database Marketing Works

A Comprehensive Consumer Database Name Address/ Zip Code Telephone Number Length of Residence Age Gender Marital Status Family Data Education Income Occupation Transaction History Promotion Inquiry Unique Identifier

A Business-to-Business Database Contact Info Contact Title Telephone Number Source of order, inquiry, referral Credit History Industrial Classification Size of Business Revenues Number of Employees Time in Business Headquarters Location Purchase History Promotion History Inquiry Unique Identifier

Characteristics of Direct Marketing Customer/prospect databases that make 1:1 targeting possible A view of customers as assets with lifetime value Ongoing relationships and affinity with customers Data-based market segmentation Research and experimentation (testing) Benefit-oriented direct-response advertising Measurement of results and accountability for costs Interactivity with customers on a personalized and individualized basis Multimedia direct response communication Multichannel fulfillment and distribution

Historic Comparison Between Direct and Traditional Brand Marketing Direct Marketing Traditional Brand Marketing Direct selling to individuals with customers identifiable by name, address and purchase behavior Mass selling with buyers identified as broad groups sharing common demographic and psychographic characteristics Products have the added value of distribution direct to the customer, an important benefit Product benefits do not typically include distribution to the customer’s door The medium is the marketplace The retail outlet is the marketplace Marketing controls the product all the way through delivery The marketer typically loses control as the product enters the distribution channel Advertising is used to generate an immediate transaction … an inquiry or an order Advertising is used for cumulative effect over time for building image, awareness, loyalty and benefit recall. Purchase action is deferred. Repetition of offers, promotional messages, toll-free numbers and web addresses are used within the advertisement Repetition of offers and promotional messages are used over a period of time Customer feels a high perceived risk – product bought unseen, recourse is distant Customer feels less risk – has direct contact with the product and direct recourse

Convergence of DM and Brand The differences have blurred due to the digital revolution … today… Most traditional marketers conduct marketing from a Web site, catalog, toll-free number and have a “call-to-action” in their ads Most direct marketers now create and reinforce brand strategies at the individual level

Objectives of Database Marketing Improve Selection of Market Segments Stimulate Repeat Purchases Objectives Customer Relationship Management Cross-selling Other Products

Track Customer Purchases and group them on Purchase History Build a data base Keep track of communication preferences Let customers decide how to give feedback Empower staff to make decisions Track Staff actions and make improvements Try new ways to leverage customer intelligence Always add to customer intelligence Develop customer intelligence on past customers Do it now

Developing a Database Sources Kiosk Activity Direct Mails Surveys Catalogs 111 Services 0800 toll free

Effective Databases RFM Scoring Recency Monetary transactions (How much do they spend?) Recency (How recently did the customer purchase?) Frequency (How often do they purchase?)

Direct Marketing Strategies One-Step Two-Step The medium is used directly to obtain an order Often use 800 number phone orders and credit card payment May use one medium to obtain inquiry and qualify prospect Typically follow up with a second medium to complete the sale

Direct-Marketing Media Infomercials Telemarketing Print, catalogs Broadcast Teleshopping TV Spots Home shopping Direct Mail

Types of Direct Mail All forms of advertising sent directly to prospects through the Postal Service or through private services Broadsides Postcards House lists Inclusions Catalogs Reprints Flyers Sales letters Folders Self-mailers

Porsche Targets Prospects with Direct Mail

Success with Catalogs

TV Spots, Infomercials, and Homeshopping

A Direct Response Print Ad

Telemarketing Outbound Inbound Telephone calling by the marketer or marketer’s agent to individual prospects, seeking purchase, subscription, membership, or participation by the call recipient. Marketers facilitate and invite prospects to call a central location via a long distance number, by a toll-free 800 number, or a fixed-cost 900 number.

Audiotex or Telemedia

Forms of Direct Selling Repetitive person-to-person Nonrepetitive person-to-person Party Plans

Cutco Knives Employs Direct Selling

Measuring Effectiveness Cost per Order (CPO)

Direct Marketing Advantages Selective reach Segmentation capabilities Direct Marketing Advantages Frequency potential Flexibility Timing Personalization Costs Measures of effectiveness

Direct Marketing Disadvantages Accuracy Image factors Content support Do Not Contact lists Rising costs

A number of factors are promoting the attractiveness of direct marketing. The main factors are: Availability of consumer credit cards. Availability of professional agencies. Competitive Pressures, Rising Media Costs, and Market Fragmentation. Increasing family incomes, including dual-income families. Technological advances.

Direct Marketing Decisions For successful implementation of direct-marketing, marketers must establish objectives, specify target market, choice of strategies, and set evaluation criteria.

Direct-Marketing Objectives Objectives of direct marketing usually focus on seeking direct response in terms of behavior.

Market Segmentation Market segmentation and targeting the right customers are critical to the success of promotional programme. Customers can be grouped on the basis of age, sex, income, education, lifestyle, and stage in family life cycle etc.

Direct marketers use a database. The database should provide the answers to the following questions: Where do they live? How did they make contact first time? What have they purchased? How often have they purchased? What is the monetary value of their purchases? How do they order or purchase, through the Internet, mail, phone, or in person? What is known about them and their families, occupation, education, children, interests, attitudes, and payment histories etc.? In case of B2B, who are the influencers, users, deciders, and purchasers? Location of corporate office and branch offices.

Direct Marketing Flow Chart (Source: G. Belch and M. Belch, Advertising and Promotion. Based on figure by Martin Bair, Henry R. Hoke, Jr., and Robert Stone).

Direct Marketing Offer and Media There are five important decision areas: product, offer, medium, distribution method, and creative strategy. One-Step Approach Two-Step Approach Direct Mail Catalogues Broadcast Media Print Media Telemarketing Electronic Shopping Direct Selling

Advantages of Direct Marketing Direct marketing offers the advantage of reaching large number of well- defined target customers and almost eliminates waste coverage. Good quality databases are available from independent suppliers and the marketer can segment customer groups with considerable precision. Direct marketer can personalise the message. Direct marketing can deliver almost perfect offers to customers. Marketer can build desired frequency level based on media. Direct marketing offers creative flexibility in different media. Direct marketer can quickly develop a list of specific profiles for direct mail. Direct marketing is more effective in building customer relationship. It is very cost effective considering the sale generated per contact. The results can be measured most accurately.

The Processes of Direct and Interactive Marketing Primary goal: The creation and cultivation of a customer Basic Premise: Customer and prospect responses are measurable Customer data drives all DM strategies Multiple channels are used to serve the customer

Customer Similarity and Customer Value Database technology made it possible to track customer transactions and actions Lifetime Value of a Customer

The Direct and Interactive Marketing Model Marketer Direct Communication Hi-Tech Media Elect. Print Media Prospect/Customer Database Target Customer/Prospect Measurable Response and/or Transaction Historical Foundations Multi-Channel Fulfillment Mail/Cat Web Physical Store

Components of the Direct and Interactive Marketing Model Direct Communication 1:1 Multiple Media Measurable Response Database Customer Relationships Multichannel Fulfillment/Distribution

Primary Applications of Direct and Interactive Marketing Traffic-building at the seller’s location Lead-generation at the buyer’s location Mail order (remote location) Multichannel distribution

Primary Users of Direct and Interactive Marketing Product and service enterprises Customer and industrial enteprises Profit and non-profit organizations Fundraising organizations Political action groups

Trends in Direct and Interactive Marketing Creating In-Store Traffic Directing Online Traffic Membership (similarity) Clubs Issues of Privacy and Security

Customer Databases An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data.

Forms of Direct Marketing