Electronic Commerce and Direct Marketing MKT 3900-01

Direct Marketing Once the ugly stepchild of marketing, DM now garners 25% of US marketer’s budgets surpassing newspapers and broadcast TV Direct marketing started fairly simply with early American colonists ordering seeds and other products not available in the Colonies. Rural America has always favored direct marketing to enable access to everything from prefab homes and barns to clothing.

Direct Marketing Direct Marketing today is at the center of a communications revolution The Internet is now the essential tool and an essential part of everyday living Marketer’s now demand their funds are used efficiently to provide customer centric communications ROI is demanded

Direct Marketing Growth Recent growth in non traditional businesses Credit card companies, banks, investment firms, insurance companies Telecom, cable, utilities now heavily involved Airlines, automobile manufacturers and the travel industry are all users Very few industries are not touched by direct marketing

Direct Marketing Defined So what is direct marketing exactly? The interactive use of advertising media to stimulate an immediate behavior modification in such a way that this behavior can be tracked, recorded, analyzed, and stored on a database for future use and retrieval.

Fundamental Definition Components Interactive – One on one communications between the marketer and prospective customers/customers. Two way interactions are the building block of DM Use of Advertising Media Combination of various media complements the overall effectiveness of the marketing efforts Track, Record, and Analyze Measurability is the hallmark of DM. Marketers now demand it! Stored in a Database for Future Use and Retrieval

Basics of Direct Marketing Seeks to generate a measurable response to an offer A call back, an order, website research The organization wants to generate leads and encourage relationship building Elements of Promotion Copy 15% List/Media 40% Timing 10% Offer 20% Layout/format 15%

Components of Promotion Media/List One of the keys to producing a response All a matter of exposure Segmenting and targeting vital Getting together the buyers/sellers Media mix vital – TV, radio, Internet, newspapers Geography, demos, psychographics Offers Relevance to TM vital; motivation important Expenses lower than advertising so offers and incentives can be more generous

Components of Promotion Creativity Copy - compel me to respond Benefits, description, support copy and facilitators or sweeteners Layout – enhance eye flow patterns, easy to read and process, highlight significant items and tell the story

Efficiency in Direct Marketing Do you attempt to capture a certain % of the market share or a % of your segment? Many direct marketing products experience different product life cycles Changes media and offer strategies  New Objectives Building and maintaining customer loyalty Costs 5-10x more to generate a new customer than retain 90% of profits from 10% of customers – Olgilvy Reducing customer defections by 5% could increase profits 25-85%

One to One and Customer Relationship Marketing Direct interaction with the individual customer Mass Customized treatment of the consumer Difference with Direct Marketing is how solutions are approached Enables information collection and insight Enables creation of products for the consumer Direct Marketing Traditionally behaviorists Results oriented (the sooner the better) If you buy outdoor equipment, sell the lists, bombarded with catalogs!

Integrating Communications Phase One – moving away from mass marketing messages … one commercial for everyone watching a particular program (TM) Identifying customer segments and sending messages per segments Integrating DM into an overall communications program First understand insights and consumer motivations Matching audiences, media and technologies avail Generate effective messages per audience

Trends in Direct Marketing Recent results show that email metrics remain strong Click rates (5.2%) declined slightly over last quarter but remain in line with same quarter last year Average volume per client increased by 16.2% from Q1 Unique click conversion rates increased 14.6% over Q1 2011 and 6.2% over Q2 2010 $153B spent in 2010 on DM Captures 53% of advertising expenditures $1 investment in DM yields $11.63

Direct Media via Postal Mail Postal Mail Advertising (p-mail) – any advertising matter delivered by the USPS to the person to be influenced Catalogs, letters, postcards, programs, videocassettes, order blanks, menus, etc. B2B heavy users of p-mail Rising cost of TV (and less for $) Unparalleled targeting of messages Measureable results

P-Mail Distinctive Features Targetability – precisely targeting a defined group of people. Example, Saab selected just 200,000 consumers to receive mailings on the Saab 9-5. These included 65,000 current Saab owners and 135,000 prospects who satisfied income and car ownership requirements. Measurability – how many mailings went out, how many responses

P- Mail Features Accountability – easy to assess outcomes for brand manager Flexibility – quick and easy to change with environmental factors Efficiency – targeting saves money over national ads

Catalogs and Audiovisual Material More than 10 billion distributed annually in US More than 2/3 recipients visit company’s website Sales to catalog recipients more than 150 times greater than those not receiving the catalog Marketers look at them as an effective and efficient way to reach prime prospects

Why consumers dig catalogs Saves time – no parking spot hunting, travel, in-store crowds Convenience – 24/7 browsing, decision making and ordering No concerns about crime in certain areas Liberal returns, online purchases accessible, 800 numbers enhance ease of shopping experience Quality merchandise Guarantees

Audio visual Advertising Videotapes, DvDs CD-Roms Capture key visuals and audio information about the brand and distributing this information to business consumers and end users to project on computers or tv Limited research on this form of marketing Yet often the result of requests to the company enhancing targeting and effectiveness Some evidence less likely to be thrown away vs p-mail Expensive unless can lead customers to online downloads

Use of Databases Access to database information of addresses, email contacts and phone information essential to the success of direct marketing campaigns. Additional pertinent demographic information necessary to best target Comparison to mass media advertising “Broadcast media send communications; addressable media send and receive.” Shimp 2010.

Benefits and Uses of Databases Allows firm to identify the best prospects for products and services Allows varied messages to different groups of customers Enables the creation of long term relationships with customers Enhances advertising productivity Enables calculation of lifetime value of customers

Data Mining Sizes range into the millions of addresses with dozens of input variables for each entrant Inexpensive software allows the segmenting of entrants based upon variables of interest Relations among variables to enable co-op marketing Depth of understanding in buyer wants, purchases, uses

Data Mining Example Credit card companies analyze your purchases You disproportionately spend on exotic vacation purchases A promotion designed around winning an exotic vacation may very well generate a response from you  Furniture company mining its database identifies that families with two children do not buy furniture within two years of purchasing a car, they acquire automobile purchase lists to better refine their promotions

Business, Strategic and Direct Marketing Planning What actions will achieve efficient, effective and expected outcomes? Strategy and planning give organizations the framework for choosing the right tools and techniques to maximize the variety available in DM Goal of Planning to stay on track, stay up to date with emerging technologies and optimize resources

Three Key Strategic Questions First, Where should we focus the greatest effort and why? How does the company generate revenue? Focus on where generate the greatest reward What do we bring to the table? What are our core competencies and distinct capabilities? Do our core capabilities suit our position? Can the firm sustain this position over time? Avoid developing competencies that do not garner a competitive advantage

The Strategic Business Plan Designed to draw in investors and support financing needs Provides information to the investors that are the “customers” for the plan Describe the key concepts of the business Establish that there is a market for the products and services the company sells Outline the organizational structure Include financial projections that show the company’s expected sales and growth over a 3 year period

Elements of the Strategic Business Plan Introduction Executive Summary Mission and Vision Statement Market Analysis Customer Analysis Business Description Organization and Management Integrated Marketing and Sales Plan Funding Request Financial Projections Appendices

Breakdown of Elements of BP Introduction Short description (no more than a page) as to why the plan is being written, its audience, business objectives and purpose as well as business concept Executive Summary Clear picture of what the business is about including the mission statement, the start date of the business, founders’ names and functions, # of employees, location of headquarters and any branch offices, description/size of facilities, the products and services category, current investors (bank names), growth summary and plan, financial highlights, market potential and summary of management plans

Breakdown of BP Mission and Vision Statements Market Analysis Central purpose of the business and its planned activities, major objectives, key strategies and primary goals Market Analysis SWOT Description of competitive environment, Identification of prospects (how was TM identified?) Market share sought and held

BP Breakdown Customer Analysis Who buys the product/service? Potential target growth in the marketplace Are their multiple buyers, decision makers and buying authorities involved? Business Description What business are you in and what are the trends in the industry? Description of products and services offered and competitive advantages of these goods (trademarks, patents, brand names) Accountability – easy to assess outcomes for brand manager Flexibility – quick and easy to change with environmental factors Efficiency – targeting saves money over national ads

BP Breakdown Organization and Management Organizational structure Staffing needs Job descriptions of top management Triggers for additional staffing requirements Include an organizational chart Details of compensation Incentives Benefit plans Bios of management and BOD Founder information

BP Breakdown Integrated Marketing and Sales Plan Funding Request Detailed summary of the marketing plan Methods of selling, distribution plan, mix for advertising(and rationale), DM, Internet, sales promotion, PR and events Discuss efforts in relation to competitors Credit and terms for receivables, credit approval process, pricing guidelines, markups, competitive response analysis, budgets and timing. Discussion of revisions if growth is not met Funding Request Details of the request and the potential sources, terms, ROI

BP Details Financial Projections Appendices Detailed accounting of how much money needed, when it is needed and when investors can expect a ROI Balance and Income Statements Cash Flow Projections Cash In Cash Out Timing of each Appendices Info relating to text of the business plan Research plans, tables, detailed market or sales projections, analyses, exhibits

Strategic Plan Brings together an organization’s management, employees, stakeholders, and customers by communicating a common understanding of where the organization is going, how employees are involved in this common purpose, and how to identify benchmarks for progress and success Are we a customer driven business? How do we hear the voice of the customer?

The Strategic Plan Introduction Executive Summary – summarizes key elements of the plan Goals and Objectives – highlights achievements for next 1-3 yrs Situation Analysis – competitive , environmental and market analysis SWOT Analysis – key strengths and weaknesses, market analysis Mission Statement – what does business do and hope to do Vision Statement – what will co look like in 3 years Business Values – principles that govern the company Key Strategies – identifies what success looks like, build strengths or resolve weaknesses? Action Plans Financial Plans – goals and objectives Performance Measures - benchmarks

The Multichannel Direct Marketing Plan Seeking to reach a symmetry and symbiotic relationship between direct marketing tools and the Internet and newer technologies Similarly developed to the Business Plan and the Strategic Plan It just is a narrower scope in vision It is a promotions plan reflecting only the visions and actions for direct marketing

Multichannel Direct Marketing Plan Intro Plan’s purpose Intended Audience Executive Summary Summary of plan’s contents Objectives, marketing strategies, key target groups and mkt segments Elements of tactical plan and budget Situation Analysis Macroenvironment of marketplace Demo trends, economic indicators, political and social issues Competitive situation Target group analysis Distribution channels Product situation Research

DM Plan Opportunity and Issue Analysis Goals and Objectives Elements of SWOT germane to the marketing plan Goals and Objectives Marketing and financial objectives Specific and measureable Benchmarks (click throughs, creation of customers) The Marketing Strategy Positioning discussions Aligning needs and wants of customers to offerings Clear understanding of the prospect Tactics Details of each marketing event and action planned Media and mailing list planning's