Direct Marketing

Lecture Notes/Annotated Chapter Outline

A.

Direct Marketing Defined Direct marketing activities include characteristics of both marketing communication and distribution strategies, resulting in an integrated marketing program focused on the needs of an individual buyer.

(Transparency 13B: Two Perspectives of Direct Marketing)

1. Direct Marketing Association (DMA) definition includes four key elements.

(Transparency 13A: Direct Marketing: Four Key Elements)

a. An interactive two-way communications system exists between the marketer and the prospective customer.

b. The targeted customer is always given an opportunity to respond.

c. d.

Communications can take place wherever and whenever there is access to communications media.

d. All direct marketing activities can be measured.

2. Direct marketing is any direct communications to a customer or business recipient that is designed to generate the following:

a.

Response in the form of an order (direct order).

b.

Request for further information (lead generation).

c. Visit to a store or other place of business for the purchase of a specific product or service (traffic generation).

3.

Integrated Marketing Communications (IMC) Perspective

Direct marketing is an important aspect of the IMC, but the focus is on selling to individuals one at a time to obtain direct response through marketing communications methods and media, which may involve a sequence of promotional activities.

4.

Distribution Channel Perspective

Direct marketing, the shortest channel of distribution for both consumers and organizations, is used to maximize efficiency and effectiveness by shortening order delivery times and eliminating traditional sales locations and heavy inventories.

B.

Factors Leading to the Growth of Direct Marketing

(Transparency 13C: Factors in the Growth of Direct Marketing)

1.

Customers time constraintsappeal of investing less time and money.

2. Increase in niche marketingclose buyer-seller relationships.

3.

Availability of specialized mediahighly targeted to narrowly defined audiences.

4.

Computerized databasesavailability of detailed personal or company information.

5. Advances in technology and electronic mediaincreased use of computers, Internet, telecommunications capability, etc.

6. Global business expansionworldwide growth of catalogs and mail-order businesses, and use of promotional tools to reach a global marketplace.

C.

Direct Marketing Tools Both personal (direct selling) and nonpersonal (direct-action advertising, electronic media) tools may be used to achieve direct marketing objectives.

1.

Direct Selling

Direct selling includes direct mail, catalogs, telemarketing, in-home or in-office sales, and vending machines.

a. Direct mailpredominant direct-selling method; includes wide range of printed materials, computer disks or CDs, videotapes, and other promotional items that are mailed directly to customers who are precisely targeted through databases and mailing lists.

b. Catalogsmost popular form of direct mail; company cuts distribution costs while reaching selected customers; customers gain time and convenience.

c. Telemarketingefficient direct marketing tool; uses one or more types of telecommunications services to obtain direct response.

d. Home or office personal sellingsales representative takes goods and services to a customers home or workplace; includes party plans and supporting catalogs.

e. Vending machinesdispense wide array of goods and services direct to the customer in convenient locations.

2.

Direct-Action Advertising

Direct response can be obtained through the use of print and broadcast media, with the objective of motivating customers to make a purchase at the time of the offer.

a. Direct response: print mediamagazines, newspapers, inserts, and supplements are the most frequently used print media.

b. Direct response: broadcast mediacommunicating with customers by television or radio to obtain immediate response to an offer.

3.

Electronic Media

Technological advances have accelerated the use of electronic media in direct marketing, including television and cable, Internet, fax, video, and other media.

a. Television and cableadvances in interactive capability have increased the usefulness of these already important media for marketing communications.

b. The Internetaccessibility and interactivity of this medium are the key advantages for direct marketers, with phenomenal growth anticipated.

c. Facsimile, video, and other mediagenerally used in combination with other direct marketing media.

D.

Objectives of Direct Marketing

The major objectives to be achieved by directing marketing efforts are to build relationships with customers and to obtain a direct customer response, although some direct marketing activities are intended to reinforce other IMC tools.

(Transparency 13D: Direct Marketing Objectives)

1. Build Customer Relationshipsindividuals that represent the seller may be perceived as an extension of the product they are selling, emphasizing the importance of developing and maintaining continuous buyer-seller relationships.

2. Direct Response or Transactionelicit a direct, immediate response from customers to elicit a one-time transaction or repeat business.

E.

Integrated Direct Marketing Communications Direct marketing tools must be integrated among themselves and with other elements of the marketing mix and communications mix.

1. Integration Across Direct Marketing Toolssynergies are obtained from the use of multiple media (direct selling, direct-action, and electronic) that are combined to achieve a common objective through multiple exposures.

2. Integration with Other Communications Mix and Marketing Mix Elementsan organizations marketing mix includes the communications mix (IMC), which in turn includes all tools of the direct marketing mixand these elements must all work together to achieve organizational objectives.

F.

The Direct Marketing Process Within the framework of the strategic planning process and other marketing activities, the direct marketing process consists of developing and maintaining databases, an interactive marketing system, and a procedure for measuring results.

1.

Customer Databases

The company that has up-to-date, accurate databases that provide relevant information about customers and their buying behavior can dominate if they are developed and managed carefully.

a. Role in integrated direct marketingdatabases with detailed consumer or organizational information have gained importance for direct marketers because of their proven usefulness in marketing decisions (market segments, media, etc.).

b. Developing and managing a databasedatabase goes beyond customer lists to include demographic characteristics, buying preferences and behavior, media habits, and other information that are gathered and analyzed on a continuous basis. Data warehousing and data mining have become an integral element of direct marketing success.

2.

Interactive Marketing System

The simple salesperson-customer transaction of the past has evolved into technology-based selling systems that combine computers, software, databases, and telecommunications technologies into one system to enable organizations to build relationships and sell directly to customers.

(Transparency 13E: Components of a Direct Marketing System)

3.

Measuring Results

The results of direct marketing programs must be measured to determine whether or not they are successful because while direct marketing is efficient, it is also costly and time-consuming to implement. Results can be measured by test markets, sales response versus objectives, marketing and sales productivity systems, and so forth.

G.

Issues in Direct Marketing There are issues and concerns that must be faced by both customers and direct marketing organizations.

1. Customer-Related Issuesmany customers are responsive to direct marketing; others are reluctant to make purchases this way.

a. Factors motivating usedesire for quick and convenient order fulfillment, lower prices, highly targeted specialized media, interactive media, and more technologically savvy buyers.

b. Factors discouraging usediscomfort with interactive technology, unavailability of direct salespeople, preference for in-store shopping, and privacy/ethical issues.

2. Organization-Related Issuesboth for-profit and nonprofit organizations are concerned with the use of resources and measures of effectiveness.

a. Resource utilizationneed for efficiency by cutting operating costs and processing time, and ability to target customers precisely; counterbalanced by the time and effort required to create and maintain a direct marketing system.

b. Effectiveness measuresoften difficult to measure results of direct marketing, but can analyze the effectiveness of each element in terms of sales results, inquiries, messages, customer service/satisfaction, or other forms of response.

3.

Legal, Ethical, and Social Issues

While many issues concern buyers and sellers about the use of direct marketing, two major issues are the possible invasion of privacy with customer databases and the tactics of some multilevel marketing (pyramid) businesses.

a. Invasion of privacyconcern with ability to create databases that contain in-depth personal information and the possibility of its sale to others.

b. Multilevel marketing (pyramid)many of these firms are legal and ethical in their practices; others are not because they place more emphasis on building a multilevel salesforce rather than focusing on the sale of a product.

H.

Trends in Direct Marketing Three related factors appear to dominate the future of direct marketing: databases, technology, and communications. These factors have brought about changes in the buying process and shifts in media usage by both buyers and sellers.