11: DIRECT MARKETING

11
DIRECT MARKETING
The content of this supplementary note links with the following chapters: 13 (page 305), 16 (page 362)
What is direct marketing? Direct marketing (i.e. a zero intermediary level channel) is current practice in industrial markets when potential buyers are few and products are sophisticated or custom-made and of high unit value. The surprising fact in recent years is the development of this selling system in the field of consumer goods, largely as a result of the development of new communication media, such as telemarketing, direct response radio and television, electronic shopping (Minitel), etc Direct marketing is defined by the Direct Marketing Association as: An interactive system which uses one or more advertising media to effect a measurable response and/or transaction at any location. According to this definition, direct marketing does not necessarily imply non-store marketing, (i.e. a marketing system without using intermediaries). To clarify the definition, a distinction must be made between direct-order marketing and direct-relationship marketing:

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11: DIRECT MARKETING

In direct-order marketing, purchases are made from the home and delivered to the home, and the firm distributes directly without using intermediaries. This is non-store marketing, and the techniques used include: o Mail order catalogues o Direct mail o Telemarketing o Electronic shopping, etc. In direct-relationship marketing, the objective is to stimulate sales by establishing direct contacts with prospects and customers to create or maintain a continuing relationship.

Direct-relationship marketing can very well co-exist with a conventional vertical indirect marketing system. For this reason, the expression interactive marketing seems more appropriate than direct marketing, which refers essentially to non-store marketing practices. The development of interactive marketing is indicative of a significant change in the exchange and communication process between producers and consumers in affluent economies. It suggests that the marketing monologue which prevails in most market situations tends to be replaced by a marketing dialogue, with customised marketing being substituted for mass or segment marketing.

Rationale of direct-order marketing Several factors explain the development of more direct marketing and communication systems: Weakening of mass media advertising's effectiveness, caused by the proliferation of advertising messages and changing viewing habits in TV (zapping, DVD) combined with the rising cost of brand image advertising campaigns. Change in attitude towards shopping, which is no longer associated with fun and excitement, but is rather perceived as a bore and as time-consuming by educated consumers who tend to give their time higher value. Catalogue shopping provides a convenient shopping alternative. The formidable development of low-cost computers, with their immense storage and processing capabilities. This has greatly facilitated the use of databases to record and keep track of commercial contacts with customers information which can then be used to reach them individually with highly personalised messages. Potential advantages for the manufacturer: o Enables greater selectivity in communicating with the market, personalization of messages and the maintenance of a continuous relationship. o Offers a way to bypass intermediaries and to reduce the firm's dependence on the goodwill of too-powerful retailers. o Enables cost savings because of the considerable cost increase of personal communication. According to a study by Forsyth (1988), the average cost of a business sales call rose to $251.63 in 1987, i.e. 160% of the 1977 cost of $96.79.

The economic incentive of increasing the productivity of marketing expenditure is very appealing.

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11: DIRECT MARKETING

The tools of direct marketing Direct marketers can use a large variety of tools to reach potential customers, from traditional face-to-face to Internet on-line selling. The most important tools are: direct mailing, catalogue selling, telemarketing, television direct response marketing and on-line marketing. Face-to-face selling remains the preferred tool in business-to-business markets, where firms, having a limited and well identified number of prospects, use their sales force to locate them and to develop them into customers. Direct-mail has grown spectacularly during the last years thanks to the development of personalised data banks which permit high target-market selectivity. One European, in average, receives 46 mailings per year against 200 in the United States. Catalogue selling accounts for 2,5% of retail sales in France. In Europe, several companies hold strong positions in this market: Les Trois Suisses, La Redoute, Manufrance, Otto Versand and Schikedanz. In the United States, the leaders are Montgomery Ward, and Sears and Roebuck. Distance selling accounts for more than 5% in the United Kingdom and 7% in the United States. Telemarketing (or telephone marketing) is experiencing a spectacular development with the generalised adoption of green (toll-free) telephone numbers. In Europe, the most striking success in telemarketing was achieved by Direct Line, a telephone sales service set up in Britain by Royal Bank of Scotland. The great advantage of telemarketing is the rate at which calls can be made. It is quite realistic for even untrained sales personnel to make more than 50 calls telephone calls in a day, compared to 300 face-to-face calls in year. With specialist telesales personnel, the call rate can rise to hundreds per day. Television marketing consists of air television spots that persuasively describe a product and provide listeners with a green telephone number for ordering; this form of distance selling is still modest in Europe. It lends itself particularly well for products where the demonstration effect is important. Online selling is probably the most promising distance selling method today.

Organisation of a direct-order marketing system Direct-order marketing requires the development of a marketing database system. The essence of the system is to communicate directly with customers and ask them to respond in a tangible way. A direct-order marketing system can be summarised as follows: The creation of personalised messages containing an offer and an invitation to respond. A database is then used to record the response of customers and to adapt the next message. The components of a direct marketing system are outlined in more detail below. The immediate objective The end objective is of course to achieve a sale, but the immediate objective is to create a dialogue and to maintain a relationship. The intermediate objective may be to obtain prospect leads, to reactivate former customers, to acknowledge receipt of an order, to welcome new

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customers, to inform customers and to prepare them for later purchase, to generate requests for catalogues or leaflets, to propose a visit to a show room, etc. Personalised messages This is the main advantage of direct marketing over mass media advertising. Instead of using standardised advertising messages and a shotgun approach, a marketing database makes possible a rifle approach and, at the limit, a truly personalised message by including details relevant to the target customer and not to others. The offer To obtain a positive behavioural response from the prospect, the message must include an offer or a proposition sufficiently attractive to induce prospects to respond. In the simplest case, it is an offer to purchase the product. It could also be: The opportunity to inspect the product A free sample or a free credit Participation in a contest or in a club.

The attractiveness of the offer is a key success factor. Measurable response In an interactive marketing system, the key objective is to engage in a dialogue with individual customers, and it is therefore essential to obtain some kind of response. The ideal response is placing an order, but other forms of response are sought, such as: Agreeing to a sales appointment Returning a reply coupon Confirming receipt of information Agreeing to attend an exhibition Providing more information about needs and wants.

In an interactive marketing system, potential customers are self-selected since only potentially interested customers will respond. One of the greatest advantages of direct marketing is that responses to campaigns are measured, enabling marketing management to identify the effectiveness of different approaches. Database marketing Any interactive marketing system implies the existence of a computerised database. A marketing database is '... an organised collection of data about individual customers, prospects or suspects that is accessible and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or of a service, or maintenance of customer relationships. (Kotler, 1997, p.721).

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11: DIRECT MARKETING

In addition to the personal identification elements, the database must include information on patterns such as: Past purchase behaviours Preferred brands Size of orders.

Logistics Within the firm the capacity to handle prospects reactions and personal orders must exist. This implies a considerable reinforcement of the sales administration and logistics departments. Communication mix The communication modes used are mainly personalised media like direct mail, catalogue marketing and telemarketing. Then come radio, magazine and television direct-response marketing and electronic shopping. Direct mail remains the most important medium.

Limitations of direct-order marketing Convenience is the major benefit for the consumer, but many consumers can be less interested in convenience than in product quality, reliable delivery and in being able to touch, feel and smell the merchandise. In addition, as direct marketing becomes more and more popular, many consumers view the techniques of direct marketing the unsolicited telephone calls, the junk mail and the trading and renting of mailing lists as an invasion of privacy.

Bibliography
1. Cespedes F.V. and Smith H.F. (1993), Database Marketing : New Rules for Policy and Practice, Sloan Management Review, Summer, pp.7-22. 2. Forsyth D.P. (1988), Sales Calls Cost More According to McGraw-Hill Direct Marketing, August, p.67. 3. Kotler (1997) 4. Kuttner R. (1998), The Net : A Market Too Perfect for Profits, Business Week, May 11, p.12. 5. Reboul, P. and Xardel, D. (1998) Commerce lectronique: techniques et enjeux, 1th Edition, Paris, Edition Eyrolles. 6. Strauss J. and frost R. (1999), Marketing on the Internet, New Jersey, Prentice-Hall. 7. Watson R.T., Akselen S. and L.F. Pitt, (1998), Building Mountains in the Flat Landscape of the World Wide Web, California Management review, Vol.40, N2, Winter, pp.36-56.

Market-Driven Management: Supplementary web resource material

Jean-Jacques Lambin, 2007 Published by Palgrave Macmillan