CHAPTER-1

INTRODUCTION

Introduction
Direct Marketing is a channel agnostic approach to driving maximum customer
satisfaction and optimal market place results.
Direct Marketing is a marketing process where companies market to carefully targeted individual
consumers with an appropriate, relevant and timely offer or message using one or more
advertising media to obtain an immediate and measurable response or transaction.
Direct Marketers communicate directly with customers, often on a one-to-one, interactive basis
to build and cultivate long lasting customer relationships. Direct Marketers use detailed
databases where they understand customers demographics, attitudes, preferences and purchasing
behaviours. With this knowledge, they tailor their marketing offers and communications to the
needs of narrowly defined segments or even individual buyers.
Direct Marketing is also referred to as Interactive Marketing or Database Marketing, because
it is expected to be two-way communication with the customer or prospect and it is database
driven, where the database contains customer demographics, attitudes, preferences and
purchasing history and behaviour. Beyond brand and image building, Direct Marketers usually
seek a direct, immediate, and measurable customer response. With digital advertising mediums
and e-commerce websites, it is possible to effectively track and measure customer responses, if
the customer looked at the offer, responded to the offer by seeking more information, visited the
marketers e-commerce website, or placed an order, etc. Early direct marketers used catalogs,

direct mailers and telephone calls. They gathered customer names and sold goods mainly by mail
and telephone. Today, with the advance in database and computer technology, direct marketers
are using new marketing media the internet. Internet provides several mechanisms - email, web
advertisements and affiliated websites to drive customers to marketers website or stores for
sales.

How does it work?

The whole objective of direct marketing is to get the customers to respond to

you directly. They do not have to go through another firm "who take a portion of the profit but,
by responding directly, they are able to obtain a product or service at a good price and the
supplier is able to make a good margin. The response can be to a telephone service or to a 1800
number, or it may be by way of an order being posted or faxed to you, or even a coupon sent
from an advertisement in a magazine. The whole purpose of direct marketing is to get the right
message quickly to the right people so that they can respond with an order straight to you. In
todays world of increasing competition the public are consistently bombarded with thousands of
different marketing offers, usually through the traditional means of television or face-to-face.
The world has become accustomed to direct marketing, usually by way of direct mail, and this is
increasingly becoming a way that business is done. Because of peoples lifestyle and the fact that
many people work during the day, time is precious. Purchasing a product through direct
marketing, at a reasonable price, is an option that many people now embrace simply because
they do not have the time to call in to the traditional stores and shop around looking for what
they want to buy.

Spending Trends A Transformation

Direct Marketing represents more than 50% of total advertising spend in the U.S.
Expected to grow 3.9% in 2011

Why?

High return on investment

For every $1 spent in Direct Marketing, there is an average of $11.69 in incremental lift in
revenue across all industries.
Trackable
In todays fragmented marketplace, CMOs, CEOs and CFOs want accountability for ad dollars
spent.

When should you consider direct marketing?

When the goal is to increase customer lifetime value

Highly targeted offer or unique value proposition
Many different segments
Need to generate a specific response
Want to test in real world situations
When you want to take a calculated risk.

Highly targeted, little waste

1:1 Media
Traditionally ROI driven (CPM not as significant as ROI)
Highly targeted, little to no waste, enables you to spend more per touch and get greater returns.
Higher Cost-Higher ROI

Other Media
Traditionally CPM driven (strive for low CPM)
Highly visible, lower cost, enables greater reach to much broader targets (greater waste).
Lower Cost- Lower ROI.

Taking calculated Risks

Intuition DOES NOT matter
opinion is a marketing survey of one
focus groups and surveys
They tell you what they think theyd do
Dont project response and sell-through well
There is little to no waste
Testing is the only way to protect ourselves and stay ahead of the competition.

PROBLEMS AND PROSPECTS

PROBLEMS
Cannot see and examine
Operating costs
Low response rates
Intense competition
Image problems
Lack of comfort with interactive technology
Privacy and ethical issues

PROSPECTS
Segmentation and targeting
Geographical range
Shopping convenience
Technological advances
Lower prices to customer is possible
Lower operating costs are possible.

Test, Learn, Optimize

Marketing Calendars must be fluid

Dollar amounts and objectives can be static
Allocations, media mix and messages need to be fluid
Programs should be readjusted with every set of results

Winning results become control

Must think and act quick to develop new tests.

Getting Started

Build a database
Ask people to opt-in to 1:1 channels
Make it easy
Give them a good reason
If they decline or dont respond, respect the decision.
Ask at every intersection
Online shopping cart check out
Catalog requests

Online information and forms

Point of Sale
Social Network
Drop boxes
If you have data on your customers/prospects: use it
Create more relevant messages
Get higher response rates
Types of segments:
Customer type (new, lapsed, best)
Purchase type (books, merchandise)
Geography
Interests
Bottom line
Learn what your audience wants and what positively affects your bottom line

Characteristics of direct marketing

Each of the tools of the marketing communications mix can be considered in terms of their core
characteristics. The Mix Selection Framework enables insight into these characteristics. The
characteristics are; communications, credibility, cost, control and tasks.
Communications concerns the size of audience a direct marketing campaign can reach and
whether messages can be personalised and be capable of interaction. On the first element the
answer is that the size of audience is dependent on the financial resources available. In reality
direct marketing is expensive so the audience is restricted. However, direct marketing incurs low
levels of wastage so the size of audience is not particularly significant. Direct marketing excels at
the use of personalised messages as it is a highly targeted activity. Indeed, the level of
interaction within direct marketing can also be high as this tool is used to engage people on a
behavioural dimension.
Credibility is concerned with the perception receivers have of the expertise and objectivity of
the source of a message. Using these criteria, direct marketing is perceived to be a relatively low

in terms of credibility. However, some direct marketing campaigns, if developed and researched
properly highly regarded. This depends largely on the perceived value, tone and style of the
campaign.
Costs associated with direct marketing are generally high. The absolute costs, the overall costs of
funding the exercise, can be high if there are people involved in the campaign (eg telemarketing)
or low if run as a technology only exercise (eg email programme). Relative costs, those costs
incurred reaching individual members of the target audience, are also high. The cost of a direct
marketing campaign spread across each member of the target audience reduces the cost per
contact. However, unlike the impact of relative cost with advertising, with direct marketing the
relative costs are high.
Control over direct marketing activities is strong. As with advertising, direct marketing events
can be terminated quite quickly. These campaigns can be created, launched and terminated
according to management preferences. However, it should be remembered that direct marketing
activities are rarely used in isolation, and should be used as part of an integrated campaign. The
implication is that the exercise of control is mediated by the use of other elements of the
marketing communications mix.

COMMUNICATIONS

CREDIBILITY

CHARACTERISTICS OF
DIRECT MARKETING

COSTS

CONTROL

Characteristics of direct marketing

Each of the tools of the marketing communications mix can be considered in terms of their core
characteristics. The Mix Selection Framework enables insight into these characteristics. The
characteristics are; communications, credibility, cost, control and tasks.
Communications concerns the size of audience a direct marketing campaign can reach and
whether messages can be personalised and be capable of interaction. On the first element the
answer is that the size of audience is dependent on the financial resources available. In reality
direct marketing is expensive so the audience is restricted. However, direct marketing incurs low
levels of wastage so the size of audience is not particularly significant. Direct marketing excels at
the use of personalised messages as it is a highly targeted activity. Indeed, the level of

interaction within direct marketing can also be high as this tool is used to engage people on a
behavioural dimension.
Credibility is concerned with the perception receivers have of the expertise and objectivity of
the source of a message. Using these criteria, direct marketing is perceived to be a relatively low
in terms of credibility. However, some direct marketing campaigns, if developed and researched
properly highly regarded. This depends largely on the perceived value, tone and style of the
campaign.
Costs associated with direct marketing are generally high. The absolute costs, the overall costs of
funding the exercise, can be high if there are people involved in the campaign (eg telemarketing)
or low if run as a technology only exercise (eg email programme). Relative costs, those costs
incurred reaching individual members of the target audience, are also high. The cost of a direct
marketing campaign spread across each member of the target audience reduces the cost per
contact. However, unlike the impact of relative cost with advertising, with direct marketing the
relative costs are high.
Control over direct marketing activities is strong. As with advertising, direct marketing events
can be terminated quite quickly. These campaigns can be created, launched and terminated
according to management preferences. However, it should be remembered that direct marketing
activities are rarely used in isolation, and should be used as part of an integrated campaign. The
implication is that the exercise of control is mediated by the use of other elements of the
marketing communications mix.

COMMUNICATIONS

CREDIBILITY

CHARACTERISTICS OF
DIRECT MARKETING

COSTS

CONTROL

Different concepts
Marketing refers to a synchronized process of promotion and sale. There are various ways
adopted by the producer to market his goods. Television, radio and newspapers have been the
most common means used. But if we analyze the situation prevalent today, these methods seem
to be a bit outdated. Revised forms of marketing are being used these days.
The advertisement techniques used today communicate directly with the consumer. Catalogue
distribution, street advertisement, fliers etc are some of them. The direct marketing has erased
the intermediate party that is the media, it deals directly with the one who would be affected that
is the customer.
Direct Marketing Services are a form of communication that sends out personalized messages to
the prospect individually instead of sending them out to the whole bunch through mass media.
This form of communication ensures, maintains and enhances long term direct relationship with
the prospects.
The other aspect of the services is that it helps the producer gauge the responses of the consumer.
The tactics can be changed according to the customer response to yield maximum profits. The
advantage of this is that it makes direct marketing services most successful.
These services have represented a revolution in the field of marketing in the past one decade.
According to a recent survey conducted in the United States of America nearly 70% of the
budgets is being spent on the various techniques of direct marketing.
Many agencies have sprung up which provide eminent direct marketing services. Direct
response from the customers is the driving force of this concept.
There is a wide range of services provided by the agency. Usually the small scale enterprises
make use of it. Some of the eminent services provided by the agencies are listed below
List management
List brokerage
Email append
Interactive marketing
Data processing
Database marketing
Modeling
Analytics
Direct marketing services are based on conceptual analysis of the purchasing trends of the
customers. The agency entrusted for providing the work, perform an all round survey to decide
upon the best possible option suitable for the company profile. Based on these results their
customer can then adjust the products and services in order to cater the needs of target audience.

Historical Background
At one time there was no such thing as marketing. Blacksmith, stonemason, saddler, carpenter,
hosier and tailor all knew their customers personally. They were in a position to discuss the size,
the shape, the design, the colour and the price of the goods they made with the people who
bought and used them. A dialogue existed between producer and consumer.
With the coming of the Industrial Revolution this personal contact came to an end. Changes in
production led to changes also in distribution. The greatly increased production of goods which
resulted from mechanization required a mass market for their consumption, and distribution
became a major undertaking. The manufacturer was no longer able to undertake the distribution
of his products to the consumer. He invested his capital in premises, machinery and raw
materials. He had neither the means nor the desire to distribute the product; nor was it necessary
for him to do so. A distributive trade grew up to serve every industry. Wholesalers, with
warehouses in major cities, purchased the manufacturers products in bulk, stocked them and
organized their distribution to retailers throughout the country. On the one hand, the wholesaler
largely financed the manufacturing operation, while, on the other, by the extension of credit to
retail shopkeepers, he financed much of the retail distribution of consumer products.
One of the major problems facing any manufacturer is to gauge the likely demand for the goods
he proposes to make. Once the direct contact between producer and consumer had been broken,
it was upon the distributive trade, in particular the wholesaler, that the producer relied for his
market information. This function the wholesale houses performed exceedingly well. Through
their teams of salesmen they served retailers in cities and towns throughout the country; the
success of the retailers business depended upon his knowing and anticipating the needs of his
clientele, and this information was fed back via the travellers to the buyers of the wholesale
houses. These buyers therefore had a feel of the market. They were generally greatly
experienced in the various commercial aspects of the classes of goods in which they specialized.
It was they who decided the particular lines of goods which were to be bought from the
manufacturers, the quantities which were to be stocked, subdivided into their natural categories
according to the nature of the goods, such as size or width, colour, design and quality. It was they
who decided the price at which the goods would be bought from the manufacturer and the price
at which they would be sold to the retailer. By so doing, they effectively set the general price
level at which goods would be sold to the consumer. Wholesale buyers were therefore, in some
respects, the first practitioners of marketing.
The heyday of the wholesale distributor was the latter part of the nineteenth century and the early
twentieth century. During this period there were of course considerable changes in consumer
requirements. Apart from the more obvious changes brought about by fashion, all classes of
merchandise underwent gradual change as the social habits of the population altered. Such
changes were, however, often barely perceptible. The pace of life was very much slower than it

is today. Furthermore, goods were usually made and bought to last: built-in obsolescence had
no meaning in the 1890s.

It was in the 1950s, with the arrival of automation on a large scale, that conditions underwent a
dramatic change. As mass-production processes were introduced into nearly every industry,
outputs increased rapidly. The dream of vast quantities of cheaply made goods at a price within
the reach of every man and woman in the country now seemed likely of fulfilment. The national
policy of full productivity and full employment resulted in rising wages and, by the 1960s, the
so-called affluent society had arrived. Ironically, however, it was at this stage that the creation of
mass markets essential to absorb these vast quantities of goods coincided with a rapid rise in
the cost of labour in the distributive trades. The savings achieved by mass production were now
being eroded by the increased cost of distribution. Furthermore, production in many industries
was at last catching up with demand. The shortages of the immediate post-war years were giving
way to abundance. What had been a sellers market since the outbreak of the Second World War
in 1939 became very much a buyers market.
For the post-war generation of businessmen this was a novel experience. It was recognized that
the scientific approach, which had brought about the revolution in production, must now be
geared to devising ways and means of creating and maintaining new markets to absorb the
output. A lead had already been given in this direction by a number of American producers for
whom the marketing concept had dawned some decades earlier.