Which is a system by which organizations communicate directly with customers to generate a response or transactions
Tools by which direct marketers implement the communication process
Factors that Led to the Growth of Direct Marketing
Direct marketing is one of the fastest growing forms of promotion in terms of dollar expenditures. A number of factors have led to this extraordinary growth.
Development and expansion of the U.S. Postal Service, which made catalogs available to both urban and rural dwellers.
Consumer credit cards, which make it easy for consumers to purchase.
The changing structure of American society and the market – Money-rich, time-poor society
Technological advances that make it easier for consumers to shop and for marketers to reach targeted consumers. These include electronic media and the Internet.
Miscellaneous factors including changing values, more sophisticated marketing techniques, and the industry’s improved image.
Role of Direct Marketing in the IMC Program
This slide can be used to show that direct marketing can be used in combination with other elements of the promotional mix and can work synergistically with these tools.
Combined with advertising – Direct marketing itself is a form of advertising
Combined with public relations – Public relations activities often employ direct-response techniques to do such things as solicit funds
Combined with personal selling – Telemarketing and direct selling are two methods of personal selling used to generate sales
Combined with sales promotions – Direct-mail pieces are often used to notify consumers of a sales promotion or event
Combined with support media – Adding a promotional product to a direct mailer increases response rates
To successfully implement direct-marketing programs
companies must make a number of decisions. As in other marketing programs, they must determine (1) what the program’s objectives will be, (2) which markets to target, (3) what direct-marketing strategies will be employed, and (4) how to evaluate the effectiveness of the program
The direct marketer usually seeks a direct behavioral response. Many organizations use direct marketing to build an image, maintain customer satisfaction, and inform and/or educate customers in an attempt to lead to future actions.
One-step approach: Medium is used directly to obtain an order
Two-step approach: Uses more than one medium
First effort – Screens potential buyers
Second effort – Generates the response
direct mail, catalogs, e-mail, broadcast media, TV spots, informercials, home shopping, print media, and telemarketing—each of which is discussed in detail in the upcoming slides.
Direct mail is the unsolicited mail one may receive. Keys to the success of direct mail are the mailing
list , which constitutes the database from which names are generated, and the ability to segment markets and, the offer.
While direct mail continues to be a popular medium amongst many advertisers, and projections are that the market will grow, this medium has been seriously threatened by the Internet.
Catalogs and E-mail
Number of catalogs mailed is decreasing
Available on the Internet for consumer and business-to-business customers
E-mail: Electronic version of regular mail
Direct mail on the Internet
Lower cost and higher effectiveness than traditional direct mail
Spam: Electronic equivalent of junk mail
Broadcast media and TV spots
Two broadcast media are available to direct marketers: television and radio. Radio’s use and effectiveness have dwindled substantially in recent years. Direct marketing in the broadcast industry involves both direct-response advertising and support advertising.
In direct-response advertising , the product or service is offered and a sales response is solicited, through either the one- or two-step approach previously discussed.
Support advertising is designed to do exactly that—support other forms of advertising.
TV spots are referred to in the direct-marketing industry as short-form programs. These spots include direct-response commercials commonly seen on television for products such as drugs and toiletries, audio and video supplies, household products, and more.
Long commercial designed for 30-minute or 1-hour time slot
Designed to be viewed as a regular TV show
Effective with a broad demographic base
Substantial growth due to toll-free telephone numbers and widespread use of credit cards
Difficult to use for direct marketing
Ads compete with the clutter of other ads
Space is relatively expensive
Response rates and profits are low
Sales by telephone
Declined due to its potential for fraud and deception, and for annoyance
personal presentation, demonstration, and sale of products and services to consumers in their homes, at work, or in other places. There are three forms of direct selling
Repetitive person-to-person selling
Salesperson visits the buyer’s home, job site, or other location to sell frequently purchased items or services. Mary Kay uses this technique
Nonrepetitive person-to-person selling
Salesperson visits the buyers home, job site, or other location to sell infrequently purchased items, such as encyclopedias.
A salesperson offers products or services to groups of people through home or office parties and demonstrations. Tupperware and PartyLite Gifts uses this sales method.
Cost per order (CPO):
Evaluates the relative effectiveness of an ad based on the number of calls generated
Customer Lifetime Value (CLTV)
Determines the dollar value associated with a long-term relationship with a customer
Helps determine if a customer should be acquired
Optimizes existing customers’ service levels
Advantages of Direct Marketing
Selective reach – Advertisers can reach a large number of people, while minimizing waste coverage.
Segmentation – Purchased lists allow segmentation based on geographic area, occupation, demographics, job title, and more
Frequency – How often the target market is exposed to the ad. Inexpensive mediums allow more frequent ad runs
Testing – Direct marketing allows for easy testing of the effectiveness of the overall program as well as specific elements.
Timing – Direct marketing materials can often be put together and distributed quickly, unlike other media, which require long-range planning.
Personalization – No other advertising medium can personalize the message as well as a direct media.
Costs – Direct marketing costs can be high, but the actual CPM may be low due to the ability to specifically target the audience and eliminate waste coverage.
Measures of effectiveness – Feedback is often immediate and always accurate.
Disadvantages of Direct Marketing
Image factors – The mail segment of this industry is often referred to as junk mail, and junk emails fare no better. Direct-response ads on TV are often low-budget ads for lower-priced products, which contributes to the image that something less than the best products are marketed this way.
Accuracy – Computerization has greatly improved the accuracy and currency of lists, but the cost of generating a lead can be expensive depending on the quality desired.
Content support – Mood creation is limited to the surrounding program and/or the editorial content.
Rising costs – As postal rates and print costs increase, direct-mail profits are directly impacted.
Do not contact lists – Now exist for both land and cell phones, and a Do Not Contact list for junk mail is under consideration by the FTC