Direct Marketing Midterm

Definition: Direct Marketing
Direct marketing is the use of interactive media to effect the behaviour of consumers to generate immediate sales and ultimate profitability.

It requires using consumer information (usually housed in databases) to creatively target market niches with effective solutions for their market needs.

When successful, direct marketers will establish lifelong relationships with consumers, creating loyalty and enhancing lifetime value of the consumer to the organization.

Direct marketing is appropriate for both for-profit and non-profit organizations.

Examples of Direct Marketing
— Email
— Websites
— Social/Digital media
— Direct mail
— Telemarketing
— TV/Radio
— Out of home
How DM impacts all aspects of Marketing Strategy Plan
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Direct Selling in Canada
Sales approach (2015):
— Individual (one-on-one) selling – 69%
— Party plan/group selling – 28.5%
— Direct orders to firm – 1.7%
— Other – < 1% Compensation structure: -- Multilevel (eg: Amway, Mary Kay) - 81% -- Single Level - 19%
Informed Consent and Privacy Issues
• Use of personal information without permission (including the sale of such information)
• Availability of information on the “open” environment of the Internet and other interactive media
• Do-Not-Call list in Canada for non-polling firms

• Consent is the customer’s agreement for the future use of his or her personal information for marketing purposes:
— Implied consent (existing customers)
— Opt-out consent for sharing non-sensitive information with other organizations
— Positive or opt-in consent for sharing sensitive information with other organizations

CEM – Commercial Electronic Message
A message that encourages participation in a commercial activity, including, but not limited to: offering, advertising or promoting a product, a service or a person.
Hybrid or Multi-Channel Systems (AKA Disintermediation)
Used by retailers which greatly threaten single-channel users and intermediaries.

For example, Avon products Inc. with all of the following channels: sales reps, catalogue, Internet, magazine

How DM Shifts the Balance of Power
With DM consumers have the upper hand – they can easily:
• Shop and compare product features and prices
• Review the track record of manufacturers and sellers
• Seek reviews and recommendations through social media
• Get quick and immediate feedback

The balance of power has shifted from the business having control over the process of retailing and the customer experience, to the customer having the ultimate control.

IMC – Integrated Marketing Communications
• A strategic business process that involves planning, developing, executing and evaluating coordinated, measurable, and persuasive communications with external and internal audiences over time
• Audiences include all relevant stakeholders in the marketing process (customers, prospects, employees, associates, others)
• The goal of it is to provide a finely targeted and consistent message across a range of media to the target market as part of the strategic marketing process
Market Segmentation
— People or organizations who have the ability to purchase a product or service

— Specific customers who make a market

— A subgroup of people or organizations that have one or more characteristics in common: they have the same product needs

Traditional marketing segments must be…
• Substantial enough to be profitable
• Accessible for marketing and information gathering
• Homogeneous within (prospects have a lot in common)
• Heterogeneous between (prospects differ between segments)
Traditional Marketing
• Print
• TV
• Direct Mail
• Telemarketing
Direct Marketing
• Email
• Mobile
• Search Engine Marketing
• Direct Mail
• Guerilla Marketing
Data Mining
Allows marketers to extract patterns from a database, allowing them to better understand their customers and target new offers.

Variables (fields) can be tracked, combined, and studied, to identify their interactions.

Relationships can be identified between various campaign factors, customer preferences and outcomes.

Market Share and Share of Customers
• Building a relationship with the customer allows marketers to gain loyalty and trust
• Loyalty results in more sales/customer (or share of customer)
• Market share + share of customer = greater sales and profits
• Share of customer focuses on the meeting the total customer need: cross-selling, new products, and customer loyalty (repeat sales)
• Direct marketing is uniquely positioned to deliver this customer advantage
Value of Customers
Organizations typically have A-level “Best” customers (the most lucrative), B-level “Core” customers (not quite as profitable), and C-level “Marginal” customers who do not spend much, but can take a great deal of time to service. Creative marketers will target more lucrative customers. B-level customers may be grown into A-levels with a little bit of customer care. C-level customers may not be targeted at all. 80/20 rule!
Customer Lifetime Value (LTV)
If you know your average order size, you can determine the lifetime value of a loyal customer.

Why use LTV?
• Useful for knowing how valuable an individual buyer is
• Helps to determine how much should be spent on acquisition costs
• Requires use of historic sales information from a database

You need to know:
• Average order size (dollars)
• How many orders annually
• How many years in a lifetime of purchasing for a valued customer

Then: Lifetime value($)
= (Average order size x Number of orders per year) x Number of years

Recency-Frequency-Monetary Analysis
This approach defines the most profitable customers:
• Recency – last purchase
• Frequency – number of purchases in period
of time
• Monetary – financial impact of individual customer

Determines which customers are the best by looking at how recently a customer purchased a product (recency), how often they purchase (frequency), and how much they spent (monetary).

How to calculate RFM (Recency-Frequency-Monetary)
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The Unique Selling Proposition (USP)
Your 30-second pitch that should translate through any medium effectively. If you can’t deliver it, why would the customer be interested?
Build Trust for Your Brand
• Trust is an emotional reaction to a brand
• Consumers are becoming more mistrusting of brands due to what they perceive to be bad corporate practices
• Cultural & regional differences impact consumers’ brand evaluations
• Tim Hortons most-trusted brand in Canada in 2015 survey
Functional Brand Trust
• Quality
• Reliability
• Consistency
Emotional Brand Trust
• Alignment between corporate and personal values
• Workplace practices
• Environmental practices
• Social responsibility
10 Most Trusted Brands in Canada
Most trusted brands out of 249 brands in 22 industries, rated on 40 attributes including: quality, innovation, value, leadership, social responsibility

1. Tim Hortons
2. President’s Choice
3. Shoppers Drug Mart
4. Google
5. Canadian Tire
6. Kraft Foods
7. Campbell Soup Company
8. Heinz
9. Canada Post
10. Johnson & Johnson

The Offer (must & may include..)
Must include:
— Price, product (positioned in consumers’ minds), length of commitment, payment terms, risk reducers (if applicable)

May include:
— Incentives to buy, more than one offering, list of customers’ obligations

Problem Solving Strategic Formula
Problems / Strategies = Solutions

Before writing and designing your ad:
• Identify the key problem(s) faced by the customer
• Develop a strategy to deal with each problem (just as in personal selling when dealing with objections)

Throughout your ad present: problem 1 + solution 1, problem 2 + solution 2, etc. etc.

This may result in a longer and more complex message. Be sure that this formula is suited to your product and target market.

FAB: Features/Advantages/Benefits
Features: Facts or characteristics about your business, products, and services.

Advantages: what the features do – tend to be factual, and aren’t connected to a prospects need.

Benefits: connects the facts about your product to a solution for your client.

Kinds of Risk
1. Financial risk: potential financial loss as a result of purchase

2. Social risk: fear of making a socially inappropriate product choice

3. Time-loss risk: potential loss of time if product is not suitable and must be returned (purchase and return time)

4. Source risk: lack of credibility of seller, lack of established reputation

5. Performance risk: potential that product will not do what is promised

Risk Reducers
These sweeten the offer:
• Money back for any reason (even if your friends don’t like it!)
• Performance guarantee
• Offering product testimonials, client lists, company information
• Reducing the time required to make purchase or return item (immediate gratification)
• Offering installment payment plans, or no money paid until trial period is complete
• Offer an incentive to buy now
AIDA Model
Use this model to structure your message

ATTENTION – Active attention grabber in first paragraph of a DM letter; music on the radio; visuals or sounds on the television; colour in the newspaper; or a great headline for print or outdoor media

INTEREST – generate interest in product & its benefits (as distinct from features)

DESIRE – Sell the sizzle, not the steak

ACTION – Moment of truth. Do they sign
up, order, try product…

Soft Selling Style
A subtle approach seldom employing an immediate response type of appeal

Structures a problem solving appeal to lead customer to the “right” choice

Hard Selling Style
A relentless, “pounding” style of aggressive presentation, often involving immediate-response appeal, high pressure approach
Offer Appeal
Appeal tactics may be:
• Logical: rational argument based (features, benefits, performance-based)
• Emotional: feeling-based appeal (satisfaction, heart- based) tied very securely to product in order to sell
• Combination Approach: feeling and rational argument
Ad Theme
• Price – only for good products – can commoditize the product
• Quality – may need to be supported with argument or research
• Celebrity – pick a good one, bad one gets expensive
• Testimonial – credible but audience needs to identify with source
• Humour – relaxes but doesn’t sell – could distract from message
• Fear – Risky if too aggressive for audience (MADD)
• Decorative model – Attention getter only – doesn’t sell
• Anger – Risky if too aggressive for audience
• Ego – Focuses on the worth of self (L’Oreal)
• Sensory – Taste, touch, scent, hearing (cold glass sweating)
• Peer group – Role models for target audience
• Novelty – Strange ads, offbeat, weird – could distract from product
• Subliminal – Works at subconscious level – not proven to exist
• Sex – Sexuality, romance, social acceptance (AXE products)