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Chapter 14 Direct Marketing Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct Marketing Interactive system of marketing Uses one or more advertising media to effect a measurable response and/or transaction at any location Uses a set of direct-response media Direct-response media: Tools by which direct marketers implement the communication process e.g. direct mail, telemarketing Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 2 Education. Factors that Led to the Growth of Direct Marketing Development and expansion of the Postal Service Consumer credit cards Changing structure of society and the market Technological advances Changing values and lifestyles More sophisticated marketing techniques The industry’s improved image Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 3 Education. Role of Direct Marketing in the IMC Program Combines: Advertising and public relations Example: Toll-free numbers Personal selling and sales promotions Examples: Emails or mails Support media Example: Promotional products, surveys Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 4 Education. Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 5 Education. Role of Direct Marketing in the IMC Program Companies decide: Program objectives Which markets to target and the strategies to use How to evaluate the program’s effectiveness Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 6 Education. Direct-Marketing Objectives To seek a behavioral response To build an image To maintain customer satisfaction To inform and/or educate customers in an attempt to lead to future actions Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 7 Education. Direct-Marketing Approaches 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 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 8 Education. Direct-Marketing Media Direct Mail Catalogs E-mail Broadcast Media TV Spots Infomercials Home Shopping Print Media Telemarketing Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 9 Education. Direct Mail Unsolicited mail Advertisers spend substantially on this medium Keys to success Mailing list: Database from which names are generated Ability to segment markets and offers Threat - The Internet/Text messages Video: How to send a direct mail Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 10 Education. Catalogs and E-mail Catalogs Number of catalogs mailed is decreasing Available on the Internet for consumer and businessto-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 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 11 Education. Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 12 Education. Broadcast media and TV spots Broadcast media Categories - Television and radio Direct-response advertising: Sales response for the offered product is solicited, through the one- or twostep approach Support advertising: Supports other forms of advertising TV spots Short-form programs, include direct-response commercials seen on TV Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 13 Education. Infomercial and Home Shopping Infomercial: Long commercial designed for 30minute or 1-hour time slot Designed to be viewed as a regular TV show Effective with a broad demographic base Home shopping Substantial growth due to toll-free telephone numbers and widespread use of credit cards Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 14 Education. Print Media and Telemarketing Print media Difficult to use for direct marketing Ads compete with the clutter of other ads Space is relatively expensive Response rates and profits are low Telemarketing: Sales by telephone Declined due to its potential for fraud and deception, and for annoyance Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 15 Education. Direct Selling Direct, personal presentation, and sales in consumers’ homes Repetitive person-to-person selling - Salesperson visits the buyer’s location to sell frequently purchased products Nonrepetitive person-to-person selling - Salesperson visits the buyer’s location to sell infrequently purchased products e.g. encyclopedias Party plans - Salesperson offers products to groups of people through parties and demonstrations e.g. Tupperware Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 16 Education. Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 17 Education. Figure 14.2 - Sales Strategy (Methods Used to Generate Sales, Reported as a 2012 of Sales Dollars) Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 18 Education. Evaluating the Effectiveness of Direct Marketing 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 Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 19 Education. Advantages and Disadvantages of Direct Marketing Advantages Disadvantages • Selective reach • Image factors • Segmentation capabilities • Accuracy • Frequency • Content support • Testing • Rising costs • Timing • Do Not Contact lists • Personalization • Costs • Measures of effectiveness Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill 20 Education.