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CHAPTER SEVENTEEN
USING DIGITAL INTERACTIVE MEDIA
AND DIRECT MAIL
OBJECTIVES
To explore the important factors advertisers weigh when considering digital interactive media and
direct mail. Each medium has its own characteristics, and each offers unique advantages and
drawbacks. Advertisers must be able to compare the merits of these media and understand the
most cost-effective ways to buy advertising on them. (p. 546)
After studying this chapter, your students will be able to:
1. Discuss the various opportunities and challenges presented by digital interactive media.
2. Explain the evolution of interactive media.
3. Debate the pros and cons of the Internet as an advertising medium.
4. Define the various kinds of Internet advertising.
5. Discuss the Net's audience and the challenges involved in measuring it.
6. Explain how Internet advertising is sold and how much it costs.
7. Enumerate the various types of direct-mail advertising.
8. Categorize the costs associated with direct-mail advertising.
9. Assess which kinds of mailing lists are best.
TEACHING TIPS AND STRATEGIES
This chapter introduces students to the world they grew up in. The Internet (also how
Direct Marketing ties into the Internet). As Arens points out in this chapter, the Internet
was one of the fastest growing and accepted mediums in recent memory. Advertisers can
use the Internet to their advantage or can they?
One of the biggest advantages of the Internet, as illustrated throughout this chapter, is the
fact that online users tend to have a higher household income then nonusers of the
Internet (p. 564). The Internet is still in its infancy and it will take some more time
before advertisers figure out how to use it effectively.
With the advent of the Internet, many companies jumped on the free Internet bandwagon.
The thought process was if we give users’ free Internet access the users will view the
banner ads and we will make lots of money. That has not really happened. Many of
these free Internet services are a “dot gone”. May we have a moment of silence for
Altavista.net, Bluelight.com, and others? I think it is a good idea to emphasize to
students that business models that are not created for a profit are in deep trouble. Internet
surfers got used to surfing and not having to see or click on the banner ad to use the
service.
At last years Superbowl, the newspapers and television reports announced that millions
of people watched the Superbowl. How do they know that? In my opinion, they are
guessing to a point. As you know they do telephone polls etc, and then extrapolate for
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the whole population who is watching and who isn’t’. With the Internet, it is a
completely different story.
If I had a banner ad on www.yahoo.com, I would know how many people clicked on it,
how long they were on my website, and what portal they came from. This presents a
problem for a website that gets millions of hits but only a few thousand clicks on the
banner ad. Going back to our Superbowl example, if there was a way to track how many
people were really watching, or partying etc, wouldn’t the advertiser rightly demand that
the cost of the ad be reduced (as you know ad prices are based on the number of people
watching).
The problem facing Internet sites is that most people use the web as a point and click
experience (they want to go somewhere and they get there). Most people did not get
accustomed to ads as they have with television and radio. This does not mean that the
Internet is dead to advertisers and unprofitable.
With more and more broadband (faster Internet connections), being offered it is
important to note that Internet advertising will be changing. I see in the not to distant
future consumers seeing more video type pop-up ads etc. Have fun with this discussion
with the class. They have a chance to be influencers of this relatively new medium for
everyone involved.
On page 564 is the Checklist for the Advantages/Disadvantages of Advertising on the
Internet.
LECTURE OUTLINE
Introduction (pp. 545-546) —Virtual pets are a creation of NeoPets. NeoPets is an
interactive community of virtual pet owners on the Internet. Members create pets
from 45 different species and play with them, feed them etc. Members can enter their
pets into virtual battles with other owners and their pets. There are numerous games
and activities on the website. NeoPets went live in early 2000 with about 500 new
registrations a day. The only advertising that the website utilizes is word-of-mouth.
Today 60,000 new registrants adopt a NeoPet each day and there are over 50 million
worldwide. NeoPets is the largest global youth community on the Internet. Users
range in age between 8-80. Majority of the users are between the ages of 13-17.
NeoPet is essentially a new kind of advertising medium in itself. The two major
contributors to the success of NeoPets are content and quality. The content is
updated daily and monitored around the clock. Parents who feel the company is
monitoring the safety of their children endorse the company. Teachers have endorsed
the Website in their lectures and classroom activities. Sponsors’ products are
included in the activities on the website as a means to advertising.
A17-1 NeoPets (p. 545)
II. Digital Interactive Media (p. 546)
A. Today, we are participating in a new media revolution, brought on by incredible
achievements in communication technology — these have engendered the digital
interactive media and the information superhighway.
B. Understanding the arrival of digital interactive media
I.
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1. Before radio and TV there was the door-to-door salesperson, an individual who
had to appeal to the consumer directly — a consumer who could shut the door at
any time.
2. Then along came radio and, 30 years later, TV. Mass marketers now had a
captive audience. However, the advent of the remote control, the first step
towards interactivity, initiated the return to consumer control. Viewers cut off
ads and "channel surfed."
3. The widespread distribution of cable TV caused network TV audience
viewership to plunge from 90 percent to 60 percent in less than a decade.
4. With the VCR, people could now record shows for later viewing, zipping through
the commercials. Alternatively, rent a movie and skip the commercials all
together. The power shift from the marketer to the consumer has been
recognized by advertising professionals who recommend adapting to the new
media because other marketers will.
5. The personal computer, cellular phone, Internet, World Wide Web, fiber optics,
satellite communications, CD-ROM, and interactive TV, are widely accepted and
growing more affordable daily. These are not just advertising media, they
represent, in many cases, new ways of living and doing business.
6. These technologies are revolutionizing the way we live, expecting to reach $100
billion in consumer online purchases by 2005. Both consumers and businesses
have increased access to one another. Most important, the new digital interactive
media improve the way businesses can develop relationships with customers and
other stakeholders.
Exhibit 17-1 Growth in online ad spending in the US (p. 549)
III.
A17-2 NeoPets (p. 549)
The Internet as a Medium (p. 549)
A. The Evolution of the Internet (p. 549)
The Internet was initiated by the U. S. Department of Defense in the 1960s as a way
to maintain communication during time of confrontation by having multiple lines of
communication always up and running through a variety of geographical areas. It
remained obscure until the 90s, used mostly by academics, military researchers, and
scientists around the world for sending and receiving electronic mail, transfer files,
and find and retrieve information from databases.
1. Commercial Online Services (p. 549)
a. In the 80s, a number of online services began operations by capitalizing on
the local electronic bulletin board services (BBSs) being used by computer
wonks, linking them to form national networks that delivered e-mail between
subscribers, online shopping services, chat room for discussion, interactive
game playing, software download capabilities, along with a host of other
features. Marketers could advertise on CompuServe or America Online
(AOL) with classifieds. Prodigy was another service that anyone with
modem-equipped personal computer could join for a basic fee of around $10
a month.
b. The Internet was still not easy to use. People had to find an Internet service
provider (ISP) and sign on directly using their SLIP/PPP account or shell
account. Once online, there was no easy way to navigate the WWW unless
the user had a lot of technical expertise. The Web's first form was entirely
text-based; it had no graphics so ads resembled print classifieds.
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c. In 1994, the first Web browser, Netscape Navigator, featured a graphical
interface, accommodated graphic files, and allowed users to point and click
on icons and pictures to find their way around cyberspace.
2. The World Wide Web (p. 550)
a. The World Wide Web, which has evolved as a commercial subset of the
Internet, offers an enormous amount of information accessible via home
pages (similar to book covers, gateways, brochure covers, or storefronts) that
act as starting points to additional information-filled pages. Web pages
follow the home page carry information about the company and its products.
b. Once business and the media sensed the lucrative nature of the Internet, they
bombarded the public about the technology, which caught on to start the gold
rush of the Information Age. The Web exploded from about 50 sites in 1993
to over 70,000 sites in 1995, to 15 million sites worldwide in 2000.
3. Internet Search Engines (p. 551)
a. The need to find an individual site among the tens of thousands available
only became possible with the creation of search engines, software programs
able to scour the Internet for a word, a phrase, or site address (similar to
using a card catalog in a library). With names like Yahoo!, Excite, and
InfoSeek, search engines are assisting visitors to navigate their way around
the world with ease locating relevant information and website addresses.
b. Actual Internet advertising began in earnest in October, 1994, when the first
banner ads — little billboards that pop up on a page when visited — were
sold by Hotwired.
Exhibit 17-2 Top 25 most visited websites (p. 551)
c. Internet growth has been exponential. Some 50 million U.S. adults accessed
the Internet in 1997, with 10 million children being the fastest-growing
segment of new Internet users. By the year 2001, more than half the U.S.
population had access to the Internet from home. Meanwhile the worldwide
Internet audience was estimated at 407 million.
Portfolio: “Advertising on the Internet,” (p. 552-555)
Exhibit 17-3 Number of people online around the world (p. 556)
A17-3
(p. 556)
d. A wide range of businesses and manufacturers use the Internet.
e. Marketers must provide accurate, up-to-date information when creating and
maintaining Internet sites, and some entertainment and freebies also help
keep visitors coming back.
B. The Internet Audience (p. 556).
A 2000 Juniper Research Study revealed that over half of PC users surveyed said
they were giving up television to spend more time on their computers. Other studies
indicate the online audience double in 12 months and 1 million less people were
watching TV.
1. Who Uses the Net (p. 557)
Exhibit 17-4 Household income composition of the World Wide Web in the
U.S (2000), Exhibit 17-5 Household income composition of the US (p. 558)
a. Recent surveys find that women now represent 46 percent of the online
population.
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b. The average age of online users has been steadily increasing in the past few
years. Today, people 55-64 years old make up 22 percent of online
households but will reach 40% by 2003.
c. Also, 27.3 percent of online users have household incomes between $40,000
and $60,000 compared with 18.9 percent of the population as a whole.
Those in the lower income brackets account for only 9.7 percent of online
users, whereas they represent nearly one-third of the U.S. population.
However, this is the fastest growing group on the Web.
d. A majority, 75 percent, of Internet users has attended college compared to 45
percent of the U.S. population.
e. In planning media for Sega, FCB developed a list of Web sites that were
known to have a higher than average composition of video gamers. These
sites ultimately delivered over 100 million impressions during Sega’s fourmonth campaign.
2. How People Access the Net (p. 558)
a. To get on the Internet, people must choose from two types of communication
systems: narrowband and broadband. Narrowband is a type of digital data
transmission in which wires each carry only one signal, or channel at a time
Normal telephone communication is narrowband, as well as, most
communications involving computers. Broadband transmission enables a
single wire to carry multiple signals simultaneously. Cable TV, for instance,
uses broadband technology. Broadband is faster and can carry a larger
volume of data, but it costs more.
b. The most common way to access, the Internet is by using a dial-up modem
via an Internet service provider (ISP) from a modem-equipped desktop
computer (PC or Mac). The ISP charges a fee (typically about $20 per
month) and provides e-mail service, Internet access, and other online
services. The computer modem is used to dial up the ISP's local telephone
number, become connected to the ISP, and then have the ISP open up access
to the Internet.
c. To use broadband, the most common ways are cable modem and DSL.
Cable-modem is a service available only from cable TV companies that
offer high-speed data transfer direct to computer (no modem needed), such as
"Roadrunner" or "@Home."
d. The second method, DSL, which stands for digital subscriber line, is now
competing with cable-modem for popularity and price. This technology
transforms a traditional telephone line into a high-speed digital link to
provide homes and businesses with always-on broadband Internet access.
c. DirectPC is a satellite-based system developed by Hughes Electronics that
offers even faster downloading than cable. More expensive than other
methods and requiring a modem, it is ideal for companies needing to make
extensive file downloads.
c. WebTV is based on the premise that some people would rather use the
Internet for fun and entertainment, not business. WebTV is much like the
cable-modem except the receiving and viewing device the TV set rather than
a computer. The system uses a set-top box (sells around $300) and offers
constant connection to the Internet.
C. Types of Internet advertising (p. 560)
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1. Websites (p. 560) are often perceived as an advertisement, but is more like a
storefront, or catalog store, a place to do business (an "ad-dress"). Websites
consist of a homepage and a number of subsequent web pages (web page refers
to an electronic document created using HTML, Hypertext Markup Language,
which can be accessed by most computers and may be scrolled many inches long
on the computer screen. A large Website may have hundreds of web pages.
2. Banners and Buttons (p. 560), the basic form of Web advertising, resemble a
little billboard, which spreads across the top of a Web page. Its 468 pixels
(picture elements) wide by 60 pixels high, or about 4.5" long and 0.5" wide on a
standard 8.5" by 11" page. When a user clicks on it, the banner links the user to
the advertiser's website or to a buffer page. Banner costs vary greatly, ranging
from free to $15,000 per month with a CPM ranging from $60 to $400. In 2003,
the Interactive Advertising Bureau (IAB) introduced the Universal Ad Package, a
suite of four standard sizes to improve planning, buying and creating online
media .
3.
4.
5.
8.
Exhibit 17-6 Number of people online around the world (p. 561)
A17-4
(p.561)
Buttons are icons that work like small banners, but are often shaped like keys or
buttons on electronic devices, and when clicked on, link the viewer to the
advertiser's home page.
Rich-media-advertising (561), which includes graphical animations and ads
with audio and video elements that overlay the page or even float over the page.
Many of the rich-media ads complement the standard banners endorsed by the
IAB, as each of these can display 15-second animations.
Interstitials (p. 561) are animated ads that pop up on the screen while the
computer searches for information or while it downloads a website that the user
has clicked on. A survey by the entertainment software company Berkeley
Systems found that interstitial ads are twice as effective at generating brand
awareness as online banners. However, to consumers they are rather annoying.
By 1999, they still accounted for only 3 percent of Web advertising dollars, far
behind the 58% generated by banners.
Rich mail (p. 562), on the other had, and allows graphics, video and audio to be
included in the e-mail message.
Sponsorship and Added-Value Packages (p. 562). Companies sponsor web
pages or sponsor particular events for a particular period of time. Added-value
packages are crated by integrating the sponsor’s brand with the publisher’s
content.
Search Engine Marketing (p. 562). Used in search engines, a meta ad is an
advertisement displayed on the results page of a search, specific to the searched
term. Ad can target a specific audience
Classified Ad Websites (p. 562). Online space for classified ad listings (listings
under classification like "cars, homes, computer," etc.) are offered free because
the space provider is supported by ad banners paid for by other advertisers. Most
sites promise more volume than they actually deliver.
E-mail Advertising (p. 562) is one of the fastest forms of Internet advertising. It
is also one of the most effective. Research shows that 77% of marketers send email ads to customers who have asked for it. Direct mail has always been a most
effective medium, but expensive. The Internet reduces the cost substantially.
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Important to differentiate responsible e-mail advertising from Spam, which is
just electronic junk mail. Many marketers, wary of the Spam issue, focus their email efforts on customer retention and relationship management (CRM)
rather than on prospecting. One of the hottest trends is viral marketing – the
Internet version of work-of-mouth advertising via e-mail. Credited as the source
of Hotmail’s incredible success. The trick is to get the company’s satisfied
customers to recommend the firm’s website to their friends.
D. Problems with the Internet as an Advertising Medium (p. 563) — The Internet is not
a mass medium in the traditional sense, and it may never be as efficient as other
media. Complaints are:
1. Too complex, cumbersome, and crowded.
2. Not worth the effort.
3. Not controlled, so security (for credit-card purchases over the Net) is still a
problem.
4. Lacks technology to run TV-quality video.
5. It is the most democratic of media. Anyone can get on it and do or say anything.
This is both good and bad from a marketer’s perspective.
IV.
Checklist: “The Pros and Cons of Internet Advertising”, (p. 564)
E. Using the Internet in IMC (p. 563)
1. A key role for the Internet is interactivity — for the first time companies can
have a dialog with customers in real time using the same channel for promotion
and interactivity to build a relationship with them.
2. Interactivity via the Internet now puts manufacturers in direct communication
with end users, bypassing the traditional intermediary, the retailer.
3. Manufacturers must now expend money on a continual basis to maintain updated
Web pages to look good to consumers (doubling and tripling Internet budgets).
Measuring the Internet Audience (pp. 565-566)
A. Seeking Standardization — The Internet is not like existing mass media and cannot
be measured effectively as such. The Internet Advertising Bureau (IAB) provides
some practical definitions based on the fundamental that WWW audience
measurement information lacks the standardization needed to compare its advertising
effectiveness to other media. Ways to measure are:
1. The ad request (p. 565) is defined by the IAB as "an opportunity to deliver an
advertising element to a Web site visitor.” Ad requests can be counted on CPM
basis.
2. Click rate (click-through rate) is unique to the Internet. Click rate occurs when a
visitor points the cursor at a Web link and "clicks" on the mouse button to get
another page. The click rate is the number of clicks on an ad divided by the
number of ad requests, which can be tabulated in CPM form to measure cost
efficiency. There are considerations that prevent marketers from obtaining
foolproof numbers, especially when ad requests rather than impressions are
measured:
a. Persons may click on another page before the requested ad is loaded on the
screen.
b. The ad may be called up from the user's computer, which is synonymous to
viewing duplicate ads.
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d. To speed up loading efficiency, some users disable the images from
appearing on their browser and only see text, not ads.
V.
Ad Lab 17-A: “Internet Ratings: The Next Frontier” (p. 566)
B. The Promise of Enhanced Tracking (p. 566)
1. Today's software now provides some of the most precise marketing tools that
marketers have ever had:
a. HTTP (hypertext transfer protocol) interacts with what are known as cookies,
small pieces of information that get stored in your Web browser when you
load certain websites. These cookies can keep track of whether a certain user
has ever visited a specific site.
1) Different messages can be delivered to a user based on the sequence of
visits by that user, the frequency of visits, time of last visit, and the
domain from which the users are surfing.
2) Cookies can indicate the user’s ISP, whether visiting from home or work,
the telephone area code, and the NAIC codes.
b. A user's interaction can be tracked
1) Content of pages read by the users can be tracked, and entered into a file
for each user.
2) Keywords entered by the user, time and day site were viewed, frequency
the site is visited and the sequence the ads were seen, the computer
system used to view the site, the browser type, and the IP address can be
stored in the user's record.
c. The ability to track people's behavior has stirred considerable debate —
although tracked by numbers, peoples' right to privacy is being violated.
d. The best known rating service is Internet Profiles Corp. (I/PRO), which
partners with A. C. Nielsen (others are: Media Matrix, BPA Interactive, and
Relevant Knowledge).
Buying Time and Space on the Internet (p. 567)
Interactive media are personal audience venues (see Chapter 13). Cost per thousand,
rating points, and share of audience do not really mean what they do in mass media. We
are not building sales volume, but relationships, one customer at a time. 100 leading
national advertisers spend the smallest piece of their marketing communications pie on
interactive — only 2.7 percent. Many direct marketers are testing online catalogs, but
less than 0.05 percent of their total sales revenue comes from such media. Cost is still a
big question when dealing with the Internet.
Exhibit 17-7 Top advertisers on the
Internet measured by media spending (p. 567)
A. Pricing Methods (pp. 567-568)
1. As described in the previous section, the banner ad is the most common manner
of advertising on the Internet, and it is billed by the number of page requests on a
CPM basis.
2. The real marketing power of the WWW is the ability to target a specific audience
in a way that is virtually impossible with traditional media:
a. By Search engine category — by selecting a category or subcategory on a
search engine (finance, news, travel, or games). Prices vary according to
category and increases as the buyer targets a more specific audience.
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Exhibit 17-8 an example of a rate card for www.banner ads from the search
engine Metacrawler. (p. 569)
b. By Keyword purchase — ads appear when a keyword is used in a user's
search request. Keywords are purchased individually or in packages that
factor the information categories or subcategories of a search engine site.
c. By click-throughs — when a user actually clicks on an ad banner to visit the
advertiser's page. CPM cost is considerably higher. Advertiser's banner
message may be seen by a user without the publisher being able to charge —
hence, hybrid-pricing combining low-cost page request rates with clickthrough rates may be offered by publishers.
d. Affiliate marketing programs are ideal for advertisers involved in ecommerce. Website publishers agree to display banner ads in exchange for a
percentage of any sales that may result from a consumer clicking on that
particular ad.
Here’s a simple example: Plain Jane has a website with a small banner ad for
Amazon.com. Since it is a small site with a small audience, she is not able to
charge Amazon.com a fee; instead, she arranges an affiliate-marketing
program. One day Joe Schmoe visits Jane’s site, clicks on Amazon.com’s
banner ad, and then he decides to purchase a book called, All About Overalls.
As an affiliate, Jane gets a small percentage of that sale.
B. The Cost of Targeting (pp. 568-569)
1. The very selective nature of the Internet can, for an additional cost, be combined
with tracking technology for a more focused campaign.
2. Contrary to popular belief, consumer targeting on the Internet is very cost
intensive.
C. Stretching Out the Dollars (p. 570)
1. A big problem Net marketer’s face is how to get reach. Web browsers surf
millions of pages each day. However, contacting and negotiating contracts with
all these sites is a nearly impossible task.
2. For this reason, most advertisers work through ad networks that act as brokers
for advertisers and websites by pooling hundreds and even thousands of Web
pages together and facilitating advertising across these pages.
a. Maximum exposure across smaller sites.
b. Difficult for advertisers to monitor for activity on and the content of Web
pages.
b. Some Webmasters have been known to artificially increase page requests.
VI.
Exhibit 17-8 An example of a rate card for WWW banner ads from the
search engine Metacrawler (p. 569)
The Global Impact of the Internet (pp 570)
A. U. S. overwhelmingly outspends the rest of the world in Internet advertising. The
1999 U. S. expenditures topped $4.6 billion while number 2, Japan, spent only $201
million and, the third; Spain spent only $170 million.
Exhibit 17-9 Online ad spending (p. 571)
Some reasons:
1. Lack of telephone and Internet infrastructure overseas
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2. Popularity of American brands worldwide
B. Overseas growth underway – Search engines signed recent contracts in Asia and
Europe
Exhibit 17-10 Estimated growth of online ad spending (1999) (p. 571)
Ethical Issue: “Profiling: Would You Take Cookies from a Stranger?” (p. 568)
VII. Other Interactive Media (p. 571)
A. CD-ROM Catalogs and Magazines (p. 573)
1. CD-ROM — compact disk with read-only memory capabilities.
a. Offers extensive memory on durable medium, high concentration of data
storage. Allows for full-motion video and high-quality sound storage.
Marketers like the CD-ROMs high quality and versatility.
b. Uses include electronic mall shopping, electronic publishing of magazines
and music, and online connectable sound and video catalogs.
B. Kiosks (p. 571) are stand-alone sales and information booths containing
computerized data base information accessible by pedestrians.
1. Open 24 hours per day, even in remote areas.
2. Allows customers to pay bills, buy stamps, get government information, and
companies to make presentations.
VIII.
3. Kiosks are used around the globe.
C. Interactive TV (ITV) (p. 572). TV service that allows viewers to interact with
programming and program sponsored ad promotions. With issues like costs,
equipment, and technology, ITV is still being tests marketed in select markets.
Direct-Mail Advertising: The Addressable Medium (p. 572) Webster Design, a marketing
communications design firm in Omaha, Nebraska, specializes in creative dimensional
direct mailing (CDDM), three-dimensional promotional materials direct mailed to 500
addresses or less. Their four-phase program with a baseball theme netted a 20-to-1 return
on investment for their client, a division of Applied Communications, Inc. (ACI).
Direct Mail includes all forms of advertising sent directly to prospects through a
government or private mail delivery service. In dollars spent, direct mail is the thirdranked advertising medium today, surpassed only by newspapers and TV.
New
firms usually use direct mail as their first medium because, of all media, direct-mail
advertising offers the straightest line to the desired customer.
A. Growth of Direct Mail (p. 573)
1. Mail-order sales are skyrocketing. National advertisers spent $41 billion on
direct mail in 1999, nearly 19% of all the ad dollars spent in the U.S.
2. Successful because:
a. It matches today's lifestyles, families have less time, and so shopping by mail
is convenient.
b. It is the most effective way to generate immediate results, since it is
addressed directly to the prospect.
4. Today's leading mail-order products include insurance and financial services.
Exhibit 17-11 2000 Mail Order Sales by Major Industry Segment (p. 573)
B. Types of Direct-Mail Advertising (p. 574)
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1. E-mail is one of the newest tools in direct marketing, its best used for customer
retention and relationship building. Marketers should first seek permission to
mail, giving people the opportunity to opt in or opt out.
2. Sales letters are the most common form of direct mail.
3. Postcards are used to announce sales, offer discounts, or generate shopper
traffic.
4. Business reply mail enables the recipient to respond without paying postage.
5. Folders and brochures are usually printed in multiple colors on good paper
stock that reproduces photos or other illustrations well.
6. Broadsides are larger than folders and sometimes used as window displays.
7. Self-mailers refer to any form of direct mail that can travel by mail without an
envelope.
8. Statement stuffers are ads enclosed in monthly customer statements mailed by
department stores, banks, or oil companies.
9. House organs are publications produced by associations or business
organizations, e.g., stockholder reports, newsletter, and consumer magazines.
10. Catalogs are reference books that list, describe, and often picture products sold
by a manufacturer, wholesaler, jobber, or retailer.
Checklist: “Pros and Cons of Direct-Mail Advertising,” (p. 575)
C. Using Direct Mail in the Media Mix (pp. 574-575)
1. Direct Mail is an efficient, effective medium for sales and business promotion.
2. Direct Mail can increase the effectiveness of ads in other media.
3. Direct Mail has two main drawbacks: cost and the junk-mail image, both of
which are almost inescapable.
4. Cooperative mailings — envelope containing a coupon for each advertiser.
5. Other uses of direct mail — for companies who do not send unsolicited mail,
direct mail is used to respond to inquiries from prospects and customers.
a. Save money by mailing only to qualified prospects.
b. Protects the company's quality image (a factor enhanced by mailing only
high-quality materials) and helps build relationships.
D. Buying Direct-Mail Advertising (p. 575)
Direct-mail advertising has three basic costs: list acquisition, creative production, and
distribution.
1. Acquiring Direct-Mail Lists (p. 575).
The heart of any direct-mail program is the mailing list. Direct-mail advertisers
use three types of lists:
a. House lists are a company’s relational database of current, recent, and longpast customers as well as future prospects. Since customers are a company's
most important asset, sufficient resources should be used to develop a rich
database of customer and prospect profiles. Ways to build a list include
offering credit plans, sending useful information, and exchanging names with
other businesses with similar customer profiles.
b. Mail-response lists include people who respond to direct mail pieces of
other companies, especially those with complementary products or services.
Mail-response lists are the house lists of other direct-mail advertisers, and
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they can be rented with a wide variety of elements, including demographic
breakdowns.
c. Compiled lists are lists that have been compiled for a different reason and
then rents or sells. Compiled lists typically yield the lowest response rate, so
experts suggest using numerous sources, computer merging them with mailresponse and house lists, and then purging them of duplicate names.
d. Lists can be bought or rented. Purchased lists can be used without limit;
rented lists may be used for a single mailing only (uses decoy names to be
sure renters don't use the list again).
e. Some list owners pay a list broker a commission to handle the rental details
(usually 20 percent).
f. Lists can be exchanged, and tailored to reflect customer location (zip code),
demographics, and customer psychographics. The SRDS Direct Mail List
Rates and Data comes in two volumes, Consumer Lists and Business Lists,
and contains over 50,000 listings in hundreds of classifications.
Exhibit 17-12 Doubleday Book Club (p. 576)
g. Quality of lists varies enormously. Prices of lists vary according to quality.
Rental rates average about $55 per thousand names, but range from $35 to
$400 per thousand. The average list changes more than 40 percent each year
as people relocate change jobs, etc. Hence, lists must be updated (cleaned)
continuously.
2. Production and Handling (p. 576)
a. To create a direct-mail package, the advertiser may use in-house staff, an ad
agency, or a freelance designer and writer. Some agencies specialize in
direct mail. The direct-mail piece normally goes through the same
production process as any other print piece.
b. The remaining production and handling tasks can be done by a local letter
shop (or mailing house). On a cost-per-thousand basis, letter shops stuff and
seal envelopes, affix labels, calculate postage, and sort, tie, and stack the
mailers. If third-class mail is used, letter shops separate mailers by zip code
and bundles them to qualify for the lower mailing rates. It also delivers the
mailers to the post office.
Ad Lab 17-B: “Developing Effective Direct-Mail Packages” (p. 577)
3) Distribution (p. 577). Distribution costs are based chiefly on weight of
mailer and method of delivery. Delivery options include U.S. Postal
Service the most common, UPS, Fed Ex, airfreight, and private delivery
services.
RL 17-1 “Advantages and Disadvantages of the U.S. Postal System”
(Website)
AD LAB 17-A “Internet Ratings: The Next Frontier” (p. 566)
1. What are some of the problems of Internet audience measurement?
The Internet audience is huge. In addition, the task of accurately measuring it is, no doubt, an
enormous endeavor. Since the Internet is still a relatively new medium, marketers lack, the
standardization needed to acquire valid and reliable measurements. This problem has a
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substantial impact on the business because the controversy over definitions significantly
affects what Web publishers count and what the agencies count and are willing to pay for.
2. Do you think these problems can be fixed? How?
Students’ answers will vary.
Answer guidelines.
Yes – As the Internet grows in popularity and technology evolves, marketers will find a way
to measure Internet audiences with the same certainty as they can with other media.
No – Internet audiences are too big to be able to ever accurately measure.
AD LAB 17-B “Developing Effective Direct-Mail Packages” (p. 577)
1. Locate a direct-mail package that has the four components common to most mailings and list
how the elements of the creative pyramid are integrated throughout the components.
Common components, direct-mail package
Creative Pyramid elements
1.
Mailing envelope
Attention
2.
Sales letter
Attention, interest, credibility
3.
Color piece or brochure
Attention, interest, credibility
4.
Response device (Reply card, envelope, or
coupon
Action
2. Review the copywriting in your direct mail package and identify how many of the techniques
mentioned in this Ad Lab are used or could be improved.
Students’ answers will vary.
Answer guidelines:
The package may or may not have all four components itemized above, so, adding any
missing component will be an improvement. Sometimes direct-mail packages have too many
components — remove the extras that create needless redundancy. Extra components rarely
add more than clutter, but if removing added components seems to detract from the package,
then let it stay and see if another component could go.
Areas that are critical would also be in the creativity and clarity of the message — does the
design of the package’s components reinforce the message? If not, figure out which
components are the weakest and make them more compatible with the best components
ETHICAL ISSUE “Profiling: Would You Take Cookies from a Stranger?”
(pp. 568. 569)
1. Do you think that cookies and profiles are a violation of personal privacy? Discuss the
ethical issues involved.
Students’ answers will vary.
Answer guidelines:
Yes – It is a violation of personal privacy because the average consumer does not understand
what cookies and online profiles are. Consumers should have the right to privacy and be
able to roam the Internet without always being watched or kept track of. The option to
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2.
3.
4.
disable cookies sometimes proves futile since there are some sites that do not work properly
without cookies.
No – First of all, consumers receive notices and disclaimers that cookies are enacted, so they
are aware. The power is always in the hands of the consumer because he or she can choose
whether or not visit certain sites that require cookies. Secondly, online profiling is
anonymous, so since no one is personal information is attached to the online profile;
nobody’s privacy has been violated.
Since profiling can help companies target the more profitable consumers and overlook
others, do you think that this can lead to online discrimination?
Students’ answers will vary.
Answer guidelines:
Yes – Marketers of high-end merchandise are going to want to strategically target those who
would be most likely to afford the products. This leaves the average consumer out of the
loop.
No – As with other media, marketers will be able to target their campaigns to the market that
fits best with their particular product or service. Better targeting reduces wasted advertising
and clutter.
Ultimately, who is responsible for Internet user privacy, the user or the
marketers/advertisers? Where does the responsibility lie for each?
Students’ answers will vary.
Answer guidelines:
Since there is no one entity regulating the Internet, users should understand that there are
risks involved. Users should be responsible for themselves and remain skeptical and
cautious. Ultimately, they have the power to log off of a site they don’t agree with and even
report suspicious activities.
Sophisticated marketers and advertisers realize that creating and maintaining relationships is
paramount with current and future customers. Critical to these relationships is trust,
especially when it involves the Internet. With this is mind, marketers and advertisers should
disclose their policies regarding profiling.
Is it better for companies to self-regulate issues of Internet privacy and security, or is federal
intervention required?
Students’ answers will vary.
Answer guidelines:
Alternative 1: Companies should regulate themselves, because they have a better
understanding of the business and consumers. They could all work together to discuss what
would work best, both for them and for the consumer.
Alternative 2: The federal government should step in and regulate Internet privacy because
companies cannot be trusted since their top priority is to themselves and to making profits.
REVIEW QUESTIONS
1. How did the Internet evolve to its present status as an advertising medium? (p. 548)
As search engines emerged for the use of the cyberspace traveler, marketers quickly
recognized the advertising potential of these and other high-traffic Internet sites. Actual
Internet advertising began in earnest in October 1994, when the first banner ads were sold by
an online magazine. Soon, other advertisers followed suit, buying banner advertising on
other popular websites.
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2. Which companies on the Internet receive the greatest amount of advertising revenue? Why?
(p. 551)
Search engines receive the greatest amount of advertising revenue. Since search engines are
the gateways to sites, they attract the greatest number of “hits” (visits).
3. What are the different ways of advertising on the Net? (pp. 560-562)
a. Websites: the website itself can be considered an ad. However, it is more like an
alternative “storefront,” where customers can find out about the company, its
products, services, and what it stands for.
b. Banners: little billboards that spread across the top or bottom of the Web page.
c. Buttons: small versions of the banner, which often look like an icon and usually
provide a link to an advertiser’s home page.
d. Sponsorships and Added-Value Packages: entire sections of a publisher's Web
page or single event that are sponsored by corporations. It becomes an added-value
package when the sponsor’s brand is integrated with the publisher’s content, banners,
or buttons on the page.
e. Interstitials: animated ads that pop up on the screen while the computer downloads a
website that the user has clicked on.
f. Meta Ads: An advertisement, used in search engines, that is displayed on the results
page of a search and specific to the searched term.
g. Classified Ads: free classified advertising opportunities that are typically supported
by ad banners of other advertisers.
h. E-mail Advertising: An electronic form of direct-mail advertising where companies
or brands directly send recipients e-mail advertising their particular product or
service.
4. What are cookies, and what are they used for? (p. 566)
Cookies are small pieces of information that get stored in your Web browser when you load
certain websites. Cookies can keep track of whether a certain user has ever visited a specific
site. This allows the website to give users different information depending on whether or not
they are repeat visitors. Cookies also indicate the users’ frequency of visits, the time of the
last visit, and the domain from which they are surfing. In addition, cookies let marketers
make an educated guess at the users’ ISP, whether they are visiting from work or home, their
telephone area code, and their NAIC code.
5. What are the different ways Web publishers charge for advertising on the Net? (pp. 567-568)
Advertising on the Internet can be purchased in several ways. The most common means is
the banner ad, typically billed on a cost-per-thousand basis determined by the number of page
requests. Ads may be purchased in a search engine’s information categories and subcategories, such as finance, news, travel, or games. Advertisers may also buy specific words
that bring up their ads when a user’s search request contains these words. Some publishers
charge their clients according to click-throughs – that is, when a user actually clicks on an ad
banner to visit the advertiser’s homepage.
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6. How would you describe the advantages the Internet offers advertisers over traditional
media? (See Checklist: The Pros and Cons of Internet Advertising, p. 564)
Advantages of Internet Advertising:
 Truly interactive medium
 Enormous audience
 Immediate response from consumers
 Highly selective targeting unmatched by any other medium
 Proximity to purchase
 Affluent market
 Provides in-depth information about a company and/or its products
 A rapidly growing industry that provides tremendous profit opportunities for the
savvy direct marketers.
 Reaches business-to-business users when television and radio often cannot-while
they are still at work
 Advertorials are effective tools for advertisers and often incorporated into WWW
publications
 Virtual storefront
7. How does audience measurement on the Web differ from that for traditional media? (p. 566568)
Internet audience measurement information lacks the standardization needed to be able to
compare its advertising effectiveness to other media.
8. What is the importance of the new interactive media to small advertisers? (p. 571-573)
Student answers will vary.
Answer guidelines:
Media planners cannot think of these new vehicles in mass media terms. Interactive media
are personal audiences’ venues. That means one on one. This makes interactive media a
perfect vehicle for small advertisers who are trying to go up against “the big guys” and want
to establish relationships, one customer at a time.
9. How could you use direct mail in an integrated marketing communications program for a
particular product? Give an example. (pp. 572-573)
Webster Design’s direct mail campaign for Applied Communications, Inc. (ACI) is a perfect
example of direct mail use in an integrated marketing communications program. Using a
creative dimensional direct mailing (CDDM), three-dimensional promotional materials
directly mailed to under 500 addresses, Webster Design created a four-phase program with a
baseball theme that netted a 20-to-1 return on investment for ACI.
10. What factors have the greatest influence on the success of a direct-mail campaign? (p. 573574)
The two most important things that affect direct-mail success are the mailing list and the
creativity used.
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EXPLORING THE INTERNET
The Internet exercises for Chapter 17 address the following areas related to the chapter: Internet
advertising (Exercise 1) and direct mail (Exercise 2).
1. Internet Advertising
Advertising banners on the Internet are akin to outdoor billboards and fill the information
superhighway with advertising messages, corporate signage, and hyperlinks. However, as is
the case with all new media, the future of ad banners is uncertain. The only thing that is
certain is that they will exist – in one form or another. Many advertisers are unsure about
putting their advertising dollars towards cyberspace, but companies like DoubleClick
(www.doubleclick.com) are flourishing as they introduce new and better ways of managing
Web advertising – helping advertisers to feel more confident about the ad programs they
place.
Visit the following advertising-related sites on the Internet and discover more about this fastchanging segment of the advertising industry. Then answer the questions that follow.
 AdForce www.adforce.com
 ChannelSeven.com (www.channelseven.com)
 Classifieds 2000 (www.classifieds2000.com)
 DoubleClick (www.doubleclick.com)
 eBusiness Association (eBA) www.ebizassociation.org
 I/Pro (www.ipro.com)
 IMGIS (www.imgis.com)
 Internet Marketing & Advertising Association (IMAA) (www.imaa.org)
 Internet Advertising Bureau (IAB) (www.iab.net)
 Internet Advertising Resource Guide (www.admedia.org)
 “Regulating Internet Advertising” (www.brownraysman.com/doclib/complaw596.html)
 Jupiter Communications (www.jup.com)
a. What group sponsors the site and what is the organization’s purpose?
b. What is the size/scope of the organization?
c. Who is the intended audience(s) of the website?
d. What services does the organization offer Web advertisers?
Sample Answer:
I/Pro
a. I/Pro’s mission is to provide data services that enable interactive marketers, advertisers,
and publishers to make more effective, efficient, and timely business decisions. The
company does so through its independent and syndicated research activities and its
associations with the Advertising Research Foundation (ARF), Internet Marketing &
Advertising Association (IMAA), the Internet Advertising Bureau (IAB), and
CommerceNet.
b. Handling the data measurement of numerous sites and ad banners on the World Wide
Web, the company is global in scope.
c. The intended audience of the website are current and potential clients, industry partners,
investors, and employees. The site is meant to warehouse a wealth of information about
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the company’s products and services, opportunities for industry partners (e.g. ad
agencies, Web development firms, etc.), current financials and corporate news, and
employment opportunities. It also provides a great degree of tools and downloadables to
assist its clients and other interested parties with their Internet activities.
d. I/Pro was established for the sole purpose of measuring online traffic and statistics for
websites and Internet ad banners. The company is much like A.C. Nielsen, Arbitron, and
Scarborough in its ability to track and measure its medium’s audience, and in turn
provides performance evaluation and advertising rates to its subscribers. The company’s
specific services can be broken down as follows:
• Auditing and Comparative Research – partnered with Nielsen Media
Research, this service allows advertisers to track the performance of their ads and
website hosts to substantiate the traffic on their sites. The service also enables
both parties to benchmark off of industry standards with comparative reports,
ultimately helping advertisers to evaluate their communications and hosts to
establish and justify their ad rates.
• Website Measurement & Analysis – this service is uniquely tailored to the
operators of websites. It allows the host to evaluate traffic levels, audience
statistics, ad banner and content effectiveness, and a host of other vital statistics.
These tools are invaluable to the website host, as they facilitate the monitoring,
evaluation, and control disciplines for the site.
• Advertising Agency and Media Buyers Products – This service relates back to
I/Pro’s partnership with other leading Internet organizations (IMAA, IAB,
CommerceNet, etc.) to assist advertisers and Internet Advertising Networks (e.g.
DoubleClick, IMGIS, and Classifieds2000) to effectively plan and buy Internet
media.
2. Direct Mail
Direct-mail advertising is one of the advertiser’s best tools to execute highly targeted
relationship-building communications. Take a few moments to familiarize yourself further
with this side of the advertising business. Browse the direct-mail-related websites below and
be sure to answer the questions that follow.
 Advo, Inc. (www.advo.com)
 Alamo Direct (www.alamodirect.com)
 American List Counsel (www.amlist.com)
 Catalyst Direct Marketing (www.catalystdm.com)
 Community Mailers (www.communitymailers.com)
 Direct Mail Express (www.dmenet.com)
 Direct Mailing Systems (www.dirmailsys.com)
 L.I.S.T. Incorporated (www.l-i-s-t.com)
 Mail Advertising Service Association (MASA) (www.masa.org)
 PostMaster Direct Response (www.postmasterdirect.com)
 Response Mail Express (www.responsemail.com)
 United States Postal Service (www.usps.com)
a. What company or group sponsors the site?
b. What is the organization’s purpose?
c. Who makes up the organization’s membership? Its constituency?
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d. What benefit does the organization provide individual members? The overall direct
marketing and advertising communities?
Sample Answer:
American List Counsel
a. The American List Counsel (ALC) is the site’s sponsor.
b. The primary mission of the American List Counsel is simply to help its clients succeed in
their direct mail efforts. Specifically, the organization aims to help its clients:
 convey and present a compelling message in a direct mail piece
 write more effective and persuasive direct mail copy
 develop more effective and efficient direct mail packaging
 execute direct mail projects at the most appropriate time
 and, most importantly, ensure the quality of mailing lists
c. The organization’s clients are made up of small to large direct marketers and agencies
interested in the list brokerage of effective mailing lists. Furthermore, the company aims
to serve these clients with its host of “how to’s.”
d. The ALS, and list brokers like it, provides a very valuable service to direct marketers and
direct-mail advertisers. Finding a list that works to meet the overall communications
objectives is often quite difficult. Many advertisers do not always know where to turn for
help. ALC’s services answer that call and are a great resource for any organization
involved in direct mail.
IMPORTANT TERMS
ad networks, 570
ad request, 565
affiliate marketing program, 568
banner, 560
broadband, 558
broadsides, 574
brochures, 574
business reply mail, 574
buttons, 561
cable-modem, 558
catalogs, 574
CD-ROM. 571
classified ad website, 562
click rate, 566
click-throughs, 568
compiled lists, 576
cookies, 566
creative dimensional direct mailing (CDDM),
572
customer retention and relationship
folders, 574
home pages, 550
house list, 575
house organs, 574
interactive TV (ITV), 572
Internet, 549
Internet service provider (ISP), 550
Interstitial, 561
keyword, 568
kiosks, 571
letter shop, 577
list broker, 576
mail-response lists, 576
meta ad, 562
narrowband, 558
postcards, 574
rich-media advertising, 561
rich mail, 562
sales letter, 574
search engine, 551
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management (CRM), 563
digital interactive media, 546
DirecPC, 559
direct-mail advertising, 573
direct subscriber line (DSL), 559
e-mail, 574
e-mail advertising, 562
self-mailers, 574
spam, 562
sponsorship, 562
statement stuffers, 574
viral marketing, 563
Web browser, 550
Web pages, 550, 560
Website, 551
WebTV, 559
World Wide Web (WWW), 550
ANCILLARY
ACTIVITIES & EXERCISES
Choose a local business in which you are interested or for which you work. Design a rough
layout of a Web page for the company on paper. Describe the role of each element of your Web
page and, if they are animated or interactive, how each element operates. Present your idea by
discussing it in terms of the following:
1. Objective of the Web page.
2. Describe the strategy of any promotion, including specific sales goals, if any, that you’ve
included in addition to the company’s identity.
3. Explain the ideas behind any artwork buttons, banners, or promotions.
4. Estimated budget for the designing and maintaining your page.
DEBATABLE ISSUE
Should the Internet be self-regulated or regulated by government?
Generally, the Internet is considered a somewhat private medium. Although it can be accessed
while at home, it’s not broadcast into homes like TV and radio — therefore it’s not currently
being regulated by the Federal Communications Commission. However, it offers controversial
information and pornography that can be accessed by young people knowledgeable in the use of
computers, and many parents believe that the power of the government should be used to gain
some control over this giant communications network. The U. S. Government is examining and
debating the issue vigorously. Many in the Senate and House of Representatives agree that
something should done and have offered measures such as regulating the use of encryption
software and encouraging the use of special computer chips to block specific types of
information.
PRO
The Internet should be self-regulated because...
A federally licensed Internet could not operate in the public interest and be a communications
safeguard against oppressive governments.
As a free-speech issue, the Internet must be a medium where government control cannot dampen
opinion and the free flow of information.
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Self-regulation by associations comprised of computer server owners, computer users, and
software company executives and programmers could easily develop a new generation of
hardware and software that could bring Internet misuse down significantly. There would be
profits in sales of the new technology and enough control to keep a lid on the problem. This free
speech can be kept free.
The self-regulation by associations can help the public better understand the hazards of the
Internet via advertising, bringing more revenues to the ad industry.
With so many products in the marketplace today, the public can hardly be expected to know
about all their potential hazards, but the media have traditionally made people aware when a
product can be truly harmful or dangerous, and could do so easily using information available
from the associations who safeguard Internet regulation.
Self-regulation could lessen the grip of government control and thereby encourage greater
commercial traffic on the Internet, especially with the U. S. government’s refusal to allow
encryption software to be used to protect international trade on the Internet.
CON
The Internet should not be self-regulated, but regulated by government because...
The principle of the profit motive is too powerful for the Internet industry to regulate itself — in
fact, the only real profitable Internet business so far is said to be the pornography industry. As
the Internet grows, who knows what questionable industries will reap big Internet profits in the
future?
Backed by huge budgets and the constitutionally specified goal of protecting the public interest,
only the government has the clout and willpower to control the Internet industry.
Today the Internet is fraught with information on how to make atomic bombs, handle toxic
chemicals, and dangerous life forms. Only the government is tasked by the constitution to defend
against all threats to our country’s existence.
Regulation by independent broadcast media and the entertainment industry has not significantly
reduced the gratuitous violence in film and TV. Thus, it would not be realistic to expect change if
the entertainment industry or the computer industry served as watchdogs over the Internet.
Almost any product, if misused or used in excess, can be physically or mentally harmful. This
also applies to the Internet, only the government can keep some control over it.
Self-regulation often leads to codes that the public can use as guides. This assumes that most
potential product hazards are apparent to anyone with common sense. However, when it comes
to a lone kook who gets his hands on a plan to build an atomic bomb, the welfare of possibly
thousands of people are left to a weirdo’s interpretation of a hazardous warning code.
Questions
1. What Internet data can be regulated and what can’t? Explain.
2. What Internet data should be regulated and what shouldn’t? Explain.
3. What other arguments can you offer, pro and con?
4. In your opinion, which side has the strongest arguments?
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IMAGES FROM THE TEXT
Images are available as color acetates through your local McGraw-Hill/Irwin sales
representative.
A17-1
A17-2 Exhibit 17-1
A17-3 Exhibit 17-3
A17-4 Exhibit 17-6
Neopets.com (p. 545)
Growth in online ad spending U. S. (p. 549)
How many people online around the world (p. 556)
Top advertisers on the Internet ranked by spending (p. 567)
REFERENCE LIBRARY
Located on the McGraw-Hill
Contemporary Advertising website:
www.mhhe.com/arens04
RL 17-1
Advantages and disadvantages of the U. S. Postal System
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