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Offline and Online Direct
Advertising
14
Direct Advertising
Direct Advertising
The use of one or more advertising
media to transmit messages that
encourage purchases of the
advertiser’s brands.
Growth of Direct Advertising
• Computer technology and database
management
• Niche marketing
Database Marketing
Collecting and electronically storing
information about present, past, and
prospective customers.
Using data to profile customers and
develop effective, efficient marketing
programs by individual communication
and relationship building.
The Role of Databases
Databases
allow
a company to:
• Target best prospects for
offering
• Offer varied messages
• Create long-term
relationships with
customers
• Enhance ad productivity
• Calculate the lifetime
value of a prospect
Lifetime Value Analysis
Customer Lifetime Value
Lifetime Value Anaysis
Customer Lifetime Value
Year 1
Revenue
A Customers
B Retention rate
C Average yearly sales
D Total revenue
Costs
E Cost%
F Total costs
Profits
G Gross profit
H Discount rate
I NPV profit
J Cumulative NPV profit
K Lifetime value(NPV)
per customer
Year 2
Year 3
Year 4
Year 5
$
$
1,000
40%
150 $
150,000 $
400
45%
150 $
60,000 $
180
50%
150 $
27,000 $
90
55%
150 $
13,500 $
50
60%
150
7,500
$
50%
75,000 $
50%
30,000 $
50%
13,500 $
50%
6,750 $
50%
3,750
75,000 $
30,000 $
1
1.2
75,000 $
25,000 $
75,000 $ 100,000 $
13,500 $
1.44
9,375 $
109,375 $
6,750 $
1.73
3,902 $
113,277 $
3,750
2.07
1,812
115,088
$
$
$
$
75.00
$
100.00
$
109.38
$
113.28
$
115.09
Lifetime Value Analysis
Two types of Mailing Lists
House lists
External lists
• Based on a company’s own internal list of
present or prospective customers
• Methods to obtain database information:
»
Two types of Mailing Lists
House lists
External lists
• House lists of other companies
• Compiled lists: Lists compiled by a
company for its own purposes or lists
purchased from another company that
specializes in list compilation
» Compiled lists are not as desirable. Why?
P-Mail Advertising
P-Mail Advertising
Refers to any advertising matter sent
directly to the person whom the marketer
wishes to influence
P-Mail’s Distinctive features
Saab 9-5 P-Mail Questionnaire
• Direct mail
questionnaire
Saab 9-5 P-Mail Response
to Questionnaire
• Response to direct
mail questionnaire
Trend Toward P-Mailing
• Rising expense of television
advertising and increased audience
fragmentation
• Unparalleled targeting of messages to
desired prospects
• Increased emphasis on measurable
advertising results
• Consumers are responsive and like pmail (survey results)
Special P-Mail Case: Catalog
Marketing
Retail Catalog
Full-line merchandise
Consumer specialty
Industrial specialty
Why Catalog Shopping? The
Consumer’s Perspective
• Saves time
• Appeals to consumers who are
fearful of shopping due to concerns
about crime
• Leisurely decisions
• Toll-Free numbers
• Comparable quality and prices
• Guarantees are attractive
Where is catalog marketing?
• Catalog marketing has reached the
mature life-cycle stage:
»
See Text
• Data Mining
• E-Mail Advertising
» Opt-in versus Spam
» Virtues: Similar to P-Mail
» Wireless E-Mail Advertising