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Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT PRINCIPLES OF MARKETING University of Management and Technology 1901 Fort Myer Drive Arlington, VA 22209 Voice: (703) 516-0035 Fax: (703) 516-0985 Website: www.umtweb.edu Page 1 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Module 14: Direct and Online Marketing: Building Direct Customer Relationships Page 2 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Copyright Warning This presentation is the intellectual property of Pearson Education Inc. 2011. Students are hereby advised that they may not copy or distribute this work to any third party info info Page 3 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Rest Stop: Previewing the Concepts Define direct marketing and discuss its benefits to customers and companies. Identify and discuss the major forms of direct marketing. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. info Overview the public policy and ethical issues presented by direct info marketing. Page 4 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT First Stop Amazon.com – The Wal-Mart of the Internet Background How Did They Do It? Success: Since its inception in 1995, Amazon.com has grown to sales of more than $19 billion today, and profits have increased 18-fold, with 50% of sales coming from overseas. info Merchandise: Amazon has expanded its merchandise beyond books to include music, videos, electronics, tools, housewares, shoes, groceries, and more. Amazon boasts, “We have info the Earth’s biggest selection!” Customer-driven: Amazon offers a better store, easier shopping, greater variety, more information and low prices. Small retailers can sell via Amazon. Innovative services include Amazon Prime, Kindle, music downloading, & shopping applications for iPhone. Customization: Amazon’s site greets customers by name and offers personalized, relevant recommendations. Users can share opinions and reviews, chat online and more. Page 5 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Direct Marketing info info Connecting directly with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. Page 6 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT The New Direct-Marketing Model The new direct-marketing model: Direct marketing has undergone a dramatic transformation. Most firms use direct marketing as a supplemental channel or medium. For many companies, direct marketing constitutes a new and complete model for doing business. Some firms employ the direct model as their only approach (e.g., Geico, Amazon, eBay). info info Page 7 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info Amazon.com obssesses over making each customer’s experience uniquely personal. Customers, like author Gary Armstrong, are greeted on their personalized home page which also features customized recommendations. Page 8 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Growth of Direct Marketing Direct marketing: Fastest growing form of marketing. 10% of U. S. economy ($ 2.1 trillion) is generated by direct marketing sales. Direct marketing sales are expected to grow at 5.3% annually through 2013. Direct marketing continues to become more Web-oriented and Internet marketing is the fast-growing form of direct sales. info info Page 9 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info Southwest Airlines uses techie direct marketing tools – including a widget and a blog – to inject itself directly into customers’ everyday lives in a way that media advertising just cannot achieve. Page 10 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Benefits of Direct Marketing Benefits to buyers: Convenient. Easy to use. Private. Ready access to products. Ready access to wealth of comparative information. info Immediate and interactive. info Page 11 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Benefits of Direct Marketing Benefits to sellers: Powerful tool for building customer relationships. Offers a low-cost, speedy way to reach markets, including business markets. Offers lower costs, improved efficiencies, and speedier handling of channel and logistics functions. Offers greater flexibility. info Gives access to buyers that could not be reached through other info channels. Page 12 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Customer Database info info An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. Page 13 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info USAA uses its extensive database to tailor its services to the specific needs of individual customers, creating incredible customer loyalty. Page 14 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Figure 14.1: Forms of Direct Marketing info info Page 15 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Direct-mail marketing: Involves sending an offer, announcement, reminder, or other item to a person at a particular physical or virtual address. Largest direct marketing medium. Well-suited to one-to-one communication. Use of traditional forms may decline as marketers switch to newer digital forms. info Can be used effectively in combination with other media, such as web info sites. Often perceived as “junk mail”. Page 16 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info Combining direct mail with personalized URLs cost JDA only $60,000 but yielded a high response rate and $13 million in sales. Page 17 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Catalog marketing: Direct marketing through print, video, or digital catalogs that are mailed to select customers, made available in stores, or presented online. info info Page 18 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Catalog marketing trends: More and more catalogs are going digital: Minimizes costs, and web space is unlimited. Allows real-time merchandising. Print catalogs are still the primary medium. Drives web traffic and can create an emotional connection to the consumer. Expected catalog sales in 2013 = $182 billion. info info Page 19 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Telephone marketing: Accounts for 17% of all direct-marketing driven sales. Used in both consumer and B2B markets. Marketers use outbound and inbound calls. Outbound: Sell directly to consumer. Inbound: Toll-free ordering or order faxing. info Do-not-call legislation has impacted theinfotelemarketing industry. Many telemarketers have shifted to other forms of direct marketing. Page 20 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action Marketers use toll-free 800 numbers to receive orders from TV and print ads, direct mail, or even catalogs. Direct response ads always feature a call to action, as shown in the ad at right. info info Page 21 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Direct-response TV marketing: Direct-response television advertising (DRTV): TV spots that are 60 or 120 seconds long. info info Ads for products like Snuggies have become DRTC classics. Page 22 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Direct-response TV marketing: Infomercials: A 30 minute or longer advertising program for a single product. Home shopping channels: Entire cable channels dedicated to selling multiple brands, items, and services. info info Page 23 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing Kiosk marketing: Information and ordering machines generally found in stores, airports, and other locations. E.g., Redbox operates more than 15,000 DVD rental kiosks nationwide. info info Page 24 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing New digital direct marketing technologies: Mobile phone marketing: Mobile ad spending is expected to grow. Watch this YouTube video to see more examples! info info Page 25 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Forms of Direct Marketing New digital direct marketing technologies: Podcasts and vodcasts. Purina Petcasts. Interactive TV (ITV): Viewer engagement is much higher than with regular TV ads. Online marketing is the final form of direct marketing. info info Page 26 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Company efforts to market products and services and build customer relationships over the Internet. info info Page 27 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Marketing and the Internet: Usage continues to grow with Internet household penetration equaling 72.5%. 33% of American consumers chose the Internet as the second-mostessential medium in their lives. Online marketing efforts are expanding. info info Page 28 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Click-only companies: So-called dot-coms, which operate only online without any brick-andmortar presence. Types of click-only firms: E-tailers (Amazon). Search engines and portals (Google). info Transaction sites (eBay). info Content sites (ESPN). Page 29 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Click-and-mortar companies: Traditional brick-and-mortar companies that have added online marketing to their operations. info info Page 30 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Click-and-mortar business trends: Almost all traditional companies have set up their own online sales and communication presence. Many click-and-mortar firms are having more online success than their click-only competitors. info info Page 31 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Figure 14.2: Online Marketing Domains info info Page 32 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Business-to-consumer (B2C) online marketing: Businesses selling goods and services online to final consumers. Trends: Online buying continues to grow. The Internet influences 35% of total retail sales; 50% of US households shop online. info B2C consumers differ from off-line consumers because customers initiate and control the Internet exchange process. info Page 33 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info People now go online to buy just about anything. Where else but the Web could you find a place that specializes in anything and everything bacon? Page 34 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Business-to-business (B2B) online marketing: Businesses using B2B Web sites, e-mail, online catalogs, online trading networks, and other online resources to reach new business customers, serve current customers more effectively, and obtain buying efficiencies and better prices. Most major B2B marketers offer online product information, purchasing, and support. Many firms use the Internet to build stronger customer relationships. info info Page 35 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Consumer-to-consumer (C2C) online marketing: Online exchanges of goods and information between final consumers. Auction sites such as eBay offer marketplaces to buy or exchange goods. Blogs and forums facilitate information interchanges. Marketers are tapping into blogs as a medium for reaching carefully targeted consumers. info Firms should monitor blogs for what is being said. info Page 36 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Consumer-to-business (C2B) online marketing: Online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases, sometimes even driving transaction terms. info info Page 37 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info GetSatisfaction.com has created a user-driven customerservice community where can discuss product and service problems. Page 38 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Corporate web sites: Marketing web sites: Designed to build customer goodwill, collect customer feedback, and supplement other sales channels, rather than to sell the company’s products directly. info info Page 39 of 54 Module 14, MKT100 A web site that engages consumers in interactions that move them closer to a direct purchase or other marketing outcome. Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Corporate web sites: Marketing web sites: Designed to build customer goodwill, collect customer feedback, and supplement other sales channels, rather than to sell the company’s products directly. info info Page 40 of 54 Module 14, MKT100 A web site that engages consumers in interactions that move them closer to a direct purchase or other marketing outcome. Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Figure 14.3: Setting Up for Online Marketing info info Page 41 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Online marketers should pay careful attention to the seven Cs of effective Web site design: Context. Content. Community. Customization. Communication. info info Connection. Commerce. Constant change helps encourage repeat visits. Page 42 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Fuel For Thought info info Visit the www.nps.gov web site. How well does this web site fulfill the 7 “C’s” of effective web site design? Page 43 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Placing ads and promotions online: Forms of online advertising (follow link for examples): Banner ads. Interstitials. Pop-up or pop-under ads. Rich media ads. Search-related ads (contextual advertising). info info Page 44 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Placing ads and promotions online: Other forms of online promotion: Content sponsorships (sponsoring special content). Alliances and affiliate programs (work with firms to promote each other). Viral marketing (Internet version of word-of-mouth). Burger King’s Subservient Chicken campaign was a huge success. info info Page 45 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info OfficeMax’s ElfYourself.com viral web site logged 193 million visits with no promotion at all. One-third of the site’s visitors were influenced to shop at OfficeMax. Page 46 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Creating or participating in online social networks: Also called web communities. E.g., MySpace, Facebook, YouTube. Marketers can participate in existing online communities or set-up their own. More focused niche social networks are emerging which can be used to target special interest groups. info info Page 47 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Online Marketing Using e-mail: 79% of all direct marketing campaigns employ e-mail. Enriched e-mail messages can grab attention. Spam accounts for 90% of all e-mail sent. Permission-based e-mail marketing is key. E-mail can produce an ROI 40-50% higher than other forms of direct marketing. info info Page 48 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action info info StubHub no longer spams indiscriminately. It now lets customers opt in for e-mail, and sends only event and ticket information that is relevant to consumer interests. Page 49 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Public Policy and Ethical Issues in Direct Marketing Irritation, unfairness, deception, and fraud: Direct marketing excesses may offend consumers. Direct marketing has been accused of taking unfair advantage of impulsive or less sophisticated buyers. Internet fraud and phishing are growing concerns. Internet shoppers have online security concerns. info Marketers often find it difficult to restrict access by vulnerable or unauthorized groups. info Page 50 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Marketing in Action Internet fraud has increased dramatically in recent years. The FBI’s Internet Crime Center provides consumers with a convenient way to alert authorities to suspected violations. info info Page 51 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Public Policy and Ethical Issues in Direct Marketing Invasion of privacy: Database marketing allows customers to receive offers closely matched to their interests. Critics worry whether marketers know TOO much about consumers. Online privacy (particularly for children) is of particular concern. If marketers don’t prevent privacy abuse, legislators may step in. info info Page 52 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Fuel For Thought Many people feel that marketers know more about their current and potential customers than they really should. How do YOU feel about the following? Should credit card companies be allowed to share data with merchants who accept the cards? What about selling their data to other businesses? Is it ethical for credit bureaus to compile and sell lists of people who have recently applied for credit cards? info info Page 53 of 54 Module 14, MKT100 Version 181118 Visit UMT online at www.umtweb.edu © 2011 Pearson Education Inc. © 2012 UMT Rest Stop: Reviewing the Concepts Define direct marketing and discuss its benefits to customers and companies. Identify and discuss the major forms of direct marketing. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. info Overview the public policy and ethical issues presented by direct info marketing. Page 54 of 54 Module 14, MKT100