Download Chapter 14

Direct and Online
Marketing
Building Direct Customer
Relationships
Chapter 14
Rest Stop: Previewing the Concepts
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2.
3.
4.
5.
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.
Overview the public policy and ethical issues
presented by direct marketing.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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First Stop
Amazon.com – The Wal-Mart of the Internet
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•
Background
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.
Merchandise: Amazon has
expanded its merchandise
beyond books to include
music, videos, electronics,
tools, housewares, shoes,
groceries, and more. Amazon
boasts, “We have the Earth’s
biggest selection!”
•
•
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
How Did They Do It?
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, and
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.
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Direct Marketing
• Direct marketing:
 Connecting
directly with carefully
targeted individual consumers to both
obtain an immediate response and
cultivate lasting customer relationships.
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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).
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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 fastest-growing form of
direct sales.
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Benefits of Direct Marketing
• Benefits to buyers:
 Convenient.
 Easy
to use.
 Private.
 Ready access to products.
 Ready access to wealth of comparative
information.
 Immediate and interactive.
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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.
 Gives access to buyers that could not be
reached through other channels.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Customer Databases and
Direct Marketing
• Customer database:
 An
organized collection of
comprehensive data about individual
customers or prospects, including
geographic, demographic,
psychographic, and behavioral data.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Forms of Direct Marketing
• Major forms of direct marketing:
 Face-to-face
selling.
 Direct-mail marketing.
 Catalog marketing.
 Telemarketing.
 Direct-response TV marketing.
 Kiosk marketing.
 New digital technologies.
 Online marketing.
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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.
 Can be used effectively in combination with
other media, such as Web sites.
 Often perceived as “junk mail.”
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
• 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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
 Do-not-call
legislation has impacted
the telemarketing industry.
• Many telemarketers have shifted to other forms of
direct marketing.
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Forms of Direct Marketing
• Direct-response TV marketing:
 Direct-response
television advertising
(DRTV):
• TV spots that are 60 or 120 seconds long.
 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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Forms of Direct Marketing
• Kiosk marketing:
 Information
and ordering machines
generally found in stores, airports, and
other locations.
 E.g., in-store Kodak kiosks allow
customers to transfer pictures from
digital storage devices, edit them, and
produce high-quality color prints.
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Forms of Direct Marketing
• New digital direct marketing technologies:
 Mobile
phone marketing:
• Mobile ad spending is expected to grow.
 Podcasts
and vodcasts.
 Interactive TV (ITV):
• Viewer engagement is much higher than with
regular TV ads.
• Online marketing is the final form of direct
marketing.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Online Marketing
• Online marketing:
 Company
efforts to market products and
services and build customer relationships
over the Internet.
• 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-most-essential
medium in their lives.
 Online marketing efforts are expanding.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Online Marketing
• Click-only companies:
 So-called
dot-coms, which operate only online
without any brick-and-mortar presence.
• Types of click-only firms:
 E-tailers
(Amazon).
 Search engines and portals (Google).
 Transaction sites (eBay).
 Content sites (ESPN).
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Online Marketing
• Click-and-mortar companies:
 Traditional
brick-and-mortar companies that
have added online marketing to their
operations.
• 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.
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Online Marketing
• Online marketing domains:
 Business-to-consumer
(B2C).
 Business-to-business (B2B).
 Consumer-to-consumer (C2C).
 Consumer-to-business (C2B).
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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 U.S. households shop online.
 B2C consumers differ from off-line consumers
because customers initiate and control the
Internet exchange process.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
• Firms should monitor blogs for what is being said.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
 E.g., GetSatisfaction.com allows users to post
questions, voice complaints, or deliver
compliments to companies.
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Online Marketing
• Conducting online marketing:
 Creating
a Web site.
 Placing ads and promotions online.
 Creating or participating in online social
networks.
 Using e-mail.
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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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
A
Web site that
engages
consumers in
interactions that
move them closer
to a direct purchase
or other marketing
outcome.
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Online Marketing
• Online marketers should pay careful attention to
the seven Cs of effective Web site design:
 Context.
 Content.
 Community.
 Customization.
 Communication.
 Connection.
 Commerce.
• Constant change helps encourage repeat visits.
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Online Marketing
• Placing ads and promotions online:
 Online
advertising has become a major
medium.
 Forms of online advertising:
• Banner ads.
• Interstitials.
• Pop-up or pop-under ads.
• Rich media ads.
• Search-related ads (contextual advertising).
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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-ofmouth).
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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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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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.
 Marketers often find it difficult to restrict
access by vulnerable or unauthorized groups.
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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.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
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Rest Stop: Reviewing the Concepts
1.
2.
3.
4.
5.
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.
Overview the public policy and ethical issues
presented by direct marketing.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
14 - 34