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Direct Marketing Direct Marketing Defined The total of activities by which the seller directs efforts to a target audience using one or more media for the purpose of soliciting a response by phone, mail, or personal visit from a prospect or customer TV Selling Radio Telemarketing Direct Selling Direct Mail Magazine and Newspaper ALSO “Direct marketing is an interactive system of marketing which uses one or more advertising media to affect a measurable response and/or transaction at any location.” Growth of Direct Marketing Direct Marketing Syndicates Consumer Credit Cards Miscellaneous factors Changing Structure of Society Changing Structure of Markets Technological Advances Direct Marketing Combines With . . . Advertising Public Relations Internet Direct Marketing Support Media Personal Selling Sales Promotions DM Ads How Database Marketing Works A Comprehensive Consumer Database Name Gender Occupation Address/ Zip Code Marital Status Transaction History Telephone Number Family Data Promotion History Length of Residence Education Inquiry History Age Income Unique Identifier A Business-to-Business Database Contact Info Industrial Classification Headquarters Location Contact Title Size of Business Purchase History Telephone Number Revenues Promotion History Source of order, inquiry, referral Number of Employees Inquiry History Credit History Time in Business Unique Identifier Characteristics of Direct Marketing • Customer/prospect databases that make 1:1 targeting possible • A view of customers as assets with lifetime value • Ongoing relationships and affinity with customers • Data-based market segmentation • Research and experimentation (testing) • Benefit-oriented direct-response advertising • Measurement of results and accountability for costs • Interactivity with customers on a personalized and individualized basis • Multimedia direct response communication • Multichannel fulfillment and distribution Historic Comparison Between Direct and Traditional Brand Marketing Direct Marketing Traditional Brand Marketing Direct selling to individuals with customers identifiable by name, address and purchase behavior Mass selling with buyers identified as broad groups sharing common demographic and psychographic characteristics Product benefits do not typically include distribution to the customer’s door Products have the added value of distribution direct to the customer, an important benefit The medium is the marketplace The retail outlet is the marketplace Marketing controls the product all the way through delivery The marketer typically loses control as the product enters the distribution channel Advertising is used to generate an immediate transaction … an inquiry or an order Advertising is used for cumulative effect over time for building image, awareness, loyalty and benefit recall. Purchase action is deferred. Repetition of offers, promotional messages, toll-free numbers and web addresses are used within the advertisement Customer feels a high perceived risk – product bought unseen, recourse is distant Repetition of offers and promotional messages are used over a period of time Customer feels less risk – has direct contact with the product and direct recourse Convergence of DM and Brand • The differences have blurred due to the digital revolution … today… • Most traditional marketers conduct marketing from a Web site, catalog, toll-free number and have a “call-to-action” in their ads • Most direct marketers now create and reinforce brand strategies at the individual level Objectives of Database Marketing Improve Selection of Market Segments Stimulate Repeat Purchases Objectives Cross-selling Other Products Customer Relationship Management • Track Customer Purchases and group them on Purchase History • Build a data base • Keep track of communication preferences • Let customers decide how to give feedback • Empower staff to make decisions • Track Staff actions and make improvements • Try new ways to leverage customer intelligence • Always add to customer intelligence • Develop customer intelligence on past customers • Do it now Developing a Database Kiosk Activity Direct Mails Surveys Sources Catalogs 111 Services 0800 toll free Effective Databases RFM Scoring Recency Monetary transactions (How recently did the customer purchase?) (How much do they spend?) Frequency (How often do they purchase?) Direct Marketing Strategies One-Step Two-Step • The medium is used directly to obtain an order • May use one medium to obtain inquiry and qualify prospect • Often use 800 number phone orders and credit card payment • Typically follow up with a second medium to complete the sale Direct-Marketing Media Infomercials Telemarketing Print, catalogs Broadcast Teleshopping TV Spots Home shopping Direct Mail Types of Direct Mail All forms of advertising sent directly to prospects through the Postal Service or through private services House lists Inclusions Broadsides Postcards Catalogs Reprints Flyers Sales letters Folders Self-mailers Porsche Targets Prospects with Direct Mail Success with Catalogs TV Spots, Infomercials, and Homeshopping A Direct Response Print Ad Telemarketing Outbound Telephone calling by the marketer or marketer’s agent to individual prospects, seeking purchase, subscription, membership, or participation by the call recipient. Inbound Marketers facilitate and invite prospects to call a central location via a long distance number, by a tollfree 800 number, or a fixed-cost 900 number. Audiotex or Telemedia Forms of Direct Selling Repetitive person-to-person Nonrepetitive person-to-person Party Plans Cutco Knives Employs Direct Selling Measuring Effectiveness Cost per Order (CPO) Direct Marketing Advantages Selective reach Segmentation capabilities Frequency potential Flexibility Timing Personalization Costs Measures of effectiveness Direct Marketing Disadvantages Accuracy Image factors Do Not Contact lists Content support Rising costs A number of factors are promoting the attractiveness of direct marketing. The main factors are: Availability of consumer credit cards. Availability of professional agencies. Competitive Pressures, Rising Media Costs, and Market Fragmentation. Increasing family incomes, including dual-income families. Technological advances. Direct Marketing Decisions For successful implementation of direct-marketing, marketers must establish objectives, specify target market, choice of strategies, and set evaluation criteria. Direct-Marketing Objectives Objectives of direct marketing usually focus on seeking direct response in terms of behavior. Market Segmentation Market segmentation and targeting the right customers are critical to the success of promotional programme. Customers can be grouped on the basis of age, sex, income, education, lifestyle, and stage in family life cycle etc. Direct marketers use a database. The database should provide the answers to the following questions: Where do they live? How did they make contact first time? What have they purchased? How often have they purchased? What is the monetary value of their purchases? How do they order or purchase, through the Internet, mail, phone, or in person? What is known about them and their families, occupation, education, children, interests, attitudes, and payment histories etc.? In case of B2B, who are the influencers, users, deciders, and purchasers? Location of corporate office and branch offices. Direct Marketing Marketing Research Direct Marketing Flow Chart Market Segmentation Direct Response Advertising Advertising Creation Media Direct Mail Telephone Broadcast Internet Newspaper Magazine Others Direct Response Expenditures Direct Mail Telephone Broadcast Internet Newspaper Magazine Others Distribution Channels Measurable Response Vending Machines Mail Order, Mail/Phone Personal Visit to Seller Customer / Prospect Database Response / Transaction Completion Personal Visit or Call to Buyer (Source: G. Belch and M. Belch, Advertising and Promotion. Based on figure by Martin Bair, Henry R. Hoke, Jr., and Robert Stone). Direct Marketing Offer and Media There are five important decision areas: product, offer, medium, distribution method, and creative strategy. One-Step Approach Two-Step Approach Direct Mail Catalogues Broadcast Media Print Media Telemarketing Electronic Shopping Direct Selling Advantages of Direct Marketing Direct marketing offers the advantage of reaching large number of welldefined target customers and almost eliminates waste coverage. Good quality databases are available from independent suppliers and the marketer can segment customer groups with considerable precision. Direct marketer can personalise the message. Direct marketing can deliver almost perfect offers to customers. Marketer can build desired frequency level based on media. Direct marketing offers creative flexibility in different media. Direct marketer can quickly develop a list of specific profiles for direct mail. Direct marketing is more effective in building customer relationship. It is very cost effective considering the sale generated per contact. The results can be measured most accurately. The Processes of Direct and Interactive Marketing • Primary goal: – The creation and cultivation of a customer • Basic Premise: – Customer and prospect responses are measurable – Customer data drives all DM strategies – Multiple channels are used to serve the customer Customer Similarity and Customer Value • Database technology made it possible to track customer transactions and actions • Lifetime Value of a Customer The Direct and Interactive Marketing Model Prospect/Customer Database Marketer Direct Communication Hi-Tech Elect. Media Media Multi-Channel Measurable Fulfillment Response Print Media Direct and/or Transaction Mail/Cat Target Customer/Prospect Web Physical Store Components of the Direct and Interactive Marketing Model • Direct Communication 1:1 • Multiple Media • Measurable Response • Database • Customer Relationships • Multichannel Fulfillment/Distribution Primary Applications of Direct and Interactive Marketing • Traffic-building at the seller’s location • Lead-generation at the buyer’s location • Mail order (remote location) • Multichannel distribution Primary Users of Direct and Interactive Marketing • Product and service enterprises • Customer and industrial enteprises • Profit and non-profit organizations • Fundraising organizations • Political action groups Trends in Direct and Interactive Marketing • Creating In-Store Traffic • Directing Online Traffic • Membership (similarity) Clubs • Issues of Privacy and Security Customer Databases An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. Forms of Direct Marketing