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Direct-Response Marketing Part 5: Principles: How to Win the Battle of the Buzz Chapter 15 Prentice Hall, © 2009 15-1 CHAPTER KEY POINTS Questions We’ll Answer • How do we define direct marketing and explain the process? • How are databases used in direct marketing? • Who are the key players in direct marketing? • What are some steps in evaluating the tools and media available to directresponse programs? Prentice Hall, © 2009 15-2 THE PRACTICE OF DIRECT MARKETING What is direct marketing? • • • • • A multichannel system of marketing using various media to connect sellers and customers who deal with each other directly rather than using an intermediary, like a wholesaler or retailer. Designed to elicit an immediate response. Uses marketing research to develop strategy. Builds databases to target customers, prospects. Uses a variety of media, including new media. Prentice Hall, © 2009 15-3 THE PRACTICE OF DIRECT MARKETING Advantages of Direct Marketing • • • • • • • Can be personalized to be more persuasive. Results are measurable; ROI is more easily known. Relevant customer information can be collected to produce more useful databases and selective reach, reducing waste. Convenient to purchase; not restricted to a location. The marketer (not wholesaler or distributor) controls product until delivery. Advertising with direct-mail components is more effective. Flexibility in form and timing. Prentice Hall, © 2009 15-4 THE PRACTICE OF DIRECT MARKETING Disadvantages of Direct Marketing • • • • Consumers are reluctant to purchase a product they can’t touch or feel. Annoyances associated with direct marketing (junk mail, telemarketers) Customer privacy, data sharing, and identity theft issues. Tension between building long-term brand image and driving short-term sales. Prentice Hall, © 2009 15-5 THE PRACTICE OF DIRECT MARKETING Direct Response Advertising • • Direct marketing includes the whole marketing process. Direct-response advertising is a type of marketing communication that combines the characteristics of advertising and sales promotion—attention-getting visuals, interesting copy, an offer, and relevant timing. – Gives the reader, viewer, or listener a way to directly respond and contact the advertiser – High cost, but well-targeted Prentice Hall, © 2009 15-6 THE PRACTICE OF DIRECT MARKETING Direct Response Advertising • • Direct marketing includes the whole marketing process. Direct-response advertising is a type of marketing communication that combines the characteristics of advertising and sales promotion—attention-getting visuals, interesting copy, an offer, and relevant timing. – Gives the reader, viewer, or listener a way to directly respond and contact the advertiser – High cost, but well-targeted Prentice Hall, © 2009 15-7 THE PRACTICE OF DIRECT MARKETING Steps in the DM Process 1. Setting objectives and making strategic decisions (research helps advertisers target, segment, prospect, and set objectives). 2. The communication of an offer (the message) by the seller through the appropriate medium. 3. Response, or customer ordering. 4. Fulfillment, or filling orders and handling exchanges and returns. 5. Maintenance of the company’s database and customer service (relationship building). Prentice Hall, © 2009 15-8 THE PRACTICE OF DIRECT MARKETING Objectives/Strategy • Provide product information – Provide space for detailed information • Create sales – Order products, visit a dealer, return a response card, visit a Web site • Retain and strengthen customer relationships – It costs so much to acquire new customers • Develop leads – Identify prospects for products (i.e. cars) that make people think before purchasing so follow-up phone calls, sales calls, or other contact can be made to help influence purchases (lead generation). • Generate traffic – Visit a store, attend an event, or otherwise interact with a brand. • Test offers – Pricing, packaging, promotional offers. Prentice Hall, © 2009 15-9 THE PRACTICE OF DIRECT MARKETING Targeting • Identifies who is to receive the offer. – Important because the Cost Per Thousand is very high • Current customers are the best prospects. – Order products, visit a dealer, return a response card, visit a Web site • Three criteria (RFM) predict who is most likely to buy again: – Recency—they purchased recently – Frequency—they purchase often – Monetary—they spend a lot of money • Profiling – For acquiring new customers, a targeting strategy is to profile current customers and look for potential customers with similar profiles. Prentice Hall, © 2009 15-10 THE PRACTICE OF DIRECT MARKETING The Offer • Typically consists of a product description, terms of sale, and payment delivery, and warranty information. • Communicates benefits and answers “What’s in it for me?” for the buyer. • Calls on the buyer to take action. – Offer provides all the information needed including price, the cost of shipping and handling, optional features, future obligations, availability of credit, extra incentives, time and quality limits, and guarantees or warranties. • Supported by a message strategy, a media strategy, and the database. Prentice Hall, © 2009 15-11 THE PRACTICE OF DIRECT MARKETING Message and Media Strategy • Message Development Guidelines – Longer and must contain more explanation and detail about price, style, and convenience; because if it doesn’t persuade the receiver to respond, the message is wasted. – Copy is written in a personal, one-to-one conversational style. – Should reflect whether the offer is one-step or a two-step offer. • One-Step Offer – Asks for a direct sales response, includes a mechanism. • Two-Step Offer – Designed to gather leads, answer consumer questions, set up appointments, drive customers to a Web site or retail store. Prentice Hall, © 2009 15-12 THE PRACTICE OF DIRECT MARKETING The Response/Order • It must be as easy as possible to respond. – Offer options: online, mail, phone, fax • Overcome resistance with: – Toll-free telephone numbers for product support – Free limited-time trials – Acceptance of several different credit cards • Create urgency by offering a gift or limited-timeonly price deal. Prentice Hall, © 2009 15-13 THE PRACTICE OF DIRECT MARKETING Fulfillment/Customer Maintenance • Fulfillment—getting the product ordered to customers • Fulfillment includes all back-end functions related to processing the order: – Delivering the product – Receiving payment – Providing tracking numbers • Customer maintenance – Tracking customer transactions and interactions with a database Prentice Hall, © 2009 15-14 THE PRACTICE OF DIRECT MARKETING Measurement and Evaluation • Various offers are evaluated and measured for effectiveness. – Track printed codes on mail-in responses – Use different numbers for different TV commercials • This info is used to identify the best offers and adjust the campaign accordingly. Principle: Because direct-marketing messages are constantly being measured, it is easier to learn what works and modify succeeding campaigns based on results than with advertising. Prentice Hall, © 2009 15-15 DATABASES: THE FOUNDATION OF DM Using Databases • Marketers use databases to: – Keep track of customers – Identify prospects – Segment groups into customers and prospects, to send relevant offers to each group • E.g., Carnival Cruise Lines segments customers into new customers, returning passengers, and frequent cruisers. – Each group gets a different “Sail and Sign” card, each with different perks and privileges • Direct marketers use the same strategy when sending offers to customers or prospects. – Better customers get more premium quality pieces than lowerusage customers who get a more modest piece. Prentice Hall, © 2009 15-16 DATABASES: THE FOUNDATION OF DM Database Management Process 1. Collection point – Completed warranty card, contest entry, trade show card 2. Data entry – Entered into computer and merged with other information 3. Data assessment – Determine relevant level of detail 4. Data clustering – Create clusters of characteristics and behaviors for segmenting or targeting 5. Data application – Apply to marketing strategy or problem (e.g., send coupons) 6. Data sharing – Manufacturer shares info with retailers 7. Data refinement – Corrections, updates, additions, deletions Prentice Hall, © 2009 15-17 DATABASES: THE FOUNDATION OF DM Lists • • • • • Customer and prospect information including addresses, phones, emails Can be purchased or rented from list brokers Lists tied to demographics, psychographics, geography, hobbies, affiliations, postal routes New lists are crated by merging and purging Three types of lists: – – – House lists: marketers own customers or members Response lists: people who respond to some type of direct-response offer Compiled lists: specific categories such as new homebuyers, graduating seniors, new mothers Prentice Hall, © 2009 15-18 DATABASES: THE FOUNDATION OF DM Data-Driven Communications • Companies use info from previous communications to target, respond to, and interact with customers. • Services like Prodigy and Melissa Data offers online buying and purchase reminders that marketers, can access. • Date Mining – Sifting and sorting through company database information to target customers and maintain a relationship. – Information is used for behavior targeting and prospecting • Privacy Issues – Cookies (that track online visits) and loyalty cars (like frequent flyer cards) concern privacy advocates. – Sometimes info is collected with the subjects permission and knowledge; sometimes without. Prentice Hall, © 2009 15-19 THE KEY PLAYERS Key Players: (1) Advertisers • • • Companies whose primary business is selling products and services by mail or phone, or direct response advertising Retail stores who use direct marketing as a supplement to other forms of marketing Dell, GEICO Prentice Hall, © 2009 15-20 THE KEY PLAYERS Key Players: (2) Agencies • • • • Advertising agencies—department or separate direct-response company owned by the agency Direct marketing agencies—independent, full-service direct marketing agencies specializing in direct response Service firms—printing, mailing, list brokering, data management Fulfillment houses—store/ship requested information/products Prentice Hall, © 2009 15-21 THE KEY PLAYERS Key Players: (3) Media Companies • • The media that deliver messages by phone, mail, or the Web Used to make an offer with a prospect – U.S. Postal Service Prentice Hall, © 2009 15-22 THE KEY PLAYERS Key Players: (4) Customers • • Dislike intrusiveness, but appreciate convenience Types of customers – Push-button shopper (phone) – Mouse-clicking shopper (computer) Prentice Hall, © 2009 15-23 THE TOOLS OF DIRECT MARKETING (1) Direct Mail • • • • • • A print advertising message for a product or service, delivered by mail Most popular method Variable data use digital printing to highly personalize messages Uses bulk mail rates Response is 2–3% Fairly high CPM, but easy to calculate payout rate Prentice Hall, © 2009 15-24 THE TOOLS OF DIRECT MARKETING (2) Catalogs • A multiple-page direct mail publication showing a variety of merchandise. • Increasing in number; even while marketers are refining databases, cutting back on number of recipients. • Catalogs can drive e-commerce, Web site purchases. • Specialty catalogs are growing in number. Prentice Hall, © 2009 15-25 THE TOOLS OF DIRECT MARKETING (3) Telemarketing • Almost as persuasive as personal sales, but a lot less expensive. • Inbound vs. outbound • Message must be simple, compelling, and short. • Issues include intrusion, privacy, and fraud. – Predictive dialing can call even unlisted numbers – Fraudulent behavior has tarnished telemarketing’s image – Do Not Call registry, “Privacy Manager,” and Caller ID restrict access by telemarketers Prentice Hall, © 2009 15-26 THE TOOLS OF DIRECT MARKETING (4) Direct-Response Advertising • Print Media – Ads in newspapers and magazines feature a coupon, order form, address, toll-free number; ask for response. • Broadcast Media – Radio provides targeted audiences, especially mobile audiences. – Cable is targeted to particular interests. – TV uses infomercials and direct-response ads. Prentice Hall, © 2009 15-27 THE TOOLS OF DIRECT MARKETING (5) Internet • Combines strengths of direct mail and telemarketing • Moves marketers closer to one-to-one marketing • Combines database information and email technology for highly personalized, lowcost messages to mass audience • Spam is an issue • Permission marketing gives recipients the choice to “opt in” or “opt out” Prentice Hall, © 2009 15-28 INTEGRATED DIRECT MARKETING What is Integrated Direct Marketing? • A systematic way to get close to your best current and potential customers. • Seeks to achieve precise, synchronized use of the right media, at the right time, with a measurable return on dollars spent. • Direct mail with a reply card and an 800 number, followed by a phone call. • Lifetime Customer Value (LCV) is an estimate of how much a purchase volume a customer or target market will generate over a length of time. Prentice Hall, © 2009 15-29 GLOBAL CONSIDERATIONS IN DIRECT MARKETING What are the global trends and issues? • The use of databases, credit cards, toll-free numbers and the Internet are driving direct marketing growth in Far Eastern and European countries. • Direct marketing is especially important in countries where advertising is tightly regulated. • Government postal regulations also limit the use of direct mail. • Regulations, standards, and cultural meanings vary greatly from country to country. • Creative messages, visuals, and words often don’t easily translate across cultures. Prentice Hall, © 2009 15-30 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Prentice Hall, © 2009 15-31