26th November 2007

Benefits of Direct Marketing
• Home shopping- hassle free & fun, convenient
• Saves Time
• Introduces a customer to a large variety of products at a time
• Comparative shopping is possible by browsing through mail order catalogues & online shopping
• Can order goods for ourselves and others also
• Sellers also benefit, they can personalize & customize messages
• Direct marketers can build a continuous relationship with each customer. Example- Parents of newborn babies may receive periodic mailings on clothing's,toys as the child grows. Example- Nestle Baby division- builds a database continuously of new mother’s & send personalized packages of gifts & advice at the key stages in the baby’s life.
• Direct Marketing Strategies can be timed to reach prospects at the right time & moments. Thus Direct Marketing- receives a higher readership-because it is sent to more interested prospects.
• Direct Marketing strategies &offers- less visible to competitors
• Measurable response to Direct Marketing campaigns- to decide the more profitable ones.


Mass Marketing versus One-to- One Marketing

Mass Marketing One to One Marketing
• Average Customer Individual Customer
• Customer anonymity (not measured) Customer profile-measured
• Standard product Customized market offering
• Mass production Customized production
• Mass distribution Individualized distribution
• Mass advertising Personalized messages
• Mass promotion Individualized incentives
• One way message Two way communication
• Share of market Share of Customers
• Economies of scale Economies of scope
• All customers Profitable customers
• Customer Attraction Customer retention
• Incomplete data Comprehensive data


Why Direct Marketing

• Environment has become more complex
• Bargaining power of the consumers has increased
• Market-more competitive
• Cost of marketing a product- increased( retail shelf cost at outlets in major cities is costly)
• Advertising budgets-high
• Less customer loyalty
• Direct marketing helps companies focus on their marketing efforts
• Consumer life-style has changed. Today,customers look out for convenience in shopping. Tele- shopping,home shopping,catalogue marketing & online-cater to core customer value
• Globalization-facilitated growth of Direct Marketing
• Niche markets with distinct preferences
• Technology


Competencies of Direct Marketing

• Direct Marketing seeks to persuade people to buy products/ services, like all other promotions
• No intermediary-cost effective-reduces intermediary mark ups to increase profits
• Precision of targeters (specific individuals)
• Calls for immediate action
• Invisible strategies
• Measurement-performance tracking,efficient allocation of resources, relationship analysis-between customer characteristics & buyer behavior in their database.
• Personalization-individual customers addressed by name/title. Information from database is used to produce a specific appeal based on consumers personal characters/past purchase behaviour.

Objectives Of Direct Marketing
• Sale of Products / Services
• Lead Generation- People who respond to Direct Marketing or are interested – ‘Lead’
• Lead Qualification-prospect
• Establishing & Maintaining Customer Relations
• Suspects-Prospects- Customers-Clients-Advocates
• Direct marketing:
- Direct Contact- direct contact with customers- emails,telephone
- Direct Response- using Mass Media TV & Internet

• Direct Mail:
- Fax mail
- Email
- Voice mail
- Product catalogue
- Solo mails
• Direct Response:
- T.V. & Radio
- Infomercials
- Space advertising-print
- Speciality advertising in print
- Binding cards(response cards-magazines)
- Speciality advertising in various media –coupons, samples etc.





Advantages of Direct Marketing

• Selective Reach:
- Reaches large number of people
- Reduces waste coverage
- Consumers with highest potential-targeted
• Segmentation Capabilities:
- Marketers maintain lists of recent product purchasers, car buyers, bank card holders.
- Segmentation through these lists on the basis of -
*Geographic area
*Occupation
*Demographics
*Psychographics
*Marketers develop effective segmentation strategies
• Frequency:
- Build frequency levels-medium used
- Direct response TV advertising-inexpensive
- Direct Mail-frequency not easily accomplished
• Flexibility:
- Direct marketing-use a variety of creative forms
- Direct marketing-direct mail-detailed copy-provides lot of information
• Timing:
- Direct Marketing-unlike other media –can be much more timely. For example direct mail can be put together very quickly-distributed to the target population.
• Personalization: Personalize the message-most effective
• Costs:
- CPM for direct mail-high;its ability to specifically target the audience-eliminating waste coverage-reduces the actual CPM
- Ads on T.V. often the lowest priced available
- Cost per customer purchase contributes to cost effectiveness of direct response advertising, cost of media-low, each sale generated- inexpensive
• Measures the Effectiveness: Measures effectiveness effectively. Feedback-immediate and accurate.


Even personal selling calls for direct marketing attempts e.g. Smokin’ Joes gives users a plethora of coupons - an innovation in DM.

The key to direct marketing is the creation of a life time value.

Time and moment – the ‘contextuality’ of the mailer is a major plus point.

Competitors do not have easy access to the information so a promotional war does not get undertaken. Such promotional wars often hurt profit margins
eg. Pepsi and Coke.


Cost of marketing product: no need to have shelf life
High cost: multi aspects of media is a costly effort- an image building exercise
Less customer loyalty: brand switchers are plenty- individual profiling cannot be established
Product layering can become very beneficial in DM.


Direct Marketing-Disadvantages
• Image Factors: Direct mail-junk mail, direct response ads on TV-often low budgeted ads for low priced products-contributes to the image-something less than the best products are marketed. Therefore, home shopping channels-promote some expensive products. Tele- marketing & Spam-irritating to many consumers-lowering the image of direct marketing industry.
• Accuracy: One of the advantages of Direct Marketing-targeting specific,potential customers. But the effectiveness-depends on the accuracy of the lists used. Lists must be updated. Selectivity decreases if lists are not kept current. Computerization-improved the currency of the lists,yet ability to generate lists-a problem.
• Content Support: Direct response advertising-creation of mood-limited to the surrounding programme and /or editorial content. Direct mail, online services-unlikely to create a desirable mood.
• Rising Costs


For successful implementation of direct marketing programmes-company-number of decisions.

• Important to determine:
-What the program’s objectives will be
-Which markets to target-through the use of a list or a marketing database
-What direct marketing strategies will be employed
-How to evaluate the effectiveness of the programme.

• To determine the effectiveness of database-database-updated frequently. RFM Scoring Method-for database
• RFM-Recency,Frequency,Monetary transactions-between the company & the customer.
• Important for data to be entered-each time a transaction is made. The company can keep a track of -
-How recently purchases have been made
-How often are they made
-What amounts of money are spent
• Tracking which products/services are used-increases the abililty to track the customer population and develop effective marketing strategies
• By analyzing the database on a regular basis-the company can - Identify trends & buying patterns-to help establish a better relationship with its customers-by more effectively meeting their needs.