direct-response marketing advertising principles and practices

Direct-ResponseMarketing

Advertising Principles and Practices

15-2Prentice Hall, © 2009

Questions We’ll AnswerQuestions 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 direct-response programs?

The Gecko Goes DirectThe Gecko Goes Direct

\

• The GEICO spokes-creature gets attention and communicates a marketing-savvy audience.

• Heavy TV advertising including the cavemen and customer with celebrity testimonials prove that direct response sell a to a broad audience.

• Their share of premiums grew from 4.6–6.25% from 2001 to 2005.

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Visit the Site

Prentice Hall, © 2009

http://www.geico.com/


What is 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.

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Direct Marketing IndustryDirect Marketing Industry



Advantages of Direct MarketingAdvantages 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 controls product until delivery.

• Advertising with direct-mail components is more effective.

• Flexibility in form and timing.


Disadvantages of Direct Disadvantages of Direct MarketingMarketing

• 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.


Direct Marketing and Direct Marketing and Direct-Response AdvertisingDirect-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.


Steps in the Steps in the Direct Marketing ProcessDirect Marketing 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).

The Direct-The Direct-Marketing Marketing

ProcessProcess



Objectives/StrategyObjectives/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 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.


TargetingTargeting• 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

website

• 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.


The OfferThe 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.


Message and Media StrategyMessage 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, and drive customers to a Web site or retail store.


The Response/OrderThe 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-time-only price deal.


Fulfillment and Customer Fulfillment and Customer MaintenanceMaintenance

• 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


Measurement and EvaluationMeasurement 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.


Using DatabasesUsing 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

lower-usage customers who get a more modest piece.


A Circular ProcessA Circular Process• Databases are an important source of

information at the both the beginning of the direct-marketing process and the end.

– Used to update personal information (e.g., addresses, marital status, family status) plus get and keep info about interactions with the company.

• Primary database objectives: 1. Record names of customers2. Store and measure ad results3. Store and measure purchasing performance4. Vehicle for continuing direct communication

Principle: A reliable database of customer and prospect contact

information lies at the heart of effective direct marketing.


Database Management ProcessDatabase Management Process1. 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

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Database Management ProcessDatabase Management Process



ListsLists• 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


Data-Driven CommunicationsData-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.

Principle: Data-driven communication lets the brand speak with a sense of history of the customer relationship because it

tracks the customer’s interactions with the brand.

Melissa Data Melissa Data

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The Melissa Data Web site explains the services offered by this company in database collection and management.


Visit the Site

http://www.melissadata.com/


Data-Driven CommunicationsData-Driven Communications• Date Mining

– Sifting and sorting through company database information to target customers and maintain a relationship.

– Information is used for behavior targeting (finding customers who might be interested in certain offers) and prospecting (profiling existing customers to find more, similar, potential customers).

• 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.– When does efficiency in targeting become invasion of

privacy?


Customer Relationship Customer Relationship Management (CRM)Management (CRM)

• Identifies and analyzes customer behavior patterns to maximize the profitability of each relationship.

• Sophisticated database technology links transactions and customer characteristics to help companies:– Improve service that are important to most profitable

customers.

– Attract new customers with similar characteristics.

– Reward the best customers.

– Identify and eliminate unprofitable customers.


Four Key Players in Four Key Players in Direct-Response MarketingDirect-Response Marketing

1. Advertisers

2. Agencies

3. Media Companies

4. Customers


Key Players: (1) AdvertisersKey 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


Key Players: (2) AgenciesKey Players: (2) Agencies

• Advertising agencies—department or separate direct-response company owned by the agency

• Direct marketing agencies—independent, full-service agencies specializing in direct response

• Service firms—printing, mailing, list brokering, data management

• Fulfillment houses—store/ship requested information/products


Key Players: (3) Media CompaniesKey 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


Key Players: (4) CustomersKey Players: (4) Customers

• Dislike intrusiveness, but appreciate convenience

• Types of customers– Push-button shopper (phone)– Mouse-clicking shopper (computer)


Tools of Direct MarketingTools of Direct Marketing

1. Direct Mail

2. Catalogs

3. Telemarketing

4. Direct-Response Advertising

5. Web-based e-marketing


The Tools of Direct Marketing: The Tools of Direct Marketing: (1) Direct Mail(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


Advantages

Tells a story

Engages attention

Personalizes message

Builds in feedback

Reaches the unreachable

Description

The medium offers a variety of formats and provides enough space to tell a complete sales story.

Because direct mail has little competition when it is received, it can engage the reader’s attention.

Because of the use of databases, it is not possible to personalize direct mail across a number of consumer characteristics, such as name, product usage, purchase history, and income.

Direct mail is particularly conducive to marketing research and can be modified until the message design matches the needs of the desired target audience.

Direct mail allows the marketer to reach audiences who are inaccessible by other media.

Table 15.1 Advantages of Direct Mail


Advantages

Negative perceptions

Cost

Mailing list

Response rates

Vulnerability

Description

The main drawback of using direct mail is the widespread perception that it is junk mail. According to a Harris-Equifax Consumer Privacy Survey, about 46 % of the public see direct-mail offers as a nuisance, and 90% consider them an invasion of privacy.

Direct mail has a higher cost per thousand than mass media. A great deal of this high cost is a result of postage. (However, it reaches a more qualified prospect with less waste.) Another cost factor is the maintenance of the database.

To deliver an acceptable response rate, the quality of the mailing list is critical. It must be maintained and updated constantly.

Because of the changing nature of mailing lists, as well as the difficulty of keeping relevant data in the database, the response rate can be a slow as 2 or 3%. Even with that low response, however, database marketers can still make money.

Direct-mail delivery is vulnerable to natural disasters as well as catastrophes such as the 9/11 terrorist attacks.

Table 15.1 Disadvantages of Direct Mail


Creating Effective Direct MailCreating Effective Direct Mail• Get the attention of the targeted prospect as the

envelope comes from the mailbox.• Create a need for the product, show what it looks

like, and demonstrate how it is used.• Answer questions, as a good salesperson does, and

reassure the buyer.• Provide critical information about product use.• Inspire confidence, minimize risk, and establish that

the company is reputable.• Make the sale by explaining how to buy, how to

order, where to call, and how to pay for the purchase.

• Use an incentive to encourage a fast response.


Writing Effective LettersWriting Effective Letters• Attention

– Pictures and benefit-oriented headlines to grab attention or generate curiosity.

• Personalize – Use a name or, if not available, a topic (“Dear Cat Lover”).

• Lead in – A brief yet compelling or surprising statement—“Dear

Friend: I could really kick myself!”• The Offer

– Make it as early in the letter as possible.• The Letter

– Use testimonials or other specifics to describe benefits. • The Closing

– Repeat the offer, add incentives or guarantees, and include a clear call to action.


Issue: Trees, Water, and WasteIssue: Trees, Water, and Waste

• Direct mail uses an estimated 100 million trees and 28 billion gallons of water per year

• Plus disposal and recycling costs; in Colorado, direct mail accounts for 340 million pounds of trash per year.

• Should direct mail be banned?• Would this infringe on advertisers’ rights to

commercial free speech?• What do you do if you’re an environmentally

responsible advertiser?


The Tools of Direct Marketing: The Tools of Direct Marketing: (2) Catalogs(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 no. of recipients

• Catalogs can drive e-commerce, Web site purchases

• Specialty catalogs are growing in number


Advantages

Targeted

Engages attention

Complete information

Convenience

Description

Can be directed at specific market segments.

Employs high-quality design and photography (see Alsto’s cover).

Extensive product information and comparisons are provided.

Offer a variety of purchase options.

Table 15.2 Advantages and Disadvantages of Catalogs

Disadvantages

Negative perceptions

Costs

Response rate

Mailing list

Description

Catalogs are viewed as junk mail by many recipients.

The cost per thousand of catalogs is higher than mass media.

The response is relatively low at 3 to 4%.

Databases must be constantly maintained.


The Tools of Direct Marketing: The Tools of Direct Marketing: (3) Telemarketing(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


The Tools of Direct Marketing: The Tools of Direct Marketing: (4) Direct-Response Advertising(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.


The Tools of Direct Marketing: The Tools of Direct Marketing: (5) Internet(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, low-cost messages to mass audience.

• Spam is an issue.• Permission marketing gives

recipients the choice to “opt in” or “opt out.”


Eddie Bauer Eddie Bauer

Visit the Site

• The Eddie Bauer Web site lets site visitors “try on” clothes in a virtual dressing room” and also sends email messages offering special prices based on customers’ past purchases.


Integrated Direct Marketing: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.


Global ConsiderationsGlobal Considerations• 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.

Discussion Questions


Discussion Question 1Discussion Question 1• Most people hate telemarketing. Say you

work for the local campus environmental organization.

• How could you conduct a campus and community telemarketing effort that would not generate resistance?

• Apply your ideas to developing a telemarketing program to promote campus fund-raising for a good cause, such as a campus Habitat for Humanity project?

• Your primary targets are students, faculty, and staff.


Discussion Question 2Discussion Question 2• Kali Johnson, a recent college graduate, is

interviewing with a large garden product firm that relies on television for its direct-response advertising.

• “Your portfolio looks very good. I’m sure you can write,” the interviewer says, “but let me ask you what is it about our copy that makes it more important than copy written for Ford, Pepsi, or Pampers?”

• What can she say that will help convince the interviewer she understands the special demands of direct-response writing?


Discussion Question 3Discussion Question 3

• One of the smaller, privately owned bookstores on campus is considering a direct-response service to cut down on its severe in-store traffic problems at the beginning of each semester.

• What ideas do you have for setting up some type of direct-response program to take the pressure off store traffic?


Discussion Question 4Discussion Question 4

• The success of infomercials helps validate direct marketing as a revenue generator.

• What characteristics of a product must you consider when determining whether to use an infomercial?


Discussion Question 5Discussion Question 5• Three-minute debate: How does the recent fervor

surrounding personal privacy affect direct marketing—specifically, telemarketing and email advertising?

• You are designing a direct-mail campaign for a local business that employs telemarketing and email advertising, but your client is reluctant because of privacy concerns.

• In class, organize into small teams with pairs of teams either arguing the direct marketing position or the privacy position. Set up a series of three-minute debates with each team having that time to argue its position. Every team of debaters has to present new points not covered in the previous teams’ presentations until there are no arguments left to present. Then, the class votes as a group on the winning point of view.


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Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

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