Electronic Commerceand Direct Marketing

MKT 3900-01

Direct Marketing

Once the ugly stepchild of marketing, DM now garners 25% of US marketer’s budgets surpassing newspapers and broadcast TV

Direct marketing started fairly simply with early American colonists ordering seeds and other products not available in the Colonies.

Rural America has always favored direct marketing to enable access to everything from prefab homes and barns to clothing.

Marketing Trends in Direct Marketing

90% of marketers, agencies and other providers use non-catalog direct mail and 46% state it is their primary promotional channel› Responses primarily from the

Internet(93.7%), phone (79.5%), internal sales force (70.8%)

Trends in Direct Marketing

B2C Businesses selected the following results for best ROI for Direct Response techniques› Direct mail 34%› Email 25%

B2C owners showed optimism with 33 1/3% increasing marketing budgets vs. 14% decreasing

Contact/Retention for B2C highest with Direct Mail (37%), email (31%), telemarketing (7%) and social media (6%)

Trends in B2B Expenditures

B2B businesses found email (44%) to be the strongest ROI for customer retention

29% B2B owners increased marketing budgets while 16% decreased budgets

Direct Mail is expected to fall 39% in the next 5 years as email begins to eclipse direct mail (to $29.8b)

Local use of email really anticipated to grow because cheaper and growing effectiveness

Direct Marketing

Direct Marketing today is at the center of a communications revolution› The Internet is now the essential tool

and an essential part of everyday living

› Marketer’s now demand their funds are used efficiently to provide customer centric communications

› ROI is demanded

Direct Marketing Growth

Recent growth in non traditional businesses › Credit card companies, banks,

investment firms, insurance companies

› Telecom, cable, utilities now heavily involved

› Airlines, automobile manufacturers and the travel industry are all users

› Very few industries are not touched by direct marketing

Direct Marketing Defined

So what is direct marketing exactly?The interactive use of advertising media to stimulate an immediate behavior modification in such a way that this behavior can be tracked, recorded, analyzed, and stored on a database for future use and retrieval.

Fundamental Definition Components

Interactive – One on one communications between the marketer and prospective customers/customers. Two way interactions are the building block of DM

Use of Advertising Media› Combination of various media complements the

overall effectiveness of the marketing efforts Track, Record, and Analyze

› Measurability is the hallmark of DM. Marketers now demand it!

Stored in a Database for Future Use and Retrieval

Basics of Direct Marketing

Seeks to generate a measurable response to an offer› A call back, an order, website research

The organization wants to generate leads and encourage relationship building

Elements of Promotion› Copy 15% List/Media 40%› Timing 10% Offer 20%› Layout/format 15%

Components of Promotion Media/List

› One of the keys to producing a response All a matter of exposure

Segmenting and targeting vital Getting together the buyers/sellers Media mix vital – TV, radio, Internet, newspapersGeography, demos, psychographics

› Offers Relevance to TM vital; motivation

important Expenses lower than advertising so

offers and incentives can be more generous

Components of Promotion› Creativity

Copy - compel me to respond Benefits, description, support copy and facilitators or sweeteners

Layout – enhance eye flow patterns, easy to read and process, highlight significant items and tell the story

Efficiency in Direct Marketing

Do you attempt to capture a certain % of the market share or a % of your segment?

Many direct marketing products experience different product life cycles› Changes media and offer strategies (i.e., fads)

New Objectives› Building and maintaining customer loyalty› Costs 5-10x more to generate a new customer

than retain› 90% of profits from 10% of customers – Olgilvy› Reducing customer defections by 5% could

increase profits 25-85%

One to One and Customer Relationship Marketing

One to One –› Direct interaction with the individual customer› Mass Customized treatment of the consumer› Difference with Direct Marketing is how

solutions are approached› Enables information collection and insight› Enables creation of products for the consumer

Direct Marketing› Traditionally behaviorists› Results oriented (the sooner the better)› If you buy outdoor equipment, sell the lists,

bombarded with catalogs!

Integrating Communications

Phase One – moving away from mass marketing messages … one commercial for everyone watching a particular program (TM)

Identifying customer segments and sending messages per segments

Integrating DM into an overall communications program› First understand insights and consumer

motivations › Matching audiences, media and technologies

avail› Generate effective messages per audience

Trends in Direct Marketing

Recent results show that email metrics remain strong› Click rates (5.2%) declined slightly over last

quarter but remain in line with same quarter last year

› Average volume per client increased by 16.2% from Q1

› Unique click conversion rates increased 14.6% over Q1 2011 and 6.2% over Q2 2010

$163B spent in 2011 on DM; 168.5B forecast for 2012

Captures 53% of advertising expenditures $1 investment in DM yields $11.63

Direct Media via Postal Mail

Postal Mail Advertising (p-mail) – any advertising matter delivered by the USPS to the person to be influenced› Catalogs, letters, postcards,

programs, videocassettes, order blanks, menus, etc.

B2B heavy users of p-mail› Rising cost of TV (and less for $)› Unparalleled targeting of messages› Measureable results

Biggest Advertisers

P-Mail Distinctive Features Targetability – precisely targeting a

defined group of people. Example, Saab selected just 200,000 consumers to receive mailings on the Saab 9-5. These included 65,000 current Saab owners and 135,000 prospects who satisfied income and car ownership requirements. (and p.s. GM’s poor management eventually bankrupted Saab)

Measurability – how many mailings went out, how many responses; one downside is that sending a message to a household does not guarantee the target will receive it

P- Mail Features Accountability – easy to assess

outcomes for brand manager Flexibility – quick and easy to

change with environmental factors

Efficiency – targeting saves money over national ads

Catalogs and Audiovisual Material

More than 10 billion distributed annually in US

More than 2/3 recipients visit company’s website

Sales to catalog recipients more than 150 times greater than those not receiving the catalog

Marketers look at them as an effective and efficient way to reach prime prospects

Why do consumers dig catalogs?

Saves time – no parking spot hunting, travel, in-store crowds

Convenience – 24/7 browsing, decision making and ordering

No concerns about crime in certain areas Liberal returns, online purchases

accessible, 800 numbers enhance ease of shopping experience

Quality merchandise Guarantees

Audio Visual Advertising

Videotapes, DvDs CD-Roms› Capture key visuals and audio information

about the brand and distributing this information to business consumers and end users to project on computers or tv

› Limited research on this form of marketing Yet often the result of requests to the company

enhancing targeting and effectiveness Some evidence less likely to be thrown away vs

p-mail› Expensive unless can lead customers to

online downloads

Use of Databases

Access to database information of addresses, email contacts and phone information essential to the success of direct marketing campaigns. › Additional pertinent demographic

information necessary to best target Comparison to mass media

advertising› “Broadcast media send communications;

addressable media send and receive.” Shimp 2010.

Benefits and Uses of Databases

Allows firm to identify the best prospects for products and services

Allows varied messages to different groups of customers

Enables the creation of long term relationships with customers

Enhances advertising productivity Enables calculation of lifetime

value of customers

Data Mining

Sizes range into the millions of addresses with dozens of input variables for each entrant

Inexpensive software allows the segmenting of entrants based upon variables of interest› Relations among variables to enable

co-op marketing› Depth of understanding in buyer

wants, purchases, uses

Data Mining Example

Credit card companies analyze your purchases› You disproportionately spend on exotic

vacation purchases A promotion designed around winning an

exotic vacation may very well generate a response from you

› Furniture company mining its database identifies that families with two children do not buy furniture within two years of purchasing a car, they acquire automobile purchase lists to better refine their promotions

Business, Strategic and Direct Marketing Planning

What actions will achieve efficient, effective and expected outcomes?

Strategy and planning give organizations the framework for choosing the right tools and techniques to maximize the variety available in DM

Goal of Planning to stay on track, stay up to date with emerging technologies and optimize resources

Three Key Strategic Questions

First, Where should we focus the greatest effort and why?› How does the company generate revenue?› Focus on where generate the greatest reward

What do we bring to the table?› What are our core competencies and distinct

capabilities? Do our core capabilities suit our position?

› Can the firm sustain this position over time? Avoid developing competencies that do not garner a competitive advantage

The Strategic Business Plan

Designed to draw in investors and support financing needs

Provides information to the investors that are the “customers” for the plan› Describe the key concepts of the business› Establish that there is a market for the

products and services the company sells› Outline the organizational structure› Include financial projections that show the

company’s expected sales and growth over a 3 year period

Elements of the Strategic Business Plan

Introduction Executive Summary Mission and Vision Statement Market Analysis Customer Analysis Business Description Organization and Management Integrated Marketing and Sales Plan Funding Request Financial Projections Appendices

Breakdown of Elements of BP

Introduction› Short description (no more than a page) as to why

the plan is being written, its audience, business objectives and purpose as well as business concept

Executive Summary› Clear picture of what the business is about

including the mission statement, the start date of the business, founders’ names and functions, # of employees, location of headquarters and any branch offices, description/size of facilities, the products and services category, current investors (bank names), growth summary and plan, financial highlights, market potential and summary of management plans

Breakdown of BP

Mission and Vision Statements› Central purpose of the business and its

planned activities, major objectives, key strategies and primary goals

Market Analysis› SWOT› Description of competitive environment, › Identification of prospects (how was TM

identified?)› Market share sought and held

BP Breakdown

Customer Analysis› Who buys the product/service?› Potential target growth in the marketplace› Are their multiple buyers, decision makers and buying

authorities involved? Business Description

› What business are you in and what are the trends in the industry?

› Description of products and services offered and competitive advantages of these goods (trademarks, patents, brand names)

Accountability – easy to assess outcomes for brand manager

Flexibility – quick and easy to change with environmental factors

Efficiency – targeting saves money over national ads

BP Breakdown

Organization and Management› Organizational structure› Staffing needs› Job descriptions of top management › Triggers for additional staffing requirements› Include an organizational chart› Details of compensation› Incentives› Benefit plans› Bios of management and BOD› Founder information

BP Breakdown

Integrated Marketing and Sales Plan› Detailed summary of the marketing plan

Methods of selling, distribution plan, mix for advertising(and rationale), DM, Internet, sales promotion, PR and events

Discuss efforts in relation to competitors Credit and terms for receivables, credit approval

process, pricing guidelines, markups, competitive response analysis, budgets and timing.

Discussion of revisions if growth is not met Funding Request

› Details of the request and the potential sources, terms, ROI

BP Details

Financial Projections› Detailed accounting of how much money

needed, when it is needed and when investors can expect a ROI Balance and Income Statements Cash Flow Projections

Cash In Cash Out Timing of each

Appendices› Info relating to text of the business plan› Research plans, tables, detailed market or

sales projections, analyses, exhibits

Strategic Plan

Brings together an organization’s management, employees, stakeholders, and customers by communicating a common understanding of where the organization is going, how employees are involved in this common purpose, and how to identify benchmarks for progress and success

Are we a customer driven business?› How do we hear the voice of the customer?

The Strategic Plan Introduction Executive Summary – summarizes key elements of

the plan Goals and Objectives – highlights achievements for

next 1-3 yrs Situation Analysis – competitive , environmental and

market analysis SWOT Analysis – key strengths and weaknesses,

market analysis Mission Statement – what does business do and

hope to do Vision Statement – what will co look like in 3 years Business Values – principles that govern the

company Key Strategies – identifies what success looks like,

build strengths or resolve weaknesses? Action Plans Financial Plans – goals and objectives Performance Measures - benchmarks

The Multichannel Direct Marketing Plan

Seeking to reach a symmetry and symbiotic relationship between direct marketing tools and the Internet and newer technologies

Similarly developed to the Business Plan and the Strategic Plan› It just is a narrower scope in vision› It is a promotions plan reflecting only

the visions and actions for direct marketing

Multichannel Direct Marketing Plan Intro

› Plan’s purpose› Intended Audience

Executive Summary› Summary of plan’s

contents› Objectives,

marketing strategies, key target groups and mkt segments

› Elements of tactical plan and budget

Situation Analysis› Macroenvironment

of marketplace Demo trends,

economic indicators, political and social issues

Competitive situation Target group analysis Distribution channels Product situation Research

DM Plan

Opportunity and Issue Analysis› Elements of SWOT

germane to the marketing plan

Goals and Objectives› Marketing and

financial objectives Specific and

measureable Benchmarks (click

throughs, creation of customers)

The Marketing Strategy› Positioning

discussions› Aligning needs and

wants of customers to offerings

› Clear understanding of the prospect

Tactics› Details of each

marketing event and action planned Media and mailing list

planning's