Direct Marketing and Marketing on the Internet Chapter 14 Direct Marketing and Marketing on the Internet Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 1 1

Direct Marketing Interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location. Common purposes of direct marketing: Close the sale Identify prospects for future contacts Provide in-depth information Seek information from consumers Foster (enhance) brand loyalty

Direct Marketing Today More than just mail-order Used by organizations throughout the world Often is not integrated with other advertising efforts. Four Principle Purposes Close a sale with a customer ID prospects and develop customer info. Engage customers, seek their advice and Generate brand loyalty

What’s Driving Direct Marketing? CONVENIENCE! for today’s dual income and single parent households. More liberal attitudes toward using credit Greater access to (Tax) toll-free calling Computer technology to facilitate transactions On-line shopping Cost per inquiry (CPI) and cost per order (CPO) advantages of direct marketing

The Growth of Direct Marketing The catalog Use of consumer credit cards Direct-marketing syndicates (agencies) The changing structure of the market worldwide Technological advances Various other factors Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-1 2 2

The McGraw-Hill Companies, Inc., 1998 Direct Response Media Direct Mail Catalogs Broadcast media Infomercials The Internet Print media Telemarketing Electronic teleshopping A number of direct response media are available to the marketer including: Direct mail - Mail order sales exceeded $382.9 billion in 1998, $239.8 of this was in the consumer market. Catalogs - Catalog sales are projected to reach $51.9 billion by the year 2000. The text lists several examples on page 449 that can be discussed in class. Broadcast media - Two broadcast media are available to direct marketers: TV and radio. Infomercials - The lower cost of commercials on cable and satellite channels has led advertisers to a new form of advertising. The Internet - a dynamic newer form of direct response media. Print media - Magazines and newspapers are difficult media to use for direct marketing because of clutter and the relative expense. Telemarketing - Over 118 million Americans receive nearly 3 billion telemarketing phone calls each year. Electronic teleshopping - an online shopping and information retrieval service accessed through personal computers. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-2 3 3

Database Marketing Knowing who the best customers are as well as what and how often they buy Mailing lists Internal lists External lists

The Marketing Database Includes data collected directly from individual customers Marketing database applications CRM analysis Marketing programs Cross-selling Privacy concerns

Advantages of Direct Marketing Selective reach Segmentation capabilities Frequency Flexibility Timing Personalization Cost efficiencies Ability to measure effectiveness Slide 14-4 The McGraw-Hill Companies, Inc., 1998 5 5

Disadvantages of Direct Marketing Direct mail is expensive. May cost 15 to 20 times more to reach a person with a direct mail piece than with a TV commercial Mail lists can be plagued with bad addresses. Mail delivery dates can be unpredictable Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-5 6 6

The McGraw-Hill Companies, Inc., 1998 Web Objectives Disseminating (Circulating) information Creating awareness Gathering research information Creating an image Stimulating trial Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-7 8 8

Advantages of the Internet Target marketing Message tailoring Interactive capabilities Information access Sales potential Creativity Market potential A number of advantages of advertising on the Web can be cited. Target marketing. A major advantage of the Web is the ability to target very specific groups of individuals with a minimum of waste coverage. Message tailoring. As a result of precise targeting, messages can be designed to appeal to the specific needs and wants of the target audience. Interactive capabilities. The interactive nature of the Web leads to a higher degree of customer involvement. Site visitors are already interested enough in the company and/or products to visit. Information access. Once users visit the website, they can garner a wealth of information regarding product specifications, purchase information, and more. New information can be made available almost immediately. Sales potential. Because this is a direct-response medium, the ability to generate sales is enhanced. Creativity. Proper design of a website can lead to repeat visits and generate interest in the company as well as its products and services (see the Ragu and Disney examples mentioned earlier). Banners and websites can be changed frequently to stimulate interest and meet consumers' needs. Market potential. The Internet keeps growing astronomically. As household penetration of PCs increases and awareness and interest in the Net continue to grow, the market potential will continue to increase. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-9 10 10

Disadvantages of the Internet Measurement problems Audience characteristics Clutter Potential for deception (Deceiving) Costs Limited production quality There are also some disadvantages associated with advertising on the Internet. Measurement problems. Due to the novelty of this medium, sophisticated and universally adopted measures of audience and effectiveness have not yet been established. Audience characteristics. The Web is not for everybody. Most users are interested in computer- and technology-related products, so over half of all Web advertising is for computer-related product. Only 14 percent of advertising is for other consumer goods, with less than 10 percent for autos, travel, and financial services (all of them prime prospects for Internet sales). WebSnarl. A major complaint associated with the Web is the time required to access information. As more and more people enter the Web, this problem will get worse. There are already indications of high dropout rates due to the slowness of the Net. Clutter. As the number of ads proliferates, the likelihood of one ad being noticed drops accordingly. One study shows that only 7.2 percent of net users say they click on banner ads for more information often or very often, while over half say that they never do so. E-mail is already experiencing floods of marketing-related communications. Potential for deception. The Center for Media Education has referred to the Web as "a web of deceit" in reference to advertisers' attempts to target children with subtle advertising messages. They have called for the government to increase regulation on the Net. Costs. Many advertisers believe the Web is an effective medium for high-ticket items but less efficient for lower-priced consumer products like soups and candies. Relatively high costs of advertising and delivery limit the Web's appeal. Limited production quality. While it is improving, Net advertising does not offer the capabilities of many competitive media from a production standpoint. Websites do not reflect the high quality of TV and print graphics. Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1998 Slide 14-10 11 11

E-Mail Bulk e-mail is known as “spam” Advantages However, e-mail is an increasingly popular tool for marketers. Advantages Cheap Good response rates

Direct Response Advertising Multiple media can be deployed to generate an immediate, measurable response. Most common media used are direct mail and telemarketing. However all conventional media can be used.