Direct Marketing Overview Chapter One The Scope of Direct Marketing

Impact of Direct Marketing 25% of U.S. marketer’s budgets are now spent on Direct Marketing Greater $ spent on Direct Marketing than Newspapers and Broadcast TV Business to Business (B to B) Direct Marketing is increasing faster than Business to Consumer (B to C) Direct Marketing

Structure of marketing channels Producer of consumer products and services Agent Ultimate consumers Wholesaler Retailer Producer of industrial products and services Industrial users Industrial distributor 6

Common marketing channels for consumer goods and services A. Producer Schwan’s B. Producer Blue Bell C. Producer Mars D. Producer Mansar Products (Jewelry) agent indi r ect wholesaler wholesaler di r ect retailer retailer retailer consumer consumer consumer consumer

Common Marketing Channels for Industrial Goods and Services A. Producer B. Producer C. Producer D. Producer Stake Fastener Company IBM Caterpillar Harkman Electric agent agent Industrial Distributor Industrial distributor Industrial user Industrial user Industrial user Industrial user

From Principles of Marketing

What is Direct Marketing? What is unique about direct marketing compared to other forms of marketing is that all the activities are designed to be: Measurable Targeted Create one to one relationships between marketers and customers

Direct Marketing Defined Direct Marketing is 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 retrieval and use.

Direct Marketing Defined Direct Marketing is the interactive - one to one communication use of advertising media – use a variety of media to create synergy to stimulate an (immediate) behavior modification – motivate a customer to take action that he or she would not otherwise take in such a way that this behavior can be tracked, recorded, analyzed, and stored on a database for future retrieval and use.

Basics of Direct Marketing Elements of Promotion Customer Lifetime Value ($CLV) and other $ Customer Loyalty Churn = Customer Turnover Pareto’s Law - 80% of Sales come from 20% of Customers (other variations of)

Elements of Promotion

Financial Dimensions of DM Customer Lifetime Value (CLV) The $value in sales over the long term (several years) a customer has to an organization Recency The amount of time since a person or firm last purchased Frequency The number of times a customer buys within a season or year Monetary The amount of money a customer spends within a season or year

Basics of Direct Marketing Customer Loyalty – important because it costs 5-10 times as much to attract new customers than to keep existing customers Churn = Customer Defections/Turnover Pareto’s Law - 80% of Sales come from 20% of Customers (other variations of)

One-to-One and Customer Relationship Marketing Data Mining – Using information from an organization’s existing customer base Customer Relationship Management (CRM) –sharing information across organizational boundaries to provide seamless superior customer service Click Through Response (CTR) – provides the ability to capture valuable information in “real time” to be used in data mining, CRM, . . ..

Behavior, Context, and Observation Traditional Direct Marketers observed the relationship between certain customer behaviors that led to future desired customer behaviors, but did not necessarily understand why customers behaved the way they did. Future successful direct marketers will need to go beyond observation and correlation to understanding the “why” or what motivates buyers to behave in a desired manner.

Integrated Marketing Communications (IMC) Brand Direct – the merging of Brand Marketing and Response Marketing

Too Much of a Good Thing? Problems with intrusiveness, legal, and privacy

M&M’s Valentine’s Day Campaign