1 © 2009 South-Western, a part of Cengage Learning Chapter 19 Direct Marketing and Personal Selling PPT 19-1

2 PPT 19-2 Introductory Scenario: Don’ Mess With Less  Who was Les Wunderman?  He created the Columbia House record club and “invented” the modern era of direct marketing.  The genius of his idea was creating a dialogue (monthly response) with consumers which led to building a relationship with the brand.

3 Direct Marketing An 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: –Solicit and close a sale –Identify prospects for future contacts –Provide in-depth information –Seek information from consumers –Foster brand loyalty PPT 19-3

4 L.L. Bean built an entire business around direct marketing. PPT 19-4 Ad in Context Example

5 Direct Marketing: A Look Back  L.L. Bean founded in 1912  Fundamental strategy: –Commitment to quality –Descriptive copy that was informative, factual, low-key –Satisfaction guarantee  Bean built a good mailing list  By 1990 Bean’s sales were $600 million; by 2007, over $1.5 billion PPT 19-5

6 Direct Marketing: Milestones  1450Invention of movable type  1667First gardening catalog  1744Franklin formulates mail- order concept of “satisfaction guaranteed”  1872Montgomery Ward catalog  1886Sears starts mail-order business  1917 Direct Marketing Advertising Association founded PPT 19-6

7 Direct Marketing: Milestones  1928Third-class bulk mail introduced  1950First credit card  1951Lillian Vernon places first ad  1953Publishers Clearing House founded  1967AT&T introduces toll-free 800  1992Over 100 million in U.S. shop at home PPT 19-7

8 Direct Marketing Today  More than just mail-order.  A complex, diverse tool used by organizations throughout the world.  Direct marketing often is not integrated with other advertising efforts.  Three Principle Purposes: –close a sale with a customer –ID prospects and develop customer database –Engage customers, seek their advice and generate brand loyalty PPT 19-8

9 What’s Driving Direct Marketing?  CONVENIENCE! for today’s dual income and single parent households.  More liberal attitudes toward using credit.  Greater access to toll-free calling.  Computer technology/new media facilitate online transactions.  More precise segmentation.  Opportunity for relationship building.  Cost per inquiry (CPI) and cost per order (CPO) advantages of direct marketing. PPT 19-9

10 Marketers, like The Adirondack Country Store, use catalogs, toll free numbers, and the Web to take advantage of direct marketing opportunities. PPT Ad in Context Example

11 Database Marketing  Knowing who the best customers are as well as what and how often they buy.  Mailing lists: –Internal lists –External lists PPT 19-11

12 Databases allow direct communication with customers like this Saturn newsletter. PPT Ad in Context Example

13 List Enhancement  Augmenting lists with externally provided lists  Incorporating information from external databases –Demographic data –Geodemographic data –Psychographic data –Behavioral data PPT 19-13

14 The Marketing Database  Includes data collected directly from individual customers –RFM Analysis of customers: recency, frequency, monetary  Goal: Develop cybernetic intimacy  Marketing database applications –Frequency-marketing programs –Cross-selling  Privacy concerns –Do not call registry –Spam blockers –Opt-out options PPT 19-14

15 Media Applications in Direct Marketing  Direct response advertising  Direct Mail  Telemarketing   Other media –Magazines –Newspapers –Infomercials PPT 19-15

16 Direct Mail  Advantages –Selective, flexible, little waste, lends itself to testing, uses many formats  Disadvantages –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 PPT 19-16

17 Direct mail offers some creative opportunities. PPT Ad in Context Example

18 Telemarketing  Telemarketing can be a potent tool. As with direct mail: –Contacts can be selectively targeted. –The impact of programs is easy to track. –Experimentation with different scripts and delivery formats is simple and practical. –Telemarketing involves live constructive dialogue.  Telemarketing shares many of direct mail’s limitations: –Very expensive on a cost-per-contact basis. –Names and addresses go bad as people move, so too do phone numbers - 15 percent of the numbers called are inaccurate. –Telemarketing does not share direct mail’s flexibility in delivery options. When you reach people in their home or workplace, you have a limited span of time to convey information and request some response. –Telemarketing is becoming a highly maligned practice in consumers. –By 2007, over 70 percent of US households had registered their phone numbers with the “Do not call registry.” PPT 19-18

19  Bulk is known as “spam”  Fraudulent know as “phishing”  However is an increasingly popular tool for marketers  Advantages –Cheap –Good response rates  Netiquette suggests getting consumer permission to send product information  Avoid bulk ings PPT 19-19

20 Direct Response Advertising in Other Media  Magazines use bind-in insert cards  Toll-free 800 numbers are vital to direct marketers using ads in newspapers and magazines  Infomercial –Long television advertisement –Range in length from 3 to 60 minutes –Keys to success ►Testimonials, Frequent call to actions, ensure same-day response ►New research shows that direct response ads are the least likely to be zapped by DVR users PPT 19-20

21 PPT Magazine ads are ideal for Direct Response Advertising. Ad in Context Example

22 Closing the Sale with Direct Marketing and/or Personal Selling  Functional specialists across several media need to work together.  Marketing databases can lead to interdepartmental rivalries.  Growth of direct marketing often means cuts in other promotional budgets.  One solution: the MARCOM manager. PPT 19-22

23 The Critical Role of Personal Selling  The face-to-face communication and persuasion process.  Most effective with products or services that are: –Higher priced –Complicated to use –Tailored/customized to users’ needs –Offer a trade-in option –Judged at the point of purchase PPT 19-23

24 Types of Personal Selling  Order taking: accepting orders for merchandise or scheduling services; deal with existing customers who are lucrative to a business due the low cost of generating additional revenues from them. Order taking is the least sophisticated of selling efforts.  Creative selling: selling where customers rely heavily on the salesperson for technical information, advice, and service. It is the most sophisticated and complex selling effort.  System selling: entails selling a set of interrelated components that fulfill all or a majority of a customer’s needs in a particular area. System selling is often executed by a “team” of sales people.  The missionary salesperson: calls on accounts with the purpose of monitoring the satisfaction of buyers and updating buyers’ needs. They may provide product information after a purchase. PPT 19-24

25 Customer Relationship Management (CRM)  Salespeople play a critical role in cultivating long-term relationships with customers—which often is referred to as a customer relationship management (CRM) program.  CRM views the relationship with buyers as a partnership and a problem solving situation.