Part 5 Principles: IMC and Total Communication Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 16-1

 How does direct-response marketing work?  What are the primary tools and media available to direct-response programs?  How are databases used in direct marketing?  What are some of the trends and challenges facing direct-response marketing? Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-2

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 16-3

Direct-response marketing is 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-4

 Relies on communication sent directly to consumers.  The response comes directly back to the source.  Includes a strong focus on market research.  Designed to elicit an immediate response.  Uses a variety of traditional and nontraditional media. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-5

1. Marketers who use direct-response to sell products or services. 2. Agencies that specialize in direct-response advertising. 3. Phone, mail, or Internet media that deliver messages. 4. Consumers who receive the information and sometimes initiate the contact. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-6

Marketers  Traditionally, the biggest direct-response users have been book and record clubs, publishers, insurance companies, sellers of collectibles, and gardening firms.  More recently, computer companies have used the direct-response model effectively.  Direct marketing can contribute to the brand impression, as well as sales. This may be positive or negative. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-7

Agencies and media companies  Advertising agencies: department or separate direct-response company owned by the agency.  Direct marketing agencies: independent, full-service direct marketing agencies specializing in direct response.  Service firms: printing, mailing, list brokering, data management.  Fulfillment houses: ensure that consumer requests are fulfilled in a timely manner. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-8

Customers and prospects  They might dislike intrusiveness of direct-response advertising, but appreciate the convenience.  Types of customers ◦ Push-button shopper (phone) ◦ Mouse-clicking shopper (computer) Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-9

This B2B brochure was designed to promote the durability of Crane & Company’s banknote paper. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-10

Objectives and strategies Direct marketing can be used to: 1. Provide in-depth product information 2. Drive traffic to a store or website 3. Develop leads for follow-up sales contacts 4. Drive a response 5. Retain or strengthen customer relationships 6. Test offers to predict their effectiveness Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-11

Targeting  Current customers are the best prospects. ◦ They may order products, visit a dealer, return a response card, visit a Web site.  Three criteria 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-12

The 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.  Provides all the information needed.  Supported by a message strategy, a media strategy, and the database. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-13

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-14 This direct-mail campaign appears to contain a packet of toy soldiers, but when opened, they turn out to be figures of children doing normal childhood activities. The message on the package, which is also the campaign theme is, “Turn Soldiers Back Into Children.” Do you think this is an effective public service piece?

Message and media strategy ◦ Messages are often longer, with more explanation and detail about price, style, and convenience. ◦ Messages should be highly personalized. ◦ 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, drive customers to a website or retail store. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-15

The response/order  The message must make response as easy as possible. ◦ 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-16

Fulfillment and customer follow-up  Getting the product to those who ordered it.  Fulfillment includes all back-end functions related to processing the order: ◦ Delivering the product ◦ Receiving payment ◦ Providing tracking numbers  The most critical aspect is maintaining a customer relationship. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-17

Response measurement 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 is used to identify the best offers and adjust the campaign accordingly. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-18

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 This is the most popular method.  A print advertising message for a product or service, delivered by mail  Variable data campaigns utilize digital printing to highly personalize messages.  Most direct mail is sent using bulk mail permits.  CPM is high, but it’s easy to calculate payout rate. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-20

This envelope is used by the Billings Chamber of Commerce/Convention & Visitors Bureau to send information about visitor, tourism and relocation opportunities. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-21

Direct mail message design Tips for writing an effective direct-response letter: Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-22 Get attention Be relevant Personalize Use a strong lead-in The offer The letter Drive to website The closing Test, test, test As a class: Discuss specific examples of each of these points.

Issues: trees, water, waste  Critics of direct mail cite its environmental impact.  Production of direct mail uses an estimated 100 million trees and 28 billion gallons of water annually. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-23

 A multiple-page direct mail publication showing a variety of merchandise.  21 st century growth is in specialty catalogs, aimed at niche markets.  Catalogs can drive e-commerce, website purchases.  Catalogs create a lasting impression. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-24

A number of marketers use CD catalogs because they provide more product information and interactivity. This one was designed for Microflex, a B2B company in the automotive industry. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-25

 Almost as persuasive as personal sales, but much less expensive.  Inbound calls are initiated by a customer. Outbound calls originate from the firm.  The message must be simple, compelling, and short.  Issues: 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 restrict access by telemarketers. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-26

 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. As a class: go to for historical catalog examples from Sears. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-27

 Combines strengths of direct mail and telemarketing.  Moves marketers closer to one-to-one marketing.  Three basic types of campaigns: 1.Addressable to current customers 2.Addressable to prospects 3.Unsolicited and often unwanted, or spam Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-28

 Issue: spam ◦ The FTC has determined that 90% of all spam involving business and investment opportunities contain false or misleading information. ◦ Critics would like to see the government close down operations.  Permission marketing ◦ Gives recipients the choice to “opt in” or “opt out.” ◦ Every customer who opts in is a qualified lead. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-29

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 Marketers use databases to: ◦ Keep track of customers and identify prospects. ◦ Segment groups into customers and prospects, to send relevant offers to each group.  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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-31

A database is important at both the beginning of the direct marketing process and at the end. (Figure 16.3 Database Marketing visual here) Using database marketing, planners can continually improve the effectiveness of their marketing communication campaigns. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-32

 Customer and prospect information including addresses, phones, s.  Can be purchased or rented from list brokers.  Tied to demographics, psychographics, geography, hobbies, affiliations, postal routes.  New lists are crated by merging and purging. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-33

Three types of lists: 1.House lists: includes the marketer’s own customers or members. 2.Response lists: people who respond to some type of direct-response offer. 3.Compiled lists: specific categories such as new homebuyers, graduating seniors, new mothers. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-34

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-35 This is a postcard mailed to B2B direct marketers offering lists classified into 47 different types of buying characteristics. It separates prospects in terms of 47 “buying influence selectors” that include such factors as job function, industry, and decision patterns.

 Services such as Prodigy and Melissa Data offer online buying and purchase reminders that marketers can access.  Data Mining ◦ Sifting and sorting through company database information to target customers and maintain a relationship. ◦ Information is used for behavioral targeting and prospecting.  The privacy issue ◦ Information is often collected with permission or knowledge. ◦ Many ads and online messages use behavioral targeting. To learn more: review “A Principled Practice: PRIVACY: The Need to Use But Not Abuse Consumer Information.” Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-36

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 16-37

 A systematic way to get close to your best current and potential customers. Linking the channels  It seeks to achieve precise, synchronized use of the right media, at the right time, with a measurable return on dollars spent.  For example, direct mail with a reply card and an 800 number could be followed by a phone call. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-38

Creating loyalty  When effective, one-on-one communication leads to a customer retention strategy that ultimately increases brand loyalty.  Lifetime Customer Value (LCV) is an estimate of how much purchase volume a customer or target market will generate over a length of time. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-39

 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-40

 Regulations, standards, and cultural meanings vary greatly from country to country.  Creative messages, visuals, and words often don’t easily translate across cultures. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-41

Advantages:  It 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.  Products are convenient to purchase, unrestricted by location.  The marketer (not wholesaler or distributor) controls product until delivery.  Advertising with direct-mail components is more effective.  It affords flexibility in form and timing. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-42

Limitations:  Consumers are reluctant to purchase a product they can’t touch or feel.  Annoyances associated with direct marketing: junk mail, online pop-ups, ad clutter, and telemarketers.  Customer privacy, data sharing, and identity theft issues.  Tension between building long-term brand image and driving short-term sales. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-43

In Chapter 17, we will: Consider the various ways people are engaged in brand experiences through promotions. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-44

“The Gecko and Friends Drive Customer Response” Key lessons:  Geico’s aggressive campaigns demonstrate how effective direct-response advertising can sell a product to a wide-ranging and varied audience.  GEICO reportedly spent $561 million on advertising in In lieu of a sales force, direct ad does the job.  As a class: What others can you think of? Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall16-45