Direct and Online Marketing: Building Direct Customer Relationships Chapter 14

Chapter Outline Growth and Benefits of Direct Marketing Customer Databases and Direct Marketing Forms of Direct Marketing Online Marketing Setting up an Online Marketing Presence The Promise and Challenges of Online Marketing Public Policy Issues in Direct Marketing Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Previewing the Concepts Define direct marketing and discuss its benefits to customers and companies. Identify and discuss the major forms of direct marketing. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. Overview the public policy and ethical issues presented by direct marketing. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Direct Marketing Connecting directly with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

The New Direct-Marketing Model Direct marketing has undergone a dramatic transformation. Most firms use direct marketing as a supplemental channel or medium. For many companies, direct marketing constitutes a new and complete model for doing business. Some firms employ the direct model as their only approach (e.g., Geico, Amazon, eBay). Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action Amazon.com obssesses over making each customer’s experience uniquely personal. Customers, like author Gary Armstrong, are greeted on their personalized home page which also features customized recommendations. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Growth of Direct Marketing Fastest growing form of marketing. 10% of U. S. economy ($ 2.1 trillion) is generated by direct marketing sales. Direct marketing sales are expected to grow at 5.3% annually through 2013. Direct marketing continues to become more Web-oriented and Internet marketing is the fast-growing form of direct sales. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action Southwest Airlines uses techie direct marketing tools – including a widget and a blog – to inject itself directly into customers’ everyday lives in a way that media advertising just cannot achieve. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Benefits of Direct Marketing Benefits to buyers: Convenient. Easy to use. Private. Ready access to products. Ready access to wealth of comparative information. Immediate and interactive. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Benefits of Direct Marketing Benefits to sellers: Powerful tool for building customer relationships. Offers a low-cost, speedy way to reach markets, including business markets. Offers lower costs, improved efficiencies, and speedier handling of channel and logistics functions. Offers greater flexibility. Gives access to buyers that could not be reached through other channels. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Benefits of Direct Marketing Benefits to Buyers Convenient Easy/private Wealth of products Information Interactive Immediate Benefit to Sellers Low cost Efficient Speedy Improved efficiencies Flexibility Access to buyers Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Customer Database An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action USAA uses its extensive database to tailor its services to the specific needs of individual customers, creating incredible customer loyalty. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Figure 14.1: Forms of Direct Marketing Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Direct-mail marketing: Involves sending an offer, announcement, reminder, or other item to a person at a particular physical or virtual address. Largest direct marketing medium. Well-suited to one-to-one communication. Use of traditional forms may decline as marketers switch to newer digital forms. Can be used effectively in combination with other media, such as web sites. Often perceived as “junk mail”. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action Combining direct mail with personalized URLs cost JDA only $60,000 but yielded a high response rate and $13 million in sales. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Catalog marketing: Direct marketing through print, video, or digital catalogs that are mailed to select customers, made available in stores, or presented online. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Catalog marketing trends: More and more catalogs are going digital: Minimizes costs, and web space is unlimited. Allows real-time merchandising. Print catalogs are still the primary medium. Drives web traffic and can create an emotional connection to the consumer. Expected catalog sales in 2013 = $182 billion. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Telephone marketing: Accounts for 17% of all direct-marketing driven sales. Used in both consumer and B2B markets. Marketers use outbound and inbound calls. Outbound: Sell directly to consumer. Inbound: Toll-free ordering or order faxing. Do-not-call legislation has impacted the telemarketing industry. Many telemarketers have shifted to other forms of direct marketing. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action Marketers use toll-free 800 numbers to receive orders from TV and print ads, direct mail, or even catalogs. Direct response ads always feature a call to action, as shown in the ad at right. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Direct-response TV marketing: Direct-response television advertising (DRTV): TV spots that are 60 or 120 seconds long. Ads for products like Snuggies have become DRTV classics. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Direct-response TV marketing: Infomercials: A 30 minute or longer advertising program for a single product. Home shopping channels: Entire cable channels dedicated to selling multiple brands, items, and services. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Kiosk marketing: Information and ordering machines generally found in stores, airports, and other locations. E.g., Redbox operates more than 15,000 DVD rental kiosks nationwide. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing New digital direct marketing technologies: Mobile phone marketing: Mobile ad spending is expected to grow. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing New digital direct marketing technologies: Podcasts and vodcasts. Purina Petcasts. Interactive TV (ITV): Viewer engagement is much higher than with regular TV ads. Online marketing is the final form of direct marketing. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Direct Marketing Podcasts and vodcasts involve the downloading of audio and video files via the Internet to a handheld device such as a PDA or portable media player and listening to them at the consumer’s convenience. Interactive TV (ITV) lets viewers interact with television programming and advertising using their remote controls and provides marketers with an interactive and involving means to reach targeted audiences. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Company efforts to market products and services and build customer relationships over the Internet. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Marketing and the Internet: Usage continues to grow with Internet household penetration equaling 72.5%. 33% of American consumers chose the Internet as the second-most-essential medium in their lives. Online marketing efforts are expanding. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Click-only companies: Types of click-only firms: So-called dot-coms, which operate only online without any brick-and-mortar presence. Types of click-only firms: E-tailers (Amazon). Search engines and portals (Google, Yahoo!). Transaction sites (eBay). Content sites (ESPN). Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Click-and-mortar companies: Traditional brick-and-mortar companies that have added online marketing to their operations. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Click-and-mortar business trends: Almost all traditional companies have set up their own online sales and communication presence. Many click-and-mortar firms are having more online success than their click-only competitors. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Figure 14.2: Online Marketing Domains Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Trends: Business-to-consumer (B2C) online marketing: Businesses selling goods and services online to final consumers. Trends: Online buying continues to grow. The Internet influences 35% of total retail sales; 50% of US households shop online. B2C consumers differ from off-line consumers because customers initiate and control the Internet exchange process. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Business-to-business (B2B) online marketing: Businesses using B2B Web sites, e-mail, online catalogs, online trading networks, and other online resources to reach new business customers, serve current customers more effectively, and obtain buying efficiencies and better prices. Most major B2B marketers offer online product information, purchasing, and support. Many firms use the Internet to build stronger customer relationships. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Consumer-to-consumer (C2C) online marketing: Online exchanges of goods and information between final consumers. Auction sites such as eBay offer marketplaces to buy or exchange goods. Blogs and forums facilitate information interchanges. Marketers are tapping into blogs as a medium for reaching carefully targeted consumers. Firms should monitor blogs for what is being said. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Consumer-to-business (C2B) online marketing: Online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases, sometimes even driving transaction terms. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Figure 14.3: Setting Up for Online Marketing Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Corporate web sites: Marketing web sites: Designed to build customer goodwill, collect customer feedback, and supplement other sales channels, rather than to sell the company’s products directly. Marketing web sites: A web site that engages consumers in interactions that move them closer to a direct purchase or other marketing outcome. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Online marketers should pay careful attention to the seven Cs of effective Web site design: Context. Content. Community. Customization. Communication. Connection. Commerce. Constant change (8th C) helps encourage repeat visits. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Context is the site’s layout. Content is the site’s pictures, sound, and video. Community is the site’s means to enable user-to-user communication. Customization is the site’s ability to tailor itself to different users or to allow users to personalize the site. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Communication is the way the site enables user-to-user, user-to-site, or two-way communication. Connection is the degree that the site is linked to other sites. Commerce is the site’s capabilities to enable commercial transactions. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Placing ads and promotions online: Forms of online advertising: Banner ads. Interstitials. Pop-up or pop-under ads. Rich media ads. Search-related ads (contextual advertising). Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Placing ads and promotions online: Other forms of online promotion: Content sponsorships (sponsoring special content). Alliances and affiliate programs (work with firms to promote each other). Viral marketing (Internet version of word-of-mouth). Burger King’s Subservient Chicken campaign was a huge success. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Marketing in Action OfficeMax’s ElfYourself.com viral web site logged 193 million visits with no promotion at all. One-third of the site’s visitors were influenced to shop at OfficeMax. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Forms of Online Advertising and Promotion Banner Ads Interstitials Search-related ads Content sponsorships Alliances Affiliate programs Viral marketing Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Creating or participating in online social networks: Also called web communities. E.g., MySpace, Facebook, YouTube. Marketers can participate in existing online communities or set-up their own. More focused niche social networks are emerging which can be used to target special interest groups. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Online Marketing Using e-mail: 79% of all direct marketing campaigns employ e-mail. Enriched e-mail messages can grab attention. Spam accounts for 90% of all e-mail sent. Permission-based e-mail marketing is key. E-mail can produce a ROI 40-50% higher than other forms of direct marketing. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Public Policy and Ethical Issues in Direct Marketing Irritation, unfairness, deception, and fraud: Direct marketing excesses may offend consumers. Direct marketing has been accused of taking unfair advantage of impulsive or less sophisticated buyers. Internet fraud and phishing are growing concerns. Internet shoppers have online security concerns. Marketers often find it difficult to restrict access by vulnerable or unauthorized groups. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Public Policy and Ethical Issues in Direct Marketing Invasion of privacy: Database marketing allows customers to receive offers closely matched to their interests. Critics worry whether marketers know TOO much about consumers. Online privacy (particularly for children) is of particular concern. If marketers don’t prevent privacy abuse, legislators may step in. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Fuel For Thought Many people feel that marketers know more about their current and potential customers than they really should. How do YOU feel about the following? Should credit card companies be allowed to share data with merchants who accept the cards? What about selling their data to other businesses? Is it ethical for credit bureaus to compile and sell lists of people who have recently applied for credit cards? Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall

Reviewing the Concepts Define direct marketing and discuss its benefits to customers and companies. Identify and discuss the major forms of direct marketing. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. Overview the public policy and ethical issues presented by direct marketing. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall