Chapter Fourteen Offline and Online Direct Advertising

Chapter Fourteen Objectives Explain direct advertising and reasons underlying its growth Describe the characteristics of direct- response advertising Discuss the distinctive features of p-mail advertising Explain the role of databases and data mining

Chapter Fourteen Objectives Perform lifetime value analysis of database entries Discuss the distinctive features and advantages of opt-in advertising Evaluate the role and future prospects of wireless advertising

Direct Advertising Use of any of several media to transmit messages that encourage purchases of advertiser’s brands Postal mail and are the most important. Facilitated by practice of Database Marketing

Database Marketing Involves collecting and electronically storing info about past, present, and prospective customer Info is used to profile customers

Niche Marketing B2b marketers have expanded usage of direct advertising

Database Marketing and Data Mining Successful direct mailing requires availability of computer databases and addressability Direct Advertising does not deal with customers as a mass Creates individual relationships with customer

Database Marketing and Data Mining

Database Assets 1.Direct advertising efforts to those who represent the best prospects for the company’s products or services 2.Offer varied messages to different groups of customers 3.Create long-term relationships with customers

Database Assets 4.Enhance advertising productivity 5.Calculate the lifetime value of a customer or prospect

Lifetime Value Analysis Customer lifetime value: Net Present Value (NPV) of profit that a company stands to realize on average new customer during a given number of years.

Lifetime Value Analysis 5 ways to augment lifetime values: 1.Increase the retention rate 2.Increase the referral rate 3.Enhance the average purchase volume per customer 4.Cut direct costs 5.Reduce marketing communication costs

Mailing Lists “windows to our pocketbooks” Internal (house lists) and external (public lists)

The Practice of Data Mining “information extraction activity whose goal is to discover hidden facts contained in databases” RFM System: Recency of a customer’s purchase Frequency of purchases Monetary Value of each purchase

The Practice of Data Mining R-F-M Categories application: Company can divide customers into quartiles or quintiles for each category To test effectiveness: 1.Take a representative random sample of customers from each cell. 2.Distribute a catalogue, brochure or other p-mailing

The Practice of Data Mining 3.Provide sufficient time for sampled customers to respond 4.After sufficient time has elapsed, determine response rate and average expenditure per cell 5.Project these statistics to full membership

The Practice of Data Mining 6.Based on response-rate and average- expenditure and with knowledge of the cost of distributing the mailing, it is easy to calculate whether this is a profitable proposition 7.The decision rule is simple: Direct mailing only to those cells whose revenue potential outstrips mailing expense

P-Mail Advertising P-mail advertising: Advertising matter sent via the postal service to the person whom the marketer wishes to influence Ex. Letters, postcards, programs, calendars, catalogs, videocassettes, blotters, order blanks, price lists, menus, etc.

P-Mail Advertising Saab 9-5 direct mail campaign: 200,000 consumers were targeted The Martin Agency developed IMC Strategy

P-Mail Advertising The Martin Agency designed four mailings: 1.Countdown mailing 2.Subsequent qualification mailing 3.Special issue of Road & Track magazine 4.Test-drive kit mailing

P-Mail Advertising Qualification mailing

P-Mail Advertising Response to qualification mailing

P-Mail Advertising Test-drive kit mailing

P-Mail Advertising Targetability Measurability Accountability Flexibility Efficiency

What Tasks can P-Mail Accomplish 1.Increase sales and usage from current customers 2.Sell products and services to new customers 3.Build traffic at a specific retailer or Web site

What Tasks can P-Mail Accomplish 4.Simulate product trial without promotional offers and incentives 5.Generate leads for a sales force

What Tasks can P-Mail Accomplish 6.Deliver product-relevant information and news 7.Gather customer information that can be used in building a database 8.Communicate with individuals in a relatively private manner

Who Uses P-Mail Advertising 77% of U.S. companies reported using p- mail in a survey “are turning from the t.v. box to the mailbox” Both B2B and marketers of consumer

Why The Trend toward P-Mailing? Rising expense of television advertising Unparalleled targeting Measurable advertising results Consumers are responsive

The Special Case of Catalog Marketing Marketer’s perspective: Catalog selling provides efficient and effective way to reach prime prospects

The Special Case of Catalog Marketing Consumer’s perspective: 1.Saves time 2.Appeals to consumers fearful of shopping 3.Convenience of making purchase decisions at leisure 4.Modern conveniences make it easy to order from catalogs

The Special Case of Catalog Marketing Consumer’s perspective: 5.Merchandise quality and prices are often comparable if not better than those of stores 6.Guarantees are attractive

Advertising The use of the Internet for sending commercial messages Alternative to banner ads, pop-ups, or other forms of rich-media presentations

Advertising Over 20% of s users receive is marketing related Expenditure is expected to exceed $2 billion by 2003

Opt-in versus Spam Opt-in ing: The practice of marketers’ asking for and receiving consumers’ permission to send them messages on a particular topic (s)

Opt-in versus Spam SPAM Unsolicited and unwanted commercial e- mail messages Brand-awareness is offset by negative reaction

The Virtues of Advertising no different from p-mail: “an actionable mess in front of a pre- disposed buyer”

The Virtues of Advertising Personalization s can be personalized to individuals unique informational needs

The Virtues of Advertising Targeting: Can target specific messages to well- defined groups of present customers or prospectives

The Virtues of Advertising Cost Efficiency is a relative bargain compared to p- mail

The Virtues of Advertising Effectiveness Response rates to s sometimes exceed 20%

The Virtues of Advertising Measurability/Accountability Calls for specific action from recipients

The Virtues of Advertising Speed Can be transmitted and received

The Virtues of Advertising Safety avoids the hazards of p-mail

Acquiring Opt-in Lists House lists generally generate higher response rates

The Special Case of Wireless Advertising By 2005 over 60 million North Americans will be using WAP, PDAs and messaging devices Advertising wireless users could create negative sentiments and be antithetical to the reason why people use wireless in the first place

The Special Case of Wireless Advertising