Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 14 Direct Marketing

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct Marketing  Interactive system of marketing  Uses one or more advertising media to effect a measurable response and/or transaction at any location  Uses a set of direct-response media  Direct-response media: Tools by which direct marketers implement the communication process 2

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Factors that Led to the Growth of Direct Marketing Development and expansion of the Postal ServiceConsumer credit cardsChanging structure of American society and the marketTechnological advancesChanging values and lifestylesMore sophisticated marketing techniquesThe industry’s improved image 3

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Role of Direct Marketing in the IMC Program  Combines:  Advertising and public relations  Personal selling and sales promotions  Support media  Companies decide:  Program objectives  Which markets to target and the strategies to use  How to evaluate the program’s effectiveness 4

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct-Marketing Objectives To seek a behavioral responseTo build an imageTo maintain customer satisfaction To inform and/or educate customers in an attempt to lead to future actions 5

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct-Marketing Approaches  One-step approach: Medium is used directly to obtain an order  Two-step approach: Uses more than one medium  First effort - Screens potential buyers  Second effort - Generates the response 6

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct-Marketing Media Direct MailCatalogs Broadcast Media TV SpotsInfomercials Home Shopping Print MediaTelemarketing 7

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct Mail  Unsolicited mail  Advertisers spend substantially on this medium  Keys to success  Mailing list: Database from which names are generated  Ability to segment markets and offers  Threat - The Internet 8

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Catalogs and  Catalogs  Number of catalogs mailed is decreasing  Available on the Internet for consumer and business- to-business customers  Electronic version of regular mail  Direct mail on the Internet  Lower cost and higher effectiveness than traditional direct mail  Spam: Electronic equivalent of junk mail 9

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Broadcast media and TV spots  Broadcast media  Categories - Television and radio  Direct-response advertising: Sales response for the offered product is solicited, through the one- or two- step approach  Support advertising: Supports other forms of advertising  TV spots  Short-form programs, include direct-response commercials seen on TV 10

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Infomercial and Home Shopping  Infomercial: Long commercial designed for 30- minute or 1-hour time slot  Designed to be viewed as a regular TV show  Effective with a broad demographic base  Home shopping  Substantial growth due to toll-free telephone numbers and widespread use of credit cards 11

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Print Media and Telemarketing  Print media  Difficult to use for direct marketing  Ads compete with the clutter of other ads  Space is relatively expensive  Response rates and profits are low  Telemarketing: Sales by telephone  Declined due to its potential for fraud and deception, and for annoyance 12

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Direct Selling  Direct, personal presentation, and sales in consumers’ homes  Repetitive person-to-person selling - Salesperson visits the buyer’s location to sell frequently purchased products  Nonrepetitive person-to-person selling - Salesperson visits the buyer’s location to sell infrequently purchased products  Party plans - Salesperson offers products to groups of people through parties and demonstrations 13

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Figure Sales Strategy (Methods Used to Generate Sales, Reported as a 2012 of Sales Dollars) 14

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Evaluating the Effectiveness of Direct Marketing  Cost per order (CPO): Evaluates the relative effectiveness of an ad based on the number of calls generated  Customer Lifetime Value (CLTV): Determines the dollar value associated with a long-term relationship with a customer  Helps determine if a customer should be acquired  Optimizes existing customers’ service levels 15

Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Advantages and Disadvantages of Direct Marketing Advantages Selective reach Segmentation capabilities Frequency Testing Timing Personalization Costs Measures of effectiveness Disadvantages Image factors Accuracy Content support Rising costs Do Not Contact lists 16