1. Advertising Principles
and Practices
Direct-Response
Marketing

2. Questions We’ll Answer
How do we define direct marketing and explain the process?
How are databases used in direct marketing?
Who are the key players in direct marketing?
What are some steps in evaluating the tools and media available to direct-response programs?

3. The Gecko Goes Direct
The GEICO spokes-creature gets attention and communicates a marketing-savvy audience.
Heavy TV advertising including the cavemen and customer with celebrity testimonials prove that direct response sell a to a broad audience.
Their share of premiums grew from 4.6–6.25% from 2001 to 2005. \
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4. What is direct marketing?
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.
Designed to elicit an immediate response.
Uses marketing research to develop strategy.
Builds databases to target customers, prospects.
Uses a variety of media, including new media.

5. Direct Marketing Industry
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6. Advantages of Direct Marketing
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.
Convenient to purchase; not restricted to a location.
The marketer controls product until delivery.
Advertising with direct-mail components is more effective.
Flexibility in form and timing.

7. Disadvantages of Direct Marketing
Consumers are reluctant to purchase a product they can’t touch or feel.
Annoyances associated with direct marketing (junk mail, telemarketers).
Customer privacy, data sharing, and identity theft issues.
Tension between building long-term brand image and driving short-term sales.

8. Direct Marketing and Direct-Response Advertising
Direct marketing includes the whole marketing process.
Direct-response advertising is a type of marketing communication that combines the characteristics of advertising and sales promotion—attention-getting visuals, interesting copy, an offer, and relevant timing.
Gives the reader, viewer, or listener a way to directly respond and contact the advertiser.
High cost, but well-targeted.

9. Steps in the Direct Marketing Process
Setting objectives and making strategic decisions (research helps advertisers target, segment, prospect, and set objectives).
The communication of an offer (the message) by the seller through the appropriate medium.
Response, or customer ordering.
Fulfillment, or filling orders and handling exchanges and returns.
Maintenance of the company’s database and customer service (relationship building).

10. The Direct-Marketing Process
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11. Objectives/Strategy Provide product information Create sales
Provide space for detailed information.
Create sales
Order products, visit a dealer, return a response card, visit a Web site.
Retain and strengthen customer relationships
It costs so much to acquire new customers
Develop leads
Identify prospects for products (i.e., cars) that people think before purchasing so follow-up phone calls, sales calls, or other contact can be made to help influence purchases (lead generation).
Generate traffic
Visit a store, attend an event, or otherwise interact with a brand.
Test offers
Pricing, packaging, promotional offers.

12. Targeting Identifies who is to receive the offer.
Important because the Cost Per Thousand is very high.
Current customers are the best prospects.
Order products, visit a dealer, return a response card, visit a website
Three criteria (RFM) 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.

13. 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
Calls on the buyer to take action.
Offer provides all the information needed including price, the cost of shipping and handling, optional features, future obligations, availability of credit, extra incentives, time and quality limits, and guarantees or warranties
Supported by a message strategy, a media strategy, and the database.

14. Message and Media Strategy
Message Development Guidelines
Longer and must contain more explanation and detail about price, style, and convenience; because if it doesn’t persuade the receiver to respond, the message is wasted.
Copy is written in a personal, one-to-one conversational style.
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, and drive customers to a Web site or retail store.

15. The Response/Order It must be as easy as possible to respond.
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.

16. Fulfillment and Customer Maintenance
Fulfillment: getting the product ordered to customers
Fulfillment includes all back-end functions related to processing the order:
Delivering the product
Receiving payment
Providing tracking numbers
Customer maintenance
Tracking customer transactions and interactions with a database

17. 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 info is used to identify the best offers and adjust the campaign accordingly
Principle:
Because direct-marketing messages are constantly being measured, it is easier to learn what works and modify succeeding campaigns based on results than with advertising.

18. Using Databases Marketers use databases to:
Keep track of customers
Identify prospects
Segment groups into customers and prospects, to send relevant offers to each group
E.g., 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.
Better customers get more premium quality pieces than lower-usage customers who get a more modest piece.

19. A Circular Process
Databases are an important source of information at the both the beginning of the direct-marketing process and the end.
Used to update personal information (e.g., addresses, marital status, family status) plus get and keep info about interactions with the company.
Primary database objectives:
Record names of customers
Store and measure ad results
Store and measure purchasing performance
Vehicle for continuing direct communication
Principle:
A reliable database of customer and prospect contact information lies at the heart of effective direct marketing.

20. Database Management Process
Collection Point
Completed warranty card, contest entry, trade show card
Data Entry
Entered into computer and merged with other information
Data Assessment
Determine relevant level of detail
Data Clustering
Create clusters of characteristics and behaviors for segmenting or targeting
Data Application
Apply to marketing strategy or problem (e.g., send coupons)
Data Sharing
Manufacturer shares info with retailers
Data Refinement
Corrections, updates, additions, deletions

21. Database Management Process
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22. Lists
Customer and prospect information including addresses, phones, s.
Can be purchased or rented from list brokers.
Lists tied to demographics, psychographics, geography, hobbies, affiliations, postal routes .
New lists are crated by merging and purging
Three types of lists:
House lists: marketers own customers or members
Response lists: people who respond to some type of direct-response offer
Compiled lists: specific categories such as new homebuyers, graduating seniors, new mothers

23. Data-Driven Communications
Companies use info from previous communications to target, respond to, and interact with customers.
Services like Prodigy and Melissa Data offers online buying and purchase reminders that marketers, can access.
Principle:
Data-driven communication lets the brand speak with a sense of history of the customer relationship because it tracks the customer’s interactions with the brand.

24. Melissa Data
The Melissa Data Web site explains the services offered by this company in database collection and management.
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25. Data-Driven Communications
Date Mining
Sifting and sorting through company database information to target customers and maintain a relationship.
Information is used for behavior targeting (finding customers who might be interested in certain offers) and prospecting (profiling existing customers to find more, similar, potential customers).
Privacy Issues
Cookies (that track online visits) and loyalty cars (like frequent flyer cards) concern privacy advocates.
Sometimes info is collected with the subjects permission and knowledge; sometimes without.
When does efficiency in targeting become invasion of privacy?

26. Customer Relationship Management (CRM)
Identifies and analyzes customer behavior patterns to maximize the profitability of each relationship.
Sophisticated database technology links transactions and customer characteristics to help companies:
Improve service that are important to most profitable customers.
Attract new customers with similar characteristics.
Reward the best customers.
Identify and eliminate unprofitable customers.

27. Four Key Players in Direct-Response Marketing
Advertisers
Agencies
Media Companies
Customers

28. Key Players: (1) Advertisers
Companies whose primary business is selling products and services by mail or phone, or direct response advertising.
Retail stores who use direct marketing as a supplement to other forms of marketing.
Dell, GEICO

29. Key Players: (2) Agencies
Advertising agencies—department or separate direct-response company owned by the agency
Direct marketing agencies—independent, full-service agencies specializing in direct response
Service firms—printing, mailing, list brokering, data management
Fulfillment houses—store/ship requested information/products

30. Key Players: (3) Media Companies
The media that deliver messages by phone, mail, or the Web
Used to make an offer with a prospect
U.S. Postal Service

31. Key Players: (4) Customers
Dislike intrusiveness, but appreciate convenience
Types of customers
Push-button shopper (phone)
Mouse-clicking shopper (computer)

32. Tools of Direct Marketing
Direct Mail
Catalogs
Telemarketing
Direct-Response Advertising
Web-based e-marketing

33. The Tools of Direct Marketing: (1) Direct Mail
A print advertising message for a product or service, delivered by mail
Most popular method
Variable data use digital printing to highly personalize messages
Uses bulk mail rates
Response is 2–3%
Fairly high CPM, but easy to calculate payout rate

34. Table 15.1 Advantages of Direct Mail
Tells a story
Engages attention
Personalizes message
Builds in feedback
Reaches the unreachable
Description
The medium offers a variety of formats and provides enough space to tell a complete sales story.
Because direct mail has little competition when it is received, it can engage the reader’s attention.
Because of the use of databases, it is not possible to personalize direct mail across a number of consumer characteristics, such as name, product usage, purchase history, and income.
Direct mail is particularly conducive to marketing research and can be modified until the message design matches the needs of the desired target audience.
Direct mail allows the marketer to reach audiences who are inaccessible by other media.

35. Table 15.1 Disadvantages of Direct Mail
Negative perceptions
Cost
Mailing list
Response rates
Vulnerability
Description
The main drawback of using direct mail is the widespread perception that it is junk mail. According to a Harris-Equifax Consumer Privacy Survey, about 46 % of the public see direct-mail offers as a nuisance, and 90% consider them an invasion of privacy.
Direct mail has a higher cost per thousand than mass media. A great deal of this high cost is a result of postage. (However, it reaches a more qualified prospect with less waste.) Another cost factor is the maintenance of the database.
To deliver an acceptable response rate, the quality of the mailing list is critical. It must be maintained and updated constantly.
Because of the changing nature of mailing lists, as well as the difficulty of keeping relevant data in the database, the response rate can be a slow as 2 or 3%. Even with that low response, however, database marketers can still make money.
Direct-mail delivery is vulnerable to natural disasters as well as catastrophes such as the 9/11 terrorist attacks.

36. Creating Effective Direct Mail
Get the attention of the targeted prospect as the envelope comes from the mailbox.
Create a need for the product, show what it looks like, and demonstrate how it is used.
Answer questions, as a good salesperson does, and reassure the buyer.
Provide critical information about product use.
Inspire confidence, minimize risk, and establish that the company is reputable.
Make the sale by explaining how to buy, how to order, where to call, and how to pay for the purchase.
Use an incentive to encourage a fast response.

37. Writing Effective Letters
Attention
Pictures and benefit-oriented headlines to grab attention or generate curiosity.
Personalize
Use a name or, if not available, a topic (“Dear Cat Lover”).
Lead in
A brief yet compelling or surprising statement—“Dear Friend: I could really kick myself!”
The Offer
Make it as early in the letter as possible.
The Letter
Use testimonials or other specifics to describe benefits.
The Closing
Repeat the offer, add incentives or guarantees, and include a clear call to action.

38. Issue: Trees, Water, and Waste
Direct mail uses an estimated 100 million trees and 28 billion gallons of water per year
Plus disposal and recycling costs; in Colorado, direct mail accounts for 340 million pounds of trash per year.
Should direct mail be banned?
Would this infringe on advertisers’ rights to commercial free speech?
What do you do if you’re an environmentally responsible advertiser?

39. The Tools of Direct Marketing: (2) Catalogs
A multiple-page direct mail publication showing a variety of merchandise
Increasing in number; even while marketers are refining databases, cutting back on no. of recipients
Catalogs can drive e-commerce, Web site purchases
Specialty catalogs are growing in number

40. Table 15.2 Advantages and Disadvantages of Catalogs
Targeted
Engages attention
Complete information
Convenience
Description
Can be directed at specific market segments.
Employs high-quality design and photography (see Alsto’s cover).
Extensive product information and comparisons are provided.
Offer a variety of purchase options.
Disadvantages
Negative perceptions
Costs
Response rate
Mailing list
Description
Catalogs are viewed as junk mail by many recipients.
The cost per thousand of catalogs is higher than mass media.
The response is relatively low at 3 to 4%.
Databases must be constantly maintained.

41. The Tools of Direct Marketing: (3) Telemarketing
Almost as persuasive as personal sales, but a lot less expensive.
Inbound vs. outbound.
Message must be simple, compelling, and short.
Issues include 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

42. The Tools of Direct Marketing: (4) Direct-Response Advertising
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.

43. The Tools of Direct Marketing: (5) Internet
Combines strengths of direct mail and telemarketing.
Moves marketers closer to one-to-one marketing.
Combines database information and technology for highly personalized, low-cost messages to mass audience.
Spam is an issue.
Permission marketing gives recipients the choice to “opt in” or “opt out.”

44. Eddie Bauer
The Eddie Bauer Web site lets site visitors “try on” clothes in a virtual dressing room” and also sends messages offering special prices based on customers’ past purchases.
Visit the Site

45. Integrated Direct Marketing:
A systematic way to get close to your best current and potential customers.
Seeks to achieve precise, synchronized use of the right media, at the right time, with a measurable return on dollars spent.
Direct mail with a reply card and an 800 number, followed by a phone call.
Lifetime Customer Value (LCV) is an estimate of how much a purchase volume a customer or target market will generate over a length of time.

46. Global Considerations
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.
Regulations, standards, and cultural meanings vary greatly from country to country.
Creative messages, visuals, and words often don’t easily translate across cultures.

47. Discussion Questions

48. Discussion Question 1
Most people hate telemarketing. Say you work for the local campus environmental organization.
How could you conduct a campus and community telemarketing effort that would not generate resistance?
Apply your ideas to developing a telemarketing program to promote campus fund-raising for a good cause, such as a campus Habitat for Humanity project?
Your primary targets are students, faculty, and staff.

49. Discussion Question 2
Kali Johnson, a recent college graduate, is interviewing with a large garden product firm that relies on television for its direct-response advertising.
“Your portfolio looks very good. I’m sure you can write,” the interviewer says, “but let me ask you what is it about our copy that makes it more important than copy written for Ford, Pepsi, or Pampers?”
What can she say that will help convince the interviewer she understands the special demands of direct-response writing?

50. Discussion Question 3
One of the smaller, privately owned bookstores on campus is considering a direct-response service to cut down on its severe in-store traffic problems at the beginning of each semester.
What ideas do you have for setting up some type of direct-response program to take the pressure off store traffic?

51. Discussion Question 4
The success of infomercials helps validate direct marketing as a revenue generator.
What characteristics of a product must you consider when determining whether to use an infomercial?

52. Discussion Question 5
Three-minute debate: How does the recent fervor surrounding personal privacy affect direct marketing—specifically, telemarketing and advertising?
You are designing a direct-mail campaign for a local business that employs telemarketing and advertising, but your client is reluctant because of privacy concerns.
In class, organize into small teams with pairs of teams either arguing the direct marketing position or the privacy position. Set up a series of three-minute debates with each team having that time to argue its position. Every team of debaters has to present new points not covered in the previous teams’ presentations until there are no arguments left to present. Then, the class votes as a group on the winning point of view.

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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Publishing as Prentice Hall