1. Direct and Online Marketing: Direct and Online Marketing: Building Direct Customer Relationships Chapter 14

2. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 2 1. Define direct marketing and discuss its benefits to customers and companies. 2. Identify and discuss the major forms of direct marketing. 3. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. 4. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. 5. Overview the public policy and ethical issues presented by direct marketing. Rest Stop: Previewing the Concepts

3. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 3 Amazon.com – The Wal-Mart of the Internet First Stop Background  Success: Since its inception in 1995, Amazon.com has grown to sales of more than $19 billion today, and profits have increased 18-fold, with 50% of sales coming from overseas.  Merchandise: Amazon has expanded its merchandise beyond books to include music, videos, electronics, tools, housewares, shoes, groceries, and more. Amazon boasts, “We have the Earth’s biggest selection!” How Did They Do It?  Customer-driven: Amazon offers a better store, easier shopping, greater variety, more information and low prices. Small retailers can sell via Amazon. Innovative services include Amazon Prime, Kindle, music downloading, & shopping applications for iPhone.  Customization: Amazon’s site greets customers by name and offers personalized, relevant recommendations. Users can share opinions and reviews, chat online and more.

4. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 4 Direct Marketing Connecting directly with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.

5. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 5  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). The New Direct-Marketing Model

6. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 6 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. Amazon.com

7. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 7  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. Growth of Direct Marketing

8. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 8 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.

9. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 9 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.

10. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 10 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.

11. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 11 Customer Database An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data.

12. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 12 Marketing in Action USAA uses its extensive database to tailor its services to the specific needs of individual customers, creating incredible customer loyalty.

13. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 13 Figure 14.1: Forms of Direct Marketing

14. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 14 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”.

15. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 15 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.

16. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 16 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.

17. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 17 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.

18. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 18 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.

19. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 19 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.

20. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 20 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 DRTC classics.

21. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 21 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.

22. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 22 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.

23. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 23 Forms of Direct Marketing  New digital direct marketing technologies: –Mobile phone marketing: Mobile ad spending is expected to grow. Watch this YouTube video to see more examples! YouTube

24. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 24 Forms of Direct Marketing  New digital direct marketing technologies: –Podcasts and vodcasts. Purina Petcasts.Petcasts –Interactive TV (ITV): Viewer engagement is much higher than with regular TV ads.  Online marketing is the final form of direct marketing.

25. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 25 Online Marketing Company efforts to market products and services and build customer relationships over the Internet.

26. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 26 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.

27. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 27 Online Marketing  Click-only companies: –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). –Transaction sites (eBay). –Content sites (ESPN).

28. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 28  Click-and-mortar companies: –Traditional brick-and- mortar companies that have added online marketing to their operations. Online Marketing

29. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 29  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. Online Marketing

30. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 30 Figure 14.2: Online Marketing Domains

31. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 31 Online Marketing  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.

32. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 32 Marketing in Action People now go online to buy just about anything. Where else but the Web could you find a place that specializes in anything and everything bacon?

33. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 33 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.

34. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 34 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.

35. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 35 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.

36. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 36 Marketing in Action GetSatisfaction.com has created a user- driven customer-service community where can discuss product and service problems. GetSatisfaction.com

37. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 37 Online Marketing  Corporate 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.

38. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 38 Online Marketing  Corporate 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.

39. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 39 Figure 14.3: Setting Up for Online Marketing

40. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 40  Online marketers should pay careful attention to the seven Cs of effective Web site design: –Context. –Content. –Community. –Customization. –Communication. –Connection. –Commerce.  Constant change helps encourage repeat visits. Online Marketing

41. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 41 Fuel For Thought Visit the www.nps.gov web site.www.nps.gov How well does this web site fulfill the 7 “C’s” of effective web site design?

42. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 42 Online Marketing  Placing ads and promotions online: –Forms of online advertising (follow link for examples):online advertising Banner ads. Interstitials. Pop-up or pop-under ads. Rich media ads. Search-related ads (contextual advertising). Watch this video clip to learn more about Google’s AdWords program! Click on filmstrip icon at left to play video

43. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 43 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.Subservient Chicken

44. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 44 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.

45. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 45 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.

46. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 46 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 an ROI 40-50% higher than other forms of direct marketing.

47. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 47 Marketing in Action StubHub no longer spams indiscriminately. It now lets customers opt in for e-mail, and sends only event and ticket information that is relevant to consumer interests.

48. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 48 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.

49. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 49 Marketing in Action Internet fraud has increased dramatically in recent years. The FBI’s Internet Crime Center provides consumers with a convenient way to alert authorities to suspected violations.

50. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 50 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.

51. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 51 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?

52. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 52 1. Define direct marketing and discuss its benefits to customers and companies. 2. Identify and discuss the major forms of direct marketing. 3. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. 4. Discuss how companies go about conducting online marketing to profitably deliver more value to customers. 5. Overview the public policy and ethical issues presented by direct marketing. Rest Stop: Reviewing the Concepts

53. Copyright 2011, Pearson Education Inc., Publishing as Prentice-Hall14 - 53 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. Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall