Direct Marketing Channel

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DIRECT MARKETINGCHANNEL

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Direct marketing channel

A marketing channel that has no intermediary levels.

Direct marketing consists of direct communications withcarefully targeted individual consumers to obtain animmediate response.

Interactivity is essential to this process.

Catalog companies, direct mailers, and telemarketershave been using the approach for years.

However, improved database technologies and newmedia (computers, modems, fax machines, e-mail, theInternet, and online services) have changed the directionand nature of direct marketing.

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Most direct marketers see direct marketing as

playing an even broader role than simply selling

products and services.

Mass marketing is targeting broadly withstandardized messages and marketing offers

distributed through intermediaries.

Today, there is a trend toward more narrowlytargeted or one-to-one marketing (called direct

marketing).

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a. What is Direct Marketing?

Mass marketers have typically sought to reach millions of buyers witha single product and a standard message delivered through the massmedia.

Under this mass-marketing model, most marketing involved one-way

Communications aimed at consumers, not two-way interactions withthem.

Direct marketing consists of direct communication with carefullytargeted individual consumers to both obtain an immediate responseand cultivate lasting Customer relationships.

Direct marketers communicate directly with consumers, often on aone-to-one, interactive basis.

Today, improved databases permit more sophisticated directmarketing and tailoring of marketing efforts.

Beyond brand and image building

, direct marketers seek a direct,immediate, and measurable consumer response.

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b. The New Direct Marketing Model

Early direct marketers--catalog companies, direct mailers,and telemarketers--gathered customer names and soldgoods mainly through the mail and by telephone.

Today, advancement in database technologies and newmarketing mediaespecially the Internet and otherelectronic channels-- direct marketing has undergone adramatic transformation.

Direct marketing may be perceived as being a distribution

function (direct distribution) and a communication function(direct contact with the consumer).

Some firms use direct marketing as a supplemental medium.

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However, for many companies today, direct marketing ismore than just a supplemental channel or medium.

The Internet and electronic commerce now constitute a newand complete model for doing business.

Some say the Internet is the foundation for a new industrialorder.

Some firms (and the number is growing) use the new directmodel as their only approach.

Experts envision the day when all buying and selling willinvolve direct connections between companies and theircustomers.

The new model will change customers expectations aboutconvenience, speed, comparability, price, and service.

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c. Benefits and Growth of

Direct Marketing

i. Benefits to Buyers

Direct marketing benefits buyers in many ways:

1). It is convenient.2). Buying is easy and private.

3). Greater product access and selection.

4). Provides a wealth of comparative information.

5). Online buying is interactive and immediate.

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ii. Benefits to Sellers

Sellers benefit by:

1). Direct marketing is a powerful tool for customerrelationship building.

2). Direct marketing can also be timed to reach prospectsat just the right moment.

3). Because of its one-to-one, interactive nature, theInternet is an especially potent marketing tool.Continuous relationships can be developed.

4). Reduce costs and increase speed and efficiency.5). Online marketing offers greater flexibility.

6). The Internet is a truly global medium.

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d. The Growth of Direct Marketing

Sales through traditional direct marketing channelshave been growing rapidly.

Sales through direct marketing channels are growing at

about 8 percent annually (as compared to only 6

percent overall sales growths).

Online marketing is growing explosively.

Sales on the Internet have been growing at about 60

percent per year for the last five years.

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Trends that seem to moving our society toward even

more direct marketing include:

a). Degasification--focus is toward mini markets.

b). Lack of time and congestion. Higher costs of driving.

c).Growth of delivery services and the support

infrastructure.

d). Growth of computer power and databases.e) Growth has also occurred in the business-to-business

sector.

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e. Forms of Direct Marketing

i. Face-to-Face SellingThe original and oldest form of

direct marketing is the sales.

Today, many companies still usesalespersons or representatives to

reach their prospects, developthem into customers, build lasting

relationships, and grow thebusiness.

ii. Telemarketing

In telemarketing telephone is usedto sell directly to consumers.

Two general types oftelemarketing include:

1). Outbound telephone marketingto sell directly to consumers.

2). Inbound toll-free 800 numbersto receive orders from televisionand radio ads, direct mail, or

catalogs.

900 numbers are used to sellconsumers information,

entertainment, or the opportunityto voice an opinion on a pay-per-

call basis.

Many customers appreciate theoffers they receive by telephone,however, because of the recent

explosion in unsolicited telephonemarketing, lawmakers are

responding with efforts to controlunsolicited telemarketing during

certain hours of the day.

Most telemarketers support someform of legislation.

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Direct mail marketinginvolves sending an offer,

announcement, reminder, orother item to a person at a

particular address.

Direct mail is well suited to

direct, one-to-onecommunication.

Advantages include:

1). High target-market

selection

2).Personalized.

3). Flexible.4). Allows easymeasurement of

results.

Even though the cost perthousand can be high, the

people who reachedthrough direct marketingare better prospects thanthose who reached with

other media.

New forms of direct mailinclude: 1). Fax mail. 2). E-mail. 3). Voice mail.

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iii. Direct-Mail Marketing


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iv. Catalog Marketing

Catalog marketing involvesselling through catalogsmailed to a selected list ofcustomers or made availablein stores.

A catalog is a printed,bound piece of at leasteight pages, selling multipleproducts, and offering adirect ordering mechanism.

Some stores offer acomplete line of goodsthrough their catalogs.

Most direct retailers haveput their catalogs on theWorld Wide Web.

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Kiosk MarketingSomecompanies place information

and ordering machines(called kiosks) in stores,

airports, and other locations(in contrast to machines

which dispense products--vending machines).

Business marketers can alsouse kiosks (such as at trade

shows).

Kiosks are also going onlineas companies merge real-world and virtual worlds of

commerce.

The Gap interactive kiosk is agreat example of this

technology.

vii. Online Marketing andElectronic Commerce

Online marketing is conductedthrough interactive online

computer systems, which linkconsumers with sellers

electronically.

There are two types of onlinechannels:

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Rapid Growth of Online Marketing

Although still in their infancy, Internet usage and onlinemarketing are growing explosively.

Electronic commerce is the general term for a buying

and selling process that is supported by electronicmeans.

This would include electronic marketplaces (these aremarket spaces in which sellers offer their productsand services electronically, and buyers search forinformation, identify what they want, and place ordersusing a credit card or other means of electronicpayment).

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The Online Consumer

The Internet users are an elite group.

They tend to be younger, more affluent, bettereducated, and more male than the general population.

However, female usage almost equals males. Net users come from all age groups, about half are 40

years or older, they differ psychographically from thegeneral population, and they differ in their approachesto buying and in their responses to marketing.

Teens are still a targeted group. The seniors group is also expected to grow in the next

several years.

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Creating Online Marketing

Marketers canconduct online

marketing in fourways:

1).By creating

an electroniconline presence.

Using thismethod, a

company can:

a). Buy space ona commercialonline service.

b).Company canopen its own Web

site.

2). Web sites

vary in purposeand content.

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b).The marketing

Web site isdesigned toengage consumersin an interactionthat will move

them closer to apurchase or other

marketingoutcome.

With this form ofsite, the marketer

initiatescommunicationand interaction.

3).Creating aWeb site is onething; getting

people to visit thesite is another.

T

he key is tocreate enoughvalue and

excitement to getconsumers to come

to the site, stickaround, and come

back again.

High involvement

products (such asnew cars,

computers, orfinancial services)

have greatersuccess than do

lower involvementproducts.

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The second method is to place advertisements online.

Companies can place online advertisement in several ways:

1) The company can put online ads that pop up while subscribers are surfing onlineservices or Web sites.

2). Content sponsorship allows a company to sponsor a specific report on one of theservices.

The third method is to participate in Forums, Newsgroups, and WebCommunities.

1). Forums are discussion groups located on commercial online services.

2). Newsgroups are the Internet version of forums.

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3). A Bulletin board system (BBS) is specialized online services that center on aspecific topic or group.

4). Web communities are sites that provide a place where members cancongregate online and exchange views on issues of common interest.

Visitors to these Net neighborhoods develop a strong sense of community.

Web communities can be either social or work-related.

The final method is to use E-mail and Web casting.

The normal method used is to encourage prospects and customers to send questions,suggestions, and even complaints to the company via e-mail.

Quick response to such messages is a key.

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The Promise and Challenges of

Online Marketing

Online marketing offers great promise for the futurebut is still years away from reaching its potential.

Online marketing is still just one important approach tothe marketplace.

The Web is still not a moneymaking proposition formany firms.

Challenges that online marketers face include:

1). Limited consumer exposure and buying.

2). Skewed user demographics and psychographics.

3). Chaos and clutter.

4). Security.

5). Ethical concerns.

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f. Customer Databases and

Direct Marketing

There are differences between massmarketing and so-called one-to-one

marketing.

A customer database is an organizedcollection of comprehensive data about

individual customers or prospects,including geographic, demographic,

psychographics, and behavioral data.

The database can be used to locate

potential customers, tailor products andservices to the special needs of targeted

customers or/and maintain long-termcustomer relationships.

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Database marketing

Database marketing isthe process of building,maintaining, and using

customer databaseand other databasefor the purposes of

contacting andtransacting with

customers.

A customer database ismuch more than just a

list of names (i.e.,customer mailing list).

Business-to-businessmarketers and serviceretailers mostfrequently use

database marketing.

Companies use theirdatabases in four

ways:

1). Identifyingprospects.

2). Deciding whichcustomers should

receive a particularoffer.

3). Deepeningcustomer loyalty.

4). Reactivatingcustomer purchases.

Like many othermarketing tools,

database marketingrequires a special

investment.

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Other Marketing Applications

through Databases24

Some of the important uses or advantages ofusing database market are as following:

Match profiles to cross-sell other products tocustomers

Modify marketing messages based on customer profiles

Reach out to customers to reinforce the purchasedecision

Find new customers Gain insight into who is purchasing products

Improve customer service


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Beside uses database marketing also

has some disadvantages like25

Marketing databases canbe costly and time

consuming,

Databases needto be carefully

planned

Consumerprivacyissues.


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b. Integrated Direct Marketing26

Too often, a companys individual directmarketing efforts are not well integratedwith one another or with other elements in itsmarketing and promotional mixes.

A more powerful approach is integrateddirect marketing, which involves usingmultiple-vehicle, multiple-stage campaigns.


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c. Public Policy and Ethical Issues in

Direct Marketing27

Direct marketers and their customersusually enjoy mutually rewardingrelation-ships, however,occasionally, a darker sideemerges.

Irritation, unfairness, deception,and fraudare common complaints.

Many consumers perceive that aninnocent desire to become close tothe customer really is an invasionof privacy (this is the toughest issuesfacing the industry).

1). Consumers can benefit fromdatabase marketing, but at whatcost to privacy?

2). in a companys desire to build a

database, they often get carriedaway.

Documents

Direct Marketing Channel