Now, what is Direct Marketing ?

Direct Marketing is an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location1980s definition of Direct Marketing

The new direct marketing is an information-driven marketing process, managed by database technology, that enables marketers to develop, test, implement, measure, and appropriately modify customised marketing programs and strategiesNew definition of direct marketing

Goals of Direct MarketingFinding new prospectsAcquiring CustomersCreating Customer Loyalty

19 WundermentalsfromBeing Direct Making Advertising Pay

#1 Direct Marketing is a Strategy, Not a TacticIts not an ad with a coupon; its not a commercial with a toll free number; its not mailing, a phone call, a promotion, a database, or a website. Its a commitment to getting and keeping valuable customers

#2 The Consumer, Not the Product, Must be the HeroThe product must create value for each of its customers. It must satisfy consumers unique differences, not their commonalities.

# 3 Communicate with Each Customer or prospect as an Audience of OneAdvertising must be relevant to each consumer as the product or service is. General advertising and more targetted direct marketing must both be part of a holistic communication strategy

# 4 Answer the Question Why Should I ?The most dangerous question a prospect or customer asks is Why Should I? And he may ask it more than once but never of you. The product and its communication stream must continue to provide him with both rational and emotional answers

# 5 Advertising Must Change BehaviorFavourable consumer attitudes go only part of the way to creating sales. Its also the consumers accountable actions such as enquiries, product trials, purchases, and repurchases that create profits

# 6 The Next Step : Profitable AdvertisingThe results of advertising are increasingly measurable ; they must now be accountable. Advertising cant be just a contribution to goodwill it must become an investment in profits

# 7 Build the Brand ExperienceCustomers have to know and feel the brand as an experience that serves to individual needs.It has to be a total and on-going immersion in satisfaction that includes everything from packaging to point of purchase, repurchase, and after-sales service and communications

# 8 Create RelationshipsRelationships continue to grow encounters do not. The better the buyer seller relationship, the greater the profit

# 9 Know and Invest in Each Customers Lifetime ValueOne automobile dealer calculated that a lifetime value of cars sold to one customer would be worth $332,000. How much should a marketer spend to create such a loyal lifetime customer for a given product or service ?

# 10 Suspects are not ProspectsProspects are consumers who are able, ready, and willing to buy ; suspects are merely eligible to do so. Communicating with prospects reduces the cost of sales ; communicating with suspects raises the cost of advertising

# 11 Media is a Contact StrategyMeasurable results from media, not the number of exposures, are what counts. Measurements such as reach and frequency are out of date. Only contacts can begin relationships.

# 12 Be accessible to your customersBe there for your customers be their database and source of information and service through as many channels of communication as possible. They cant tell you what they need unless they can reach you.

# 13 Encourage Interactive DialoguesListen to customers rather than talk to them. Let them advertise their individual needs. Theyll be grateful for your responsiveness.Convert one-way advertising to two-way information sharing

# 14 Learn the Missing When?The answer Not Now is as dangerous to advertising as Not This. Only consumers know when they are ready to buy, and they will tell you if you ask them in the right way

# 15 Create an advertising curriculum That Teaches as it SellsA Curriculum is a learning systme that teaches one bit of information at a time. Each advertising message can build on the learning of the previous one. It can teach consumers why your product is superior and why they should buy it

# 16 Acquire Customers with the Intention to Loyalise themPromotions sell product trials but not ongoing brand loyalty. They may attract wrong customers, who may never become loyal. The right customers must be acquired and persuaded to want what the product does and not what the promotion offers. The right customers may infact be your competitors best customers

# 17 Loyalty is a Continuity ProgramTotally satisfied customers are least likely to fall away. Those who are merely satisfied may fall away without warning. To build ongoing relationships, rewards for good customers should be tenure-based (on previous purchases, usage behavior and length of relationship). Rewarding tenure can prevent competitors from conquesting your best customers

# 18 Your Share of Loyal Customers, Not Your Share of Market, Creates ProfitsSpend more on the good customers you have. Ninety percent of most companies profits come from repeat customers. It costs 6 to 10 times to get a new customer as to keep an old one.

# 19 You are What You KnowData is an expense knowledge is a bargain. Collect only data that can become information, which , in turn, can become knowledge. Only knowledge can build on success and minimise failure. A company is know better than what it knows.

Beyond all this, DM is a Process ..

The 60 30 10 Rule in DM60% of the success of your direct response marketing program will be selecting the right audience and reaching them with your message.30% of the success of your direct response program will be making the best possible offer to this highly selected audience.10% of the success of your direct response program will be the creative, and excellent presentation.

Why the database is so importantYou cant save souls in an empty church - David OgilvyNo product or service, however brilliant, will sell to the wrong people. And no creative idea, however stunning, will work if it isn't seen by the best prospects.A poor product or message sent to the right prospect is better than the other way round.

The origin of the databaseThe idea is not new; the technology is. The average person in 1995 had more computing power in their wrist watch than did an IBM 360 main frame in 1961.Thats the machine used on space launches - the one credited with inaugurating the computer age.

The backbone of direct marketingBy continually testing and monitoring you can:Evaluate the initial response.Monitor customer behaviour - response to various offers - over time.Assess the potential of a given prospect.Spend your money where it will do best.

Typical Mailing ResultsFactorDifferences between best & worstListx 6.0 (12 lists)Offerx 3.0 (3 prices, 2 ways to pay)Timingx 2.0 (2 different times a year)Creativex 1.35 (2 envelope colours, a personalised plastic card)Ways to Replyx 1.2 (sticker, either phone or mail response, or choice)

Read results carefullyIf you combine all the results on the last example, in theory the best combination is 58 times better than the worst.This is very misleading because in reality, uplifts cannibalise each other. Two tests giving a 20% uplift each will not, combined, produce 40%. It may be 30% - or less.

Surprising results simple tests can achieveWe tried a mailing with a letter, no brochure vs. one with brochure. ROI went up 92%.We tested a letter twice as long making the same proposition. Response was almost double.We tested the effect of a human face in an ad: much the same occurred.

Dont ignore the most important - and easiest - testMost people think of comparative testing.But the most important test is the easiest: trying a message out on small numbers before you spend all your money:Why mail 1 million and hope, when you can mail 10,000 and be sure?Never spend money you cant afford to lose without testing first.

Vary your messages to fit the individualDifferent Strokes for Different Folks Chairman: Is it right for our firm?Managing Director: Will it help the business run better?Finance Head:Is it good value?Marketing Head: Will it help the sales force?Operations Manager: Is it reliable?User: Is it easy to use?Secretary: Does my boss need it?

To summarise

If you cant measure it, you cant manage itTry to establish the value of each name - customer, lapsed customer and potential. This should reflect past and potential value. Then you know what you can afford to get and keep them.Discover which are more likely to be loyal - and spend more on them.

Top 10 Uses of Direct MailGenerating leadsGenerating store trafficResponding to competitive activityGenerating customer loyaltyGenerating new customers/referralsImproving sales force efficiencyImproving customer serviceIncreasing customers average purchase amounts generating higher salesAnnouncing store hours/sales/new locationsAugmenting media advertising to top prospects and select customersIf you want to do something, chances are, Direct Mail can help you accomplish it. Effectively and efficiently.

If you cant measure it, you cant manage itTry to establish the value of each name - customer, lapsed customer and potential. This should reflect past and potential value. Then you know what you can afford to get and keep them.Discover which are more likely to be loyal - and spend more on them.

Dont assume a scheme will be the right answer. Loyalty is what is left when the bribes are removedVictor Ross,Former Chairman, Readers Digest, EuropeIts what you do with the knowledge gained that may ensure successMost do very little because they dont know how

Enlightened companies remember information for customers, not about them."

20 225 RuleIn a HBR article, Cooper and Kaplan discovered that the famous Pareto Principle of 20 80 Rule had to be revisedA 20 225 Rule was actually operating : 20 % of your customers were generating 225 % of profits. The middle 70 % of your customers were hovering around the break-even point, and 10 % of customers were losing 125 % of profits !

To Build Processes to Differentially Treat Customers Based on Their Potential Value and Promote Continuous Learning

THEY DONT LOOK VERY MUCH ALIKEBRAND MANAGEMENT Reflects to the customer what the company and / or product stands for Should be coherent across all activities undertaken by the company Brand values are built up over time, but they should be the result of conscious design by the company Much effort goes into defining brand footprints - ie values of the company or product, and alignment with the profile of the customers Tone, style, manner of the product or service at all points of contact with the customer should be defined by the brand - not the other way aroundCUSTOMER RELATIONSHIP MANAGEMENTFocuses upon managing the customer relationship, in order to achieve sales (although many CRM programmes in fact focus on product sales alone) the customer life cycle of recruitment, customer development and retention are common themes in CRM programmes CRM is a data driven. Customer data is used extensively the understand behaviour and direct the appropriate communication to the customer CRM impacts all parts of the company. Business processes should run from the centre through to the distribution channels where the customer touches the company Are these two approaches to Marketing in conflict, or they dependent upon each other?Brand Management and CRM are both big issues within the Marketing Dept, and within the company as a whole - but rarely in the same room, or with the same people. But is this starting to change?

BUT THEY CANT LIVE WITHOUT EACH OTHER Brand Management is softer

Brand Management has to do with Values Attitudes Imagery Words Creative

Brand Management matches the psychology and needs of the customer to the features of the product or service

Brand Management shapes the customer propositionCRM is harder

CRM has to do with

Data and Analysis Organisation and culture Business processes Technology Service standards across multiple channels

CRM deals with the mechanics of building and maintaining customer relationships

CRM takes the customer proposition and delivers it to the customer

BRANDING AND CRM COME TOGETHERBRANDMANAGEMENTCRMDelivers: Values of product or service being offered coherence of product features tone and style of customer contact - written or spoken visual appearanceDelivers: relationship strategy who to contact how and when to contact service standards processes and technology to relationship manage customers consistent product or service proposition delivered to the customer over lifetime of relationship

Brand Management and CRM coming together - clothes buying modelDifferent segments on Needmap, leads to different value proposition being available to the customer

These lead to potentially different CRM strategies being developed for each segment

CUSTOMER ACQUISITIONVia targeted recruitment products. Event driven, relationship development programmeTARGET: 3 relevant product sales, activation, and loyalty generationOutbound prioritisation based on ranking of customer by product RETENTIONPrioritisedSegmentsNurture priority customersCUSTOMER DEVELOPMENTNext best action for customer.Driven by customer segment, event triggers, product propensity matrix, and contact rulesRelationshipstagePropensity matrixEventsTHE TOOLS OF CRM

CUSTOMER DEVELOPMENT STRATEGY - BIG PICTURERecruitment product, eg for financial services

A SHIFT TO RELATIONSHIP MARKETINGAdopting a CRM strategy requires the customer to be put at the centre of the organisation.This will require changes to infrastructure, systems and processes, organisation and culture.Such changes must be allowed to evolved over time - they cannot be implemented on a single big bang

ANNUAL CAMPAIGNS - product focusedIncreasing volumes of data are available to Marketers. These data combine to deliver:

customer segmentationcustomer propensity to purchase products key event data in customer relationship

But still most campaigns are centred around products rather than customers

JAN APR JUL OCT JANMany so called CRM programmes are still focused around product campaigns. These will provide business benefit in terms of improved efficiency, but might more correctly be described as better direct marketingBETTER DIRECT MARKETING DRESSED UP AS CRM

TURN THROUGH 90 DEGREES - move from product to customer focusWhat Is CRM trying to do?Products: 1 2 3 4 5 Customer 1Customer 2Customer 3Customer 4Customer 5

Customer .

FROM: Finding customers that are right for each productTo: Finding products that are right for each customerTo achieve this we need to align around:

Organisation and culture Business processes and skills Measurement and incentives Information management Technology

STAGES OF CUSTOMER MANAGEMENTPLANNING AND STRATEGYMARKETING FACTORYCHANNEL CUSTOMER CONTACT MANAGEMENTFEED BACK LOOP IN ALL STAGESProcesses and systems infra structure broken down into three major stages

A BROAD RANGE OF DISCIPLINES NEED TO WORK TOGETHERKEY ASPECTS OF SUCCESSFUL CRM DEPLOYMENTBrand ManagementOrganisationBusiness Processes Information Technology Marketing/Sales skillsCRMStrategyKEY ASPECTS OF SUCCESSFUL BRAND AND CRM DEPLOYMENT

Concentrate on customers more than prospectsWhy retailers lose customers1. Moved away or died4% 2. Other company friendships5%3. Competition 9%4. Product dissatisfaction 14%5. No contact/indifference/attitude of sales force 68%Retail research by McGraw-Hill