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  1. Chapter 19 Direct Marketing © 2006 Thomson/South-Western

  2. Introductory Scenario: Don’ Mess With Less • Who was Les Wunderman? • He created the Columbia House record club and “invented” the modern era of direct marketing • The genius of his idea was creating a dialogue (monthly response) with consumers which led to a building a relationship Ch 19: Direct Marketing 2 © 2006 Thomson/South-Western

  3. Direct Marketing • Interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location • Common purposes of direct marketing • Close the sale • Identify prospects for future contacts • Provide in-depth information • Seek information from consumers • Foster brand loyalty Ch 19: Direct Marketing 3 © 2006 Thomson/South-Western

  4. Direct Marketing: A Look Back • L.L. Bean founded in 1912 • Fundamental strategy: • Commitment to quality • Descriptive copy that was informative, factual, low-key • Satisfaction guarantee • Bean built a good mailing list • By 1990 Bean’s sales were $600 million; by 2004, about $1.2 billion Ch 19: Direct Marketing 4 © 2006 Thomson/South-Western

  5. Direct Marketing: Milestones • 1450–-Invention of movable type • 1667—First gardening catalog • 1744–-Franklin formulates mail-order concept of “satisfaction guaranteed” • 1872---Montgomery Ward catalog • 1886---Sears starts mail-order business • 1917 Direct Marketing Advertising Association founded Ch 19: Direct Marketing 5 © 2006 Thomson/South-Western

  6. Direct Marketing: Milestones • 1928–-Third-class bulk mail introduced • 1950—First credit card • 1951–-Lillian Vernon places first ad • 1953–-Publishers Clearing House founded • 1967–-AT&T introduces toll-free 800 • 1992–-Over 100 million in U.S. shop at home Ch 19: Direct Marketing 6 © 2006 Thomson/South-Western

  7. Direct Marketing Today • More than just mail-order • A tool used by organizations throughout the world • Direct marketing often is not integrated with other advertising efforts • Three Principle Purposes • close a sale with a customer • ID prospects and develop customer info. • Engage customers, seek their advice and generate brand loyalty Ch 19: Direct Marketing 7 © 2006 Thomson/South-Western

  8. What’s Driving Direct Marketing? • CONVENIENCE! for today’s dual income and single parent households. • More liberal attitudes toward using credit • Greater access to toll-free calling • Computer technology to facilitate transactions • On-line shopping • Cost per inquiry (CPI) and cost per order (CPO) advantages of direct marketing Ch 19: Direct Marketing 8 © 2006 Thomson/South-Western

  9. Database Marketing • Knowing who the best customers are as well as what and how often they buy • Mailing lists • Internal lists • External lists Ch 19: Direct Marketing 9 © 2006 Thomson/South-Western

  10. List Enhancement • Augmenting lists with externally provided lists • Incorporating information from external databases • Demographic data • Geodemographic data • Psychographic data • Behavioral data Ch 19: Direct Marketing 10 © 2006 Thomson/South-Western

  11. The Marketing Database • Includes data collected directly from individual customers • Goal: Develop cybernetic intimacy • Marketing database applications • RFM analysis • Frequency-marketing programs • Cross-selling • Privacy concerns Ch 19: Direct Marketing 11 © 2006 Thomson/South-Western

  12. Media Applications in Direct Marketing • Direct response advertising • Direct Mail • Telemarketing • E-mail • Other media • Magazines • Newspapers • Infomercials Ch 19: Direct Marketing 12 © 2006 Thomson/South-Western

  13. Direct Mail • Advantages • Selective, flexible, little waste, lends itself to testing, uses many formats • Disadvantages • Direct mail is expensive • May cost 15 to 20 times more to reach a person with a direct mail piece than with a TV commercial • Mail lists can be plagued with bad addresses • Mail delivery dates can be unpredictable Ch 19: Direct Marketing 13 © 2006 Thomson/South-Western

  14. E-Mail • Bulk e-mail is known as “spam” • However e-mail is an increasingly popular tool for marketers • Advantages • Cheap • Good response rates • Netiquette suggests getting consumer permission to send product information • Avoid bulk e-mailings Ch 19: Direct Marketing 14 © 2006 Thomson/South-Western

  15. Direct Response Advertising • Multiple media can be deployed to generate an immediate, measurable response. • Most common media used are direct mail and telemarketing • However all conventional media can be used Ch 19: Direct Marketing 15 © 2006 Thomson/South-Western

  16. Direct Response Advertising in Other Media • Magazines use bind-in insert card • Toll-free 800 numbers are vital to direct marketers using ads in newspapers and magazines • Infomercial • Long television advertisement • Range in length from 3 to 60 minutes • Keys to success • Testimonials • Frequent call to actions • Ensure same-day response Ch 19: Direct Marketing 16 © 2006 Thomson/South-Western

  17. Coordination Challenge • Functional specialists across several media need to work together • Marketing databases can lead to interdepartmental rivalries • Growth of direct marketing often means cuts in other promotional budgets • One solution: the marcom manager Ch 19: Direct Marketing 17 © 2006 Thomson/South-Western