Is a system of marketing that is interactive. Buyers and sellers can exchange
information with each other directly. It also called interactive marketing,
dialog marketing, or membership marketing.
Uses one or more advertising media
Has a measurable response (direct response or action advertising)
efforts aimed at stimulating some action on the part of the potential customer.
Utilizes responses that can be made at any location, not just mail order
or catalogue sales.
Stores activity on a database.
Database marketing builds and maintains a base of data on current and
prospective customers and communicates with them using several media and
is one of the fastest-growing marketing methods used today
Database marketing is an efficient method for increasing sales. It is
also a major component of most IMC programs.
A good database enables marketers to target, segment, and grade customers.
The role of direct marketing in IMC
Companies use media that generate inquiry responses to build databases of
names and addresses. Such media are used as linkage media - media that
help prospects and customers link up with a company.
Other companies may simply purchase a mailing list as the database. The
marketer communicates directly with the prospect to effect a two-way link
that establishes or enhances a relationship.
Direct marketing is the oldest and fastest growing marketing method worldwide
due to advances in telecommunications and computer technology and changes in
society, the expanding use of credit cards, and the increase in the number of
women working outside the home.
The impact of databases on direct marketing
Modern computer technology enables marketers to compile and analyze
customer data in unprecedented ways.
The database is the key to direct marketing success. It is the corporate
memory of all important customer information..
The database allows a company to measure efficiency of its direct response
advertising efforts.
B. Working with a marketing database requires two processes:
Data management is the process of gathering, consolidating, updating,
and enhancing information about customers and prospects that reside in the
database.
Data access enables marketers to manipulate, analyze, and rank
information to make better decisions. Suggested methods are:
Customer profiling - snapshot of customer at a given time (identifies
common characteristics and ranking of their relative importance in different
segments).
RFM formula (88.0K)(recency, frequency, monetary) - using the three measures
to help rank customers by the type of merchandise or services they buy,
how often they buy, or by how much they spend.
Perhaps the greatest reason for direct marketing's growth is that marketers
and agencies realize they can't do the job with one medium anymore. With a database,
companies
Can pick the prospects they can serve most effectively, efficiently, and
profitably (the purpose of all marketing).
Can send discrete messages (through, for example, addressable electronic
media)s to individual customers and prospects, allowing people to feel unique,
not part of a mass market.
Drawbacks to direct marketing
In the past, direct marketers were sales oriented, not relationship oriented,
giving direct marketing a bad name.
Consumers enjoy visiting retail stores and shopping.
Consumers like seeing products first hand and are hesitant to buy goods
unseen.
Clutter confuses the consumer.
Direct marketing media don't always get the prestigious affiliation
offered by some media, making it more costly to build product image.
Direct marketing raises consumer concerns over privacy.
All direct marketers face two basic strategy decisions: the extent to which
they will use "direct sales" and the extent to which they will use "direct-response
advertising."
Direct sales strategy - marketer's representatives sell to customers
directly, at home or at work, rather than through a retail establishment or
some other intermediary. Direct sales feature:
Personal Direct Selling - face-to-face selling away from a fixed
retail location. There are two main forms:
Person-to-person - a representative introduces the product to the
customer, convinces the customer of the product's value, and completes the
sale.
Group - in network organizations (like Amway) the direct sales
people are both distributors (sellers) and end users.
Telemarketing - decades old method of direct sales, Telemarketing
includes selling and prospecting by telephone, answering phone inquiries,
and providing sales-related services to callers.
Telemarketing is a major source of income for some companies and organizations,
especially nonprofit and charitable causes, political candidates, and home-study
courses.
Reasons for such widespread use of Telemarketing:
Costs far less than personal selling.
Many consumers have accepted that shopping by telephone is convenient
and inexpensive.
Telemarketing is the next best thing to face-to-face personal selling
because telemarketers do more than just take orders.
When combined with other forms of direct-response media, a greater effect
is created.
Direct-response advertising is advertising that asks the reader, viewer,
or listener to provide feedback straight to the sender. Any medium can be used,
but the most common are:
Direct mail - after personal selling and telemarketing, most effective
method for closing a sale or generating inquiries.
Catalog sales - the largest direct marketers are catalog companies.
Catalogs are reference books (now also CD-ROMs) that list, describe, and usually
picture the products sold by a manufacturer, wholesaler, jobber, or retailer.
Some marketers have added editorial and slick photography to sell a certain
image, creating "magalogs."
Newspaper and magazine ads and inserts featuring coupons or listing
toll-free phone numbers can be effective in stimulating customer responses.
Direct marketers' use of TV and radio has increased dramatically in recent
years. More people are watching infomercials and featuring toll-free
numbers and buying the advertised products.
Interactive media systems allow users to control both the content
and the pace of presentations and to order merchandise directly from the system.
On-line personal computers are the most popular interactive medium.
Personal selling is a human medium and the best marketing communication tool
for relationship building. It is the interpersonal communication process by
which a seller ascertains and then satisfies the needs of a buyer to the mutual,
long-term benefit of both parties.
Types of personal selling
Personal selling is used in many venues - retail, business-to-business,
industrial, and professional.
It is one of the company's communication tools. It's importance depends
on the type of business or industry, the nature of the product, and the
business strategy.
Advantages of personal selling
Nothing is as persuasive as personal communication.
Skilled salesperson can evaluate prospect's body language and read between
the lines and can answer questions as they arise (feedback).
Flexibility allows for negotiation.
It is the best communication tool for gaining distribution for new products.
Face-to-face conversation is the best way to establish a relationship.
Drawbacks of personal selling
Labor intensive.
Most costly method of communication with prospects.
One-on-one fails to provide significant economies of scale.
The idea of "salesman" carries a poor reputation.
A salesperson can make or break a delicate relationship.
The role of personal selling
Sales people often are the client's window on the company.
Sales people provide four distinct communication functions: information
gathering, information providing, order fulfillment, and relationship building.
Gathering information
Sales reps serve as the eyes and ears for the company, gathering information
as they research the market place.
They monitor the competition.
Providing information
Good salesmen impart a lot of information to prospects in an articulate
and persuasive manner.
They keep the organization informed upstream and downstream.
Personal selling involves all three of the IMC triangle ("say ->
do -> confirm"). What the rep does colors the relationship
between the company and customer.
Fulfilling orders
The salesman is tasked with "closing" - securing an agreement (the sale)
with a client. Something only a one-on-one meeting can produce well.
The sales people must assure complete follow-up is conducted after the
sale, that goods and services are delivered correctly ("do" and "confirm").
This is the point where cross-functional management gets coordinated
and good internal communication assures good external relationships.
Building relationships
The sales person should be the ultimate relationship marketer. Customers
want to buy from people they like.
Sales people build relationships by paying attention to three simple
things:
Keeping commitments - salesman must assure products and services
are delivered on time, correctly. This task is made more difficult if
they must deal with the effects of puffery and overpromises in advertising.
Servicing their accounts - keeping communication lines open
and supporting clients with services is paramount.
Solving problems - uncovering problems of customers can lead
to successful relationships and successful ads.
Sales Promotion is a direct inducement that offers extra incentives anywhere along
the marketing route to enhance or accelerate the product's movement from producer
to consumer. There are three important elements.
May be used anywhere along the marketing route: from manufacturer to dealer,
dealer to customer, or manufacturer to customer.
Normally involves a direct inducement (such as money, prizes, etc.) that
provides extra incentives to buy, visit the store, request literature, or
take some other action.
Is designed to speed up the selling process. Sales promotion is expensive,
but effective.
Effects of sales promotion on brand value
Positive effects of sales promotion on brand volume
Adds tangible immediate, extra value to the brand.
Maximizes sales volume.
Advertising helps develop and reinforce a quality, differentiated brand
reputation and build "market value." Sales promotion helps build "market
volume."
The negative effects of sales promotion on brand value
Excessive promotion at the expense of advertising hurts profits.
May have a positive effect on short-term market share, but may have a
negative effect on brand attitudes and long-term market share.
Customers become deal-prone rather than brand-loyal .
Overemphasis on price eventually destroys brand equity.
High cost.
Aggressive sales promotion or advertising can draw competitors into a
war with reduced sales and profits for everyone.
Too much sales promotion will lead to high-volume, but low-profitability.
Sales promotion strategies and tactics
Push strategies are primary defensive tactics designed to secure
the cooperation of retailers, gain shelf space, and protect against competitors.
Trade Promotion (sales promotions aimed at members of distribution
channel- is one of the principal tactics marketers use to "push" product
through the distribution pipeline.
Pull Strategies are offensive tactics designed to attract customers
and increase demand for the product. Consumer advertising and consumer sales
promotions are designed to induce customers to seek the product and "pull"
it through the pipeline.
Manufacturers use push strategies because of trade concentration
- more products going through fewer retailers - gives greater control to the
retailer and less to the manufacturer. Trade tactics include:
Slotting allowances
Fees retailers charge manufacturers for shelf or floor space for a new
product
FTC and ATF are investigating the legality of such controversial fees
Trade deals
Trade deals offer short-term discounts or other dollar inducements with
retailers who pass the savings on to customers.
Excessive trade deals threaten brand loyalty by encouraging consumers
to buy whatever is on sale.
Abuse of trade deals by retailers can be done with forward buying and
diverting.
Forward buying - a retailer stocks up on a product when it is
discounted and buys smaller amounts when it is at list price
Diverting - using the promotional discount to purchase large
quantities of an item in one regional promotion, shipping portions of
the buy to areas of the country where the discount is not offered.
Display allowances - retailers charge manufacturers fee to make
room for and set up displays.
Buyback allowances - manufacturers pay retailers for the old unsold
products to make shelf room for the new product
Advertising allowances - either a percentage of gross purchases
or a flat fee paid to the retailer for advertising the manufacturer's product
Cooperative (co-op) advertising and advertising materials
Local advertising expenses shared by retailer, distributor, and manufacturer
Advertising materials - manufacturer-provided ads, photos, radio commercials,
preprinted inserts, etc.
Dealer premiums and contests - manufacturers offer special gifts
and prizes to encourage retail dealers and salespeople to reach specific
sales goals or to stock a certain product.
Push money (PM) or spiffs - small money inducements to encourage
retail salespeople to push the sale of particular products
Company conventions and dealer meetings - used to introduce new
products, sales promotion programs, or new advertising campaigns and to
conduct sales and service training sessions.
The proliferation of cable TV, VCRs, etc. has fragmented advertising audiences,
making pull techniques more inviting to reach a mass audience. Common consumer
sales promotions include:
Point-of-Purchase (P-O-P) Materials
Display materials and advertising-like devices designed to build traffic,
exhibit and advertise the product, and promote impulse buying. They work
best when used with other forms of advertising.
The emphasis on P-O-P has led to greater variety and creativity, including
"talking" antacid boxes, jingles that play when display case door is opened,
and interactive computers.
Coupons
Coupon - a certificate with a stated value that is presented
to the retail store for a price reduction on a specified item.
Distributed in newspapers, in magazines, door to door, on packages,
in stores, or by direct mail, but the great number is distributed in newspaper
free-standing inserts (FSIs), colorful preprinted newspaper ads.
Coupons in or on packages have the highest redemption rates.
Electronic coupons
High-tech electronic coupons work like paper coupons entitling the shopper
to a discount.
Method of distribution differs - interactive touch-screen videos at
the point of purchase, instant-print discounts, rebates, and offers to
try new brands.
Give the retailer information about the customer.
Cents-off promotions, refunds and rebates - short-term reductions
in price of a product in the form of cents-off packages, one-cent sales,
free offers, box-top refunds
Refunds offered in form of cash or coupons toward future purchases;
often consumer must supply proof of purchase and sales receipt
Rebates are refunds on large-ticket items e.g., cars; handled by the
seller.
Premiums - item offered free or at a bargain price to encourage
the consumer to buy an advertised product - intended to improve product's
image, gain goodwill, broaden customer base, and produce sales quickly.
In-pack premiums - items such as prizes in Cracker Jack boxes
On-pack premiums - items attached to the outside of the package
- have good impulse value, but subject to pilferage
Self-liquidating premium - the consumer pays enough that the
seller breaks even but doesn't make a profit.
Continuity premium - given weekly to customers who frequent the
same store.
Sampling - free trial offered in hopes of converting consumer to
habitual use - most costly of all sales promotion techniques - limited to
products available in small sizes, purchased frequently, and supported by
advertising
Polybagging - samples delivered in plastic bags with the daily newspaper
or a monthly magazine
In-store sampling - demonstrators dispense samples to passing shoppers
Combination offers - tying two products together at a special price;
used to introduce a new product.
Contests and sweepstakes - contest offers prizes based on
skill of entrants - sweepstakes offer prizes based on chance drawing
of entrants' names with no purchase required and all laws must be observed.
A game has the chance element of a sweepstakes but is conducted over
a longer time.
Encourage consumption by creating consumer involvement
Require good promotion and advertising and dealer cooperation.
RFM formula (88.0K)
2002 McGraw-Hill Higher Education