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  • 1. Marketing Management Unit 4 Delivering Marketing Programs Chapter 14 - Promotion-Decisions and Strategies Lesson 45 -Direct marketingLet us now learn more about the fast becoming popular promotional tool-Direct Marketing. Youare already aware that , direct marketing is concerned with establishing an individual relationshipbetween the business offering a product or service and the final customer.Direct marketing has been defined by the Institute of Direct Marketing as:The planned recording, analysis and tracking of customer behavior to develop a relationalmarketing strategiesDirect marketing Direct connections with carefully targeted individual consumers to both obtain animmediate response and cultivate lasting customer relationships; Direct communications with care-fully targeted individual consumers to obtain an immediate response.Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods and ser-vices to customers without using marketing middlemen.What does direct marketing channels include ? You must have also received direct mails ormight have been approached by telemarketers !These channels include direct mail, catalogs, telemarketing, interactive TV, kiosks, Web sites, andmobile include direct mail, catalogs, telemarketing, interactive TV, kiosks, Web sites, and mobiledevices. Direct marketing is one of the fastest growing avenues for service customers.Direct marketers seek a measurable response, typically a customer order. This is sometimes calleddirect-order marketing. Today, many direct marketers use direct marketing to build along-term rela-tionship with the customer ( customer relationship marketing). They send birthday card, informationmaterials, or small premiums to select customers. Airlines, hotels, and other businesses build strongcustomer relationships through frequency award programs and club programs.Is their growth of direct marketing ?What do you think ? Sales produced through traditional direct-marketing channels ( catalogs, directmail, and telemarketing) have been growing rapidly. In developed countries retail sales grow around3 percent annually, catalog and direct-mail sales grow at about double that rate.Is it not interesting to know that direct sales include sales to the consumer market ( 53 percent ), B2B(27 percent), and fund raising by charitable institutions ( 20 percent ). Total media spending for alldirect marketing is increasing now. Electronic marketing is also showing even more explosive growth.The extraordinary growth of direct marketing is the result of many factors.16.101G © Copy Right : Rai University 455
  • 2. Marketing Management Let us find out why ? Market demassification has resulted in an ever-increasing number ofmarket niches. Higher costs of driving, traffic congestion, parking headaches, lack of time, a short-age of retail sales help, and line at checkout counters all encourage at-home shopping. Consumersappreciate direct marketers’ toll-free phone numbers available 24 hours a day, 7 days a week, andtheir commitment to customer service. They growth of home deliveries has made ordering fast andeasy. In addition, many chain stores have dropped slower-moving specialty items, creating an oppor-tunity for direct marketers to promote these items to interested buyers. The growth of the Internet, e-mail, mobile phones, and fax machines has made product selection and ordering much simpler. Moreand more business marketers have turned to direct mail and telemarketing in response to the high andincreasing costs of reaching business markets through a sales force.Knowing benefits of Direct marketingLet us now know about the benefits of direct marketing . Can you highlight some ?Direct marketing benefits customers in many ways. Home shopping is fun, convenient, and hassle-free. It saves time and introduces consumers to a larger selection of merchandise. They can docomparative shopping by browsing through mail catalogs and online shopping services. They canorder goods for themselves or others. Business customers also benefit by learning about availableproducts and services without tying up time in meeting salespeople.Sellers also benefit. Direct marketers can buy a mailing list containing the names of almost anygroup: left-handed people , overweight people, millionaires. They can customize and personalize theirmessages. Direct marketers can build a continuous relationship with each customer. The parents ofa newborn baby will receive periodic mailings describing new clothes, toys, and other goods as thechild grows. Nestlé’s baby-food division continuously builds a database of new mothers and mails sixpersonalized packages of gift and advice at key stages in the baby’s life.Direct marketing can be timed to reach prospects at the right moment, and direct marketing materialreceives higher readership because it is sent to more interested prospects. Direct marketing permitsthe testing of alternative media and messages in search of the most cost-effective approach. Directmarketing also makes the direct marketer’s offer and strategy less visible to competitors. Finally,direct marketers can measure responses to their campaigns to decide which have been the mostprofitable.Although direct and online marketing are booming, a large number of companies still relegate them tominor roles in their communication / promotion mix.. Advertising, sales promotion sales force mayalso see direct marketing as a threat when it has to turn over smaller customers and prospects todirect mailers and telemarketers.However, companies are increasingly recognizing the importance of integrating their marketing com-munications.In brief the following summarize the benefits of direct marketing The advertiser can target a promotional message down to an individual level, and where possible personalise the message. There are a large number of mailing databases available that allow businesses to send direct mailing to potential customers based on household income, interests, occupation and other variables Businesses can first test the responsiveness of direct mailing (by sending out a test mailing to a small, representative sample) before committing to the more significant cost of a larger cam- paign Direct mailing campaigns are less visible to competitors – it is therefore possible to be more creative, for longer456 © Copy Right : Rai University 16.101G
  • 3. Marketing ManagementHowever, direct mail has several weaknesses: A piece of direct mail is less “interactive” than a television or radio advert, although creative packaging can still stimulate customer response Lead times to produce direct mailing campaigns can be quite long There is increasing customer concern with “junk mail” – the receipt of unsolicited mail which often suggests that the right to individual privacy has been breached.WHAT ARE THE MAJOR CHANNELS FOR DIRECT MARKETING ?Direct Marketers can use a number of channels for reaching individual prospects and customers .Let us discuss some of them:-1. Face to Face Selling - Do you know that the original and oldest form of direct marketing is the field sales call ? Many companies use direct sales force or agents to locate prospects and de- velop them into customers. Amway, Avon and Tupperware are examples of such companies.2. Direct Mail - Direct mail marketing involves sending an offer , announcement , reminder or other item to a person. Using highly selective mailing lists , direct marketers send out millions of mail pieces each year – letters , flyers ,foldouts etc.Can you highlight how to construct a direct mail campaign ?3. Catalog Marketing - In catalog marketing, companies may may send full-line merchandise catalogs, specialty consumer catalogs, and business catalogs, usually in print form but also some- times as CDs, viewos, or online1. Face to Face selling2. Direct Mail.3. Catalog Marketing4. Telemarketing5. Kiosk Marketing6. e-marketingThe success of a catalog business depends on the company’s ability to manage its customer listscarefully so that there is little duplication or bad debts, to control itsinventory carefully, to offer quality merchandise so that returns are low, and to project a distinctiveimage. Some companies distinguish the catalogs by adding literary or information features, sendingswatches of materials, operating a special hot line to answer questions, sending fights to their bestcustomers, an d donating a percentage of the profits to good causes4. Telemarketing - Telemarketing involves the use of the telephone and call centers t attract pros-pects, sell to existing customers, and provide service by taking orders and answering questions.Telemarketing helps companies increase revenue, reduce selling costs, and improve customer satis-faction.Companies use call centers for inbound telemarketing ( receiving calls from customers ) and out-bound telemarketing ( initiating calls to prospects and customers ). In fact, companies carry out fourtypes of telemarketing: Telesales: Taking orders from catalogs or ads and also doing outbound calling. Telecoverage: Calling customers to maintain and nurture key account relationships. Teleprospecting: Generating and qualifying new leads for closure by another sales channel. Customer service and technical support: Answering service and technical questions.5. Kiosk marketing - A kiosk is a small building or structure that might house a selling or informa-tion unit. The term describes newsstands, refreshment stands, and free-standing carts whose ven-dors sell watches, costume jewelry, and other items often seen along the aisles in a mall. The term16.101G © Copy Right : Rai University 457
  • 4. Marketing Managementalso covers computer-linked vending machines and “customers-order –placing machines” that onesees in stores, airports, and other locations. All of these are direct-selling tools.6. E-marketing - The newest channels for direct marketing are electronic. E-business describes awide variety of electronics platforms, such as the sending of purchase orders to suppliers via elec-tronics data interchange (EDI) or extranets; the use of fax and e-mail to conduct transactions; theuse of ATMs, EFTPOS, and smart cards to facilitate payment and obtain digital cash; and the use ofthe Internet and online services. All of these involve doing business in a “market space” as comparedto a physical “marketplace.The Internet today functions as a information source, an entertainment source, a communicationchannel, a transaction channel, and even a distribution channel. One can use it as a shopping mall, aTV set , a newspaper, a library, or a phone. Users can send e-mail, exchange views, shop forproducts, and access news, receipes, art, and business information.The Internet provides marketers and consumers with opportunities for much greater interaction andindividualization. Companies in the past would send standard media-magazines, newsletters, ads-without any individualization or interaction. Today these companies can send individualized contentand consumers themselves can further individualize the content; and today companies can interactand dialogue with larger groups than ever in the past.Direct Marketing in India: In India, direct selling is growing at a fast pace. Total sales through direct selling route in 2002 was Rs.1,723.7 crore. India was the fastest growing market in 2000 in terms of revenues from direct selling, registering a 54% yoy growth. 90% of goods sold by the direct sellers in India are sourced from goods manufactured within the country. Most of the Direct Selling companies operating in India today are in the field of cosmetics, personal products, household products, cookware and healthfood. Amway is the largest player in India with annual sales exceeding Rs5bn Other major players are Avon Beauty Products (I) Pvt Ltd, Oriflame India Pvt Ltd, Tupperware India Pvt Ltd, Lotus Learning Pvt Ltd, LB Publishers and Distributors Pvt Ltd and DK Family Learning The Indian Direct Selling Association is an association of companies engaged in the business of direct selling in India. All major players in India are affiliated to IDSA. Mass-market penetration is now catching up within the Rs 1,800-crore direct selling industry as well, and direct selling majors such as Amway, Tupperware and Avon now seem to be following the path charted by FMCG giants such as Hindustan Lever, Marico, Britannia, Nestle, Dabur, Godrej and Tata Tea.Considering the above facts, the following questions come into picture. What are other challenges it would face and what are the possible solutions? How should the company frame its strategies, to account for the gaping demographic differ- ences present in the Indian market? How should a new direct-selling company compete with an established FMCG major, such as HLL, if it also adopts direct-selling strategies? What are the strategies that should be followed by a direct-selling company to create a strong brand name? What are the new fields into which direct-selling companies could venture?458 © Copy Right : Rai University 16.101G
  • 5. Marketing ManagementHere is something you would find interesting……….APPLICATION EXERCISE :Review the following article. Bring out the key points. Discuss your points of agreement and dis-agreement* Telemarketing: Dial N for nuisance SRIKALA BPTI [ WEDNESDAY, NOVEMBER 26, 200304:33:29 PM ]BANGALORE : The CEO of ING Vysya Bank, Bart Hellemans, got an unusual call on his cellphone a few months ago. The caller wanted him to open a savings account with a foreign bank.When polite refusal didn’t work, Hellemans finally had to get tough with the caller and remind herthat she was talking to the CEO of a bank, and he didn’t need to bank with another bank.Increasingly, high-income people in Indian metros including Bangalore , are being swamped by nui-sance phone calls from smooth-talking telemarketers, offering everything from loans to credit cardsto insurance policies. They are persuasive, persistent and often insufferable, intruding into your workand private hours.Personal information like your residence address, contact number and your email IDs are no morepersonal details. Hundreds of telemarketing companies store and sell such information to businesseswanting to direct sell their products and services.Chaitra, who runs a telemarketing company, dredges out potential clients by conducting paintingcompetitions in residential complexes. “We ask residents for contact information for communicatingthe contest results,’ she says. The moment a resident passes on the information, he enters the hit-listof an insurance company’s barrage of unsolicited mail and calls.Sharath, an entrepreneur in the business of database collection, says that even the attendance regis-ters at colleges have become a scavenging ground for data predators. “We collect student addressesfrom various colleges and pass them on to companies in the computer education businesses.”A number of home finance and insurance companies participate in exhibitions and fairs exclusivelyfor collecting data. On the other hand, credit card issuers themselves are huge database repositories.Take the case of a well-known MNC bank. The moment a card-user does a high-value transaction,he becomes a candidate for its personal loans and the target of a marketing offensive.Insurance company sources say that many card issuers part with their database for a fee but handlethe task of sending out direct mailers themselves.Intriguingly, businesses swear by telemarketing despite its low success rate. This is because at evena 1-2 per cent hit rate, this strategy is more cost-effective than advertising-led marketing strategies.At Rs 3,000 per month telemarketing executives come cheap. Add the 15-20 per cent commissioninvolved, and still the cost of direct marketing is a pittance. According to Srinivas, a business insider,the big advantage is that “We hire executives on project basis so their salary is not our burden”.No wonder, Bangalore is a base for nearly 200 telemarketing companies, which hire students andhousewives who are looking for flexi-time jobs.If the current trend is any indication, the future is even brighter for telemarketing companieswhich means more harassment for those of us who value our privacy and our time.16.101G © Copy Right : Rai University 459
  • 6. Marketing ManagementNo no-call listWhile the citizens in the US have the luxury of ‘a no-call list’ and can choose not to receive calls fromtelemarketing companies, Indians have to wait for a few more years.The Indian law is silent on telemarketing issues and according to Standard Chartered Bank’s creditcard division head, Shyam Srinivasan, it is left to the companies to draw up the no-call list.“If a customer chooses not to receive calls, he can inform the company and will be taken out of thedatabase,” says Srinivasan. Unfortunately, only a few have put the concept to practice. Point to remember460 © Copy Right : Rai University 16.101G
  • 7. Marketing Management16.101G © Copy Right : Rai University 461
  • 8. Marketing Management Tutorial - MApplication Exercise – 1Kellogg’s Has introduced Choco breakfast cereal biscuits priced at Rs. 5 for 50 gms. These biscuitsas per the claims of the brand contain vitamins and the brand makes an attempt to change theperception of consumers in having biscuits for breakfast. The brand’s target market is the entirefamily comprising adults and children, and is aimed at meeting a part of the nutritional requirementsof the family What are the leading brands of biscuits advertised widely through different kinds of me- dia? What is the size of the biscuit market in India? What is the size of the biscuit market in India? With these details draw out a media plan for Chocos?Application Exercise – 2Youth is the target segment for bar type chocolates ( 5 Star, Charge, Picnic brands). Perk ispositioned as a snacking chocolate while 5 star and Charge are positioned as energy bars. Thereseems to be considerable potential for developing the market for bar type of chocolates. Thesechocolates if they are positioned as snack foods may also compete with biscuits, savories and icecreams. Te psychographics profile of the target your segment is urban, lively, fun loving in the age of18-25 years. What kinds of media would you recommend for a national brand of bar chocolate? ( Take into consideration the reach, frequency and media costs involved in collecting appropri- ate informationApplication Exercise – 3The refrigerator market has almost revived after the introduction of no-frost models and the entry ofa number of brands in recent times. Godrej made a tremendous impact on the perception of consum-ers when it used ‘puf’ attribute in its positioning. Samsung, LG, Whirlpool and BPL are some ofthe brands which have come out with campaigns to get into the ‘consideration’ aspect of the mindsetof consumers . Whirlpool had launched a campaign for its range of frost-free fridges with an appealdifferent from those of the competitive brands. The advertisement projects Whirlpool as a verydependable brand in social situation avoiding embarrassment in front of hosts. It emphasizes thecapability of the refrigerator to produce ice quickly when it is most needed. Study the various appeals of refrigerators in the market and comment on the appeal of Whirlpool in particular. Identify the specific conceptual appeal involved and comment on he positive and negative aspects of the appeal.Application Exercise – 4The battery market has a few brands in the alkaline battery segment – Duracell Energizer andExcel. A large sum ( about Rs. 10 Crores ) was spent in advertising durable batteries for a total saleof Rs. 40 crores ( 1997-98). These batteries form about one per cent of the total battery market.Duracell’s appeal was “Lasts six to seven times longer than ordinary batteries”. Engizer came outwith a product-specific campaign which emphasized the longer life in high drain equipments likepagers and cellular phones. Excel claimed it was the longest lasting alkaline battery. Given the consumer usage pattern of batteries and the appeals of the alkaline brands, what kind of appeal would you formulate for a new brand of alkaline battery?462 © Copy Right : Rai University 16.101G