Changing behaviour of marketing communications


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Changing behaviour of marketing communications

  1. 1. Direct communication gaining importance over indirect communication 2009 Direct communication gaining importance over indirect communication Assignment Marketing Management MBA Attow Sanil Subhash Chandra Bose Date: 27/11/2009 1 Page
  2. 2. Direct communication gaining importance over indirect communication 2009 Table of contents Topics Pages Executive summary 3 Mass media marketing 2–4 Direct marketing 4–9 Changing behaviour of consumer attitudes and marketing 9 – 12 Key challenges for direct marketing 12 – 13 Comparison of direct and indirect marketing 13 – 15 Conclusion 15 References 15 – 16 2 Page
  3. 3. Direct communication gaining importance over indirect communication 2009 Executive Summary Marketing in an organizational context is the process of informing customers about the products or values that organization provides. It is a unified process through which organization create values to the customers and create a strong customer relationship in order to capture attention and values from customers in return. The roles of marketing communications are the means which convey the message to the customers directly or indirectly. The organization would be very careful spreading the message to the consumers. If the message is not constructed properly, it will be a total disaster of companies brand image which in-turn affects shareholders value. In the modern world of competition it is essential that the marketing communication should outspread the right distinctive features of the product in order to win over the competitor. Once the message has been propagated it is necessary to capture the market response from the consumer, thus marketing communication is a to and fro process between organization and the consumers. This means that the organization is the sender of the message and receiver of the market response. The market responses can be collected from customers using market research and market information systems. Throughout the document we indent to cover the fact that mass marketing is declining its popularity instead direct marketing getting popularity among companies which also benefits the customers. Mass media marketing In the past decades, technology improvement in digital-communication made significant changes in the traditional advertising medium like newspaper, TV, Radio, magazines, movies, sponsoring events etc. TV as mass medium Advertisement revenue contributes to the growth of major television channels. TV is the most effective tool for mass marketing and brand building. TV will allow marketers to address big audience in seconds. Some of the major disadvantages of TV are as below. • As number of channels increases more fragmentation in the customer base. • Some of the threats to TV as a mass medium are DVR, TiVO, Sky+, Astro max which gave user an option to skip ads and watch their favourite programs. • More than 50% of the TV viewers multitask, paying less attention to TV browsing on the internet14. • The message though TV is temporary, so it may require multiple times to get customer attention. • Very costly medium to communicate with. 3 Page Newspaper
  4. 4. Direct communication gaining importance over indirect communication 2009 On an average 80% of the newspaper revenue come from advertisements. This is one of the oldest traditional medium used for advertisement by big, small and medium scale businesses. Newspaper allows marketers to address people in a given geographic area. The most important feature of newspaper advertising is the flexibility of marketers in deciding the placement of the ad. Another feature is the quick turnaround time. The marketers will get customer responses in a day or two. At the same time newspaper poses lot of disadvantages. • Ad spaces are more expensive, since the marketers have to compete with others who are ready to advertise. • Ads are of short shelves, most of the customers read the newspaper once only after that they will discard. • With the increasing popularity of the online newspaper the readership are declining dramatically. • Marketers have to pay for non-audience too who will probably never be the customers. Magazines Magazines are more focussed when compared to newspaper and TV media for advertisements, albeit expensive medium. Magazines medium allows marketers to reach targeted audiences. More readership involvement in magazines there by more attention to the advertising campaigns also. The main disadvantages are • Very costly compared to newspaper • Limited flexibility in terms of placement and ad format Radio This is the most affordable advertising universal medium for small and medium scale business, rates can generally be negotiated. Customers enjoy the radio once on a while in home, work place, or even in the car. Wider ranges of flexibilities are available for marketers according to the demographic. • Radio listeners spread over many stations, so marketers need to advertise more than once in several stations to address the audience. • Most of the customers listen to radio as a background medium they might be doing something else while listening to radio. That means the advertisement should be good enough to capture audience attention. • There is no replay option like TV medium, so targeted customer might miss the adverts. Direct Marketing The direct marketing is the process in which organization market their products or services to the aim targeted individual consumers with apt, prompt message or offer 4 using one or more advertising media. Direct marketing captures the customer Page feedback after conveying the message. Direct marketers often communicate one
  5. 5. Direct communication gaining importance over indirect communication 2009 to one there by the marketers will create a long lasting customer relationship. This will create better brand image for the company or the organization and customer retention. Direct marketing can also called as “Interactive marketing” or “Database marketing”, where in marketers analyse customer database which contain customer demographics, psychographics from the purchasing history. The marketer will push the products and services which suites their life style or preferences. Direct marketing also includes sales promotions, vouchers, coupons etc to boost the sales and also to keep customer satisfaction after sales. There are mainly four medium used for direct marketing. Direct mail Telephone sales (Telemarketing) The internet On-site promotions Direct mail This is very popular in arts and entertainment industry. Mailing list can be developed from organization customers, visitor information, database purchase from different agencies etc. In some cases organization work together and share their database if there are no competency factors between them. Direct mail is very effective in targeting audience. The main advantages are individual attention, cost effectiveness, useful in communicating with lost customers, inform target audience about your new product service and getting feedback from them. Direct marketing has serious drawback if it is not done properly. One among them is the accuracy and usefulness of mailing list. If you advertise in mass media like TV or print media, you may or may not target your audience even though the segmentation is not proper. But when you do direct marketing selecting mailing list play serious role, an improper selection may even create bad reputation for the brand which will be complete waste of money. Effective direct mail techniques 1. Identify your target market; make sure that there is no room for error. Build the database from your customers or purchase the list from someone. The price of the list may vary according to the type of list. 2. Ensure the accuracy of the mailing list; don’t send mail to the people who relocated, died etc that’ll create negative feedback. 3. Make the mail stand out from others; it can be achieved by good design, promising offers, coupons etc otherwise it may be discarded. 5 Page
  6. 6. Direct communication gaining importance over indirect communication 2009 4. Make sure to leave a space for response from the customer. It can be in the form of toll free telephone number, coupon to return or order form to complete. 5. Give quick replies for responses and enquiries; because those responses are from promising customers. Telemarketing As the name implies this marketing can be achieved by calling or texting the customers. There are mainly two types of telemarketing, 1. Inbound; where in user can call to some toll free number and ask enquiries redeem their gifts etc, which can also be used as a customer service centre also. 2. Outbound; the organization contacts the customers though telephone to reach target markets and deliver message. Normally telemarketing is done after analysing the customers buying behaviour from CRM and also from other companies that share the customer information. Although the telemarketing programs are highly effective, implementation and execution of the telemarketing program require high expertise level of professionals, highly compact equipments. Another important problem with the telemarketing programs are the legality and standard practices applied for marketing which strictly follow guidelines issues by the government or concerned authorities. For instance in India, there is a registry called “Do Not Disturb” (DND). Once customer registers with the registry, marketers are not allowed to do marketing call again. Big penalties are there for calling to DND customers. Onsite promotion The main objective of onsite promotion is to stimulate customer attention. This can be used to brand the product, services of an organization in a high traffic area. It can be also done by sponsoring events like sporting events, grand opening trade shows, social campaigns, exhibitions etc. The main disadvantages of the onsite promotion are very costly and risky. Advertising on internet an overview By the advent of powerful broadband internet connection, ad-skipping digital video recorders, multimedia mobile phones and portable audio and video player make the customer to rethink their buying practices. Now a day customers are more demanding because of the influence of modern digital devices and internet. According to Korgankar and Wollin1, the web is a constant message delivery, audience selectivity, multimedia capable, accountable, global reach; audience controlled advertising exposure and interactivity making it, along with its component 6 an advertising medium. The most important point about web advertisement is its Page
  7. 7. Direct communication gaining importance over indirect communication 2009 flexibility, it varies from corporate logos, banners, pop up messages, video ads, flash ads, pop up messages, email messages and text based links. Online ad spending in North America Source: Euromonitor International from World Association of Newspapers/Jupiter Research Note: Data for 2009 is forecast; figure 1 Advantages of web advertising Lot of companies are turning to invest more into web for commercials. It can be seen from the graph above (figure1) that in North America itself they are spending US$ 17bn in second quarter of 2008 and a humongous growth is happening in online advertising space between 2005 and 2009. Both consumers and the organization have complete control doing web advertisements. Consumer can filter the ads, whereas companies can target the exact audience by demographics, psychographics analyzing social behaviour of the users in web. Marketers and the consumer can have close relationships with millions of users simultaneously which opened the door for direct marketing. The cost compared to the traditional advertising medium when it compared to TV or other advertising space2, 3. Online ads can virtually account for unlimited advertising space. Once consumer captured the attention he/she can watch it over again. Internet delights over traditional media the opportunity of the marketer to open up a sales and distribution channels, customer can buy the product right away after seeing the commercial(s). Can understand the web surfers habits their by marketer can place relevant ads for the web surfer next time. Two way communications can be done using web when it compared to traditional media like TV, print etc. 7 Disadvantages of web advertising Page
  8. 8. Direct communication gaining importance over indirect communication 2009 Advertising media clutter is an issue, as competition of web user becomes more acute4. Frequent and unwanted pop-ups make the user annoying, which in-turn affects user habit to visit the site again5. Due to the virus attacks and irrelevant messages decrease the trust of the site and their by it affects marketers` or corporate brand images. Direct communication in digital world 1) SMS marketing: SMS marketing is a highly effective direct marketing technique. Initially SMS marketing in Europe created a bad image but Mobile Marketing association stipulated strict guidelines for SMS advertisement. It is not possible to send message to everyone. SMS sending can be done only to those who are subscribed in receiving SMS advertisement. Asian and European markets are the most effective market for SMS marketing. The SMS marketing can be in two ways it can be used with a long digit number or a short code to get customer feedbacks and responses. 2) Bluetooth marketing: This marketing is some sort of permission marketing. Companies and brands who are interested in publishing different advertisement can publish to mobile devices and other devices with Bluetooth capabilities. Before receiving the content the device ask for permission. This marketing can be effective in shopping malls; where in everyone can push their advertisement. Recently there was a successful campaign in India to promote Tata Sumo Grande. 3) Email marketing: This is one of the cheapest form of advertising which enhances customer relationship, encourage customer loyalty and customer retention. Advantages • ROI can be calculated easily • Cost effective • Short period of time for delivery • Paper free advertisement • More than half of the email users check their mail once in a day Disadvantages • Companies who communicate with their prospective customers will mark email as spam which will be ineffective in a way. • It is difficult for the customer to identify the genuine and spam emails. • According to B2B marketing report15 only 56% of the convincing emails are accepted by mail servers due to spam algorithms, 20% of the spam emails are rejected and 8% of the marketing emails are filtered. 8 Page
  9. 9. Direct communication gaining importance over indirect communication 2009 4) Interactive online marketing: Interactive online marketing can also called as affiliate marketing. Sales generated are used more often to check the effectiveness, using campaigns and e-commerce application. The main advantages of marketer is lower costs, better relationships and at the same time customer also benefit convenience in buying (anytime), provide better information with less hassles. Changing behaviour of Consumer attitudes and marketing There are 2 different factors that contribute the changing behaviour of marketing communication. Firstly, the mass markets are fragmented; marketers are shifting away from mass marketing towards personal selling, building relationship with customers and more narrowly defined towards micro markets. Organization are diversified there operation strategies. For instance Coca Cola’s marketing campaigns is an example for this. They are creating segmented advertising for their products targeting the individuals. Secondly, the vast improvement of information technology accelerates movement towards segmented marketing. With the help of information technology the now a day marketers can easily track customer needs. Marketing has moved though customer acquisition through customer retention though customer selection. This narrowed the marketing campaign more towards direct, personal selling. Figure 2 9 As advertising budget shift to adopt new formats and media, the future advertising Page market will depend on four market drivers: attention, originality, measures and
  10. 10. Direct communication gaining importance over indirect communication 2009 marketing inventories. The graph above shows (figure 2) the forecast made by the IBM institute of business value analysis. It is evident from the forecast data (it may be too conservative) digital, mobile and interactive formats are the key driving force for the overall advertising industry. Attention Consumers are increasingly exercising control of how they view, interact with and filter advertising, they would like to skip ads and concentrate on content. This will continue to shift their attention from traditional linear TV (TV in which no option for skipping the content). IBM survey’s says that 71% of respondents use internet more than 2 hours per day for personal use, however only 48% of the respondents watch TV for 2 hours per day. Penetration of DVR in US is a typical example where people can skip the ads and watch their favourites programs only. Moreover the audience continue to be fragmented10. Figure 3 Studies from several countries revealed that TV is becoming “background secondary medium” especially among young users11. From the graph above (figure 3) it can be seen that only content service with mass adoption is social networks. Only aged people spend time on traditional TV. From the survey done by IBM almost 53% of DVR owners in United States were watching 50% of the programs in replay, because of time convenience and also facility to skip ads and contents. Originality The growing popularity for user generated content (UGC) and peer delivered content make the distinctive factors to more concentrate towards internet rather 10 than linear TV. Semi-professionals, amateurs are creating their content and upload it and share it to their friends and networks. Moreover the new revenue sharing Page program helps amateur, professionals and semi-professionals to create and upload
  11. 11. Direct communication gaining importance over indirect communication 2009 strategic video content of products and services which is more appealing than ads created by agencies. The consumers are being trusted by influencer, they will watch user generated content referred by friends from Youtube and video sites. Community based recommendation improve authenticity; this can be utilized to promote products or services which is one of the key strategy in social media marketing. Figure 4 The production cost for a professional video ads are typically US$100,000 to US$350,000 and more, which cannot is affordable for small businesses. However utilizing the potential of community you can create ads for low cost with semi- professionals or amateurs. Current TV pays $1000 to viewer-created advertisements that choose to air12. Measurement Since the technology is evolving day by day and also due to the competition of ad agencies, advertisers demand much more accountability and ROI. Advertisers are also demanding for individual specific attention for evaluation of advertisement effectiveness, which create pressure for traditional mass-market model. Advertisers are shifting towards impact based rather than impression based; it is evident from the graph (figure 5) below. 11 Page
  12. 12. Direct communication gaining importance over indirect communication 2009 Figure 5 Marketing inventories Exploiting the potential of internet lots of new entrants are coming in, which in-turn opened large inventories for advertising. New platform players are offering advertisers to purchase ads via aggregated networks. This will create transparency in the pricing streamlined buying and selling and improved analysis and reporting capabilities. Within next 5 years the traditional incumbent based advertisements selling will change and a good amount of selling will be through automated auction platform. Google’s adwords platform is a typical example for this. It is no longer efficient to distribute commercials through single platform because of the consumer fragmentation. The advertisers are forced to move to dynamic and efficient platforms capable of delivering, planning, measuring effectiveness across different channels. Reasons for direct marketing growth in nutshell • Fast moving changing market • Changes in technology • Changes in demographics and life style • Changing role of direct marketing, more as strategic database marketing and also it can act as a distribution channel for example Insurance marketing • Direct marketing can also be used as a promotional tool for brand building • Consumer fragmentation • Better accountability Key challenges for direct marketing These days consumers are informative with the high penetration of internet technologies. The economy has been changed from product economy centered to consumer segment centered. So customer satisfaction is the primary concern. 12 Page
  13. 13. Direct communication gaining importance over indirect communication 2009 • Ad blindness: Customers are aware of ads this will lead them not to click on the advertisements. Marketers should be innovative in developing and placing the ads. • Improved customer know-how: With customer generated reviews with web 2.0 tools like blog, misrepresented data may create problem with campaigns of the products and services. • Ad filtering tools: With the new technology tools which can filter emails, pop- ups and direct communication with the customer in weblogs. • Growing customer expectations: Competition between companies opened new room for customer to bargain and expect more. • Fragmentation of media: With millions of blogs and online media the competition for advertisements has dramatically increased. Better offering by different marketers create value segmentation of the cost in the same media. • ROI measurement: With comprehensive statistics and reports companies can analyse report and started more demanding to target the audience, that means more and more accountability create challenges to marketers. • Increase in privacy among customers make the marketers to apply different strategies to address customers • DNC in US and DND in India are real problems for direct marketers • Customers can’t feel the product before purchasing them Comparison of direct and indirect marketing Both direct selling and indirect selling had a common objective which is to increase profit by sale. But both differ in the effectiveness, because they differ in the media they use for advertise and also the cost difference. The cost and effective results of advertising campaigns in internet is 10 times better than traditional media13. For branding it would be better to have blending components of traditional communication and online media. From the figure below (figure 6), it can seen the online spending of ads in US is very big compared to TV ads. Mass Marketing Direct Marketing Average customer Individual customer Customer anonymity Customer profile Standard product Customized market offering Mass production Customized production Mass distribution Individualized distribution Mass advertising Individualized incentives 13 Mass promotion Individualized message Page One-way message Two-way message
  14. 14. Direct communication gaining importance over indirect communication 2009 Economies of scale Economics of scope Share of market Share of customer All customers Profitable customers Customer attraction Customer retention Figure 6 14 Page
  15. 15. Direct communication gaining importance over indirect communication 2009 Source: Euromonitor International from trade sources/national statistics Note: Data for 2009 is forecast, Credit card transactions in India; figure 7 The figure above (figure 7) shows the online credit card transaction of India. With the help of direct and indirect communication, it opened a window to new distribution channel through e-commerce. This also means even in India where internet penetration is still at its infant stage shows people are spending lot of time in internet. Conclusion The influence of internet and modern digital technologies changed the world of marketing communication. The customer became more demanding and competition also got high, companies changed marketing strategy from sales to customer satisfaction and retention. Direct marketing is the ultimate tool to create customer satisfaction. Major developed countries like US, UK and Australia uses direct media as one of the most effective marketing medium now. India is also now shifting the face of mass media to direct media. With new marketing trends like social media, search engine marketing and twitter, mass media is regaining identity to an extent. The superior factors that make direct media more popular are its cost effectiveness, greater accountability with targeted marketing. Now marketers are trying blended form of marketing, advertising companies are offering 360 degree solutions for companies and organization. At the same time loads of FMCG companies are still relying on mass media tools like TV and print medium. Only with mass media tools the companies can address their need at any place any time. Mass media is very effective than direct media for brand building. So it is not possible to rely on direct marketing in modern digital world. References 1) Korgaonkar, P, and L D Wolin, 2002, ‘Web Usage, Advertising, and Shopping: Relationship Patterns’, Internet Research: Electronic Networking Applications and Policy, Vol 12, No 2, pp 191–204. 2) Korgaonkar and Wolin, ‘Web Usage, Advertising, and Shopping: Relationship Patterns’. 3) Pelle, Stefano, 2005, ‘Media Innovation: Advertising on the Internet’, Last accessed on December 4, 2007. 4) Kanso, Ali M, and Richard Alan Nelson, 2004, ‘Internet and Magazine Advertising: Integrated Partnership or not?’, Journal of Advertising Research, Vol 44, No 4, pp 1–14. 5) Pelle, Stefano, ‘Media Innovation: Advertising on the Internet’. 6) Bringing in Best Practices in Direct Marketing to Indian Marketers 7) Marketing communication strategy Level 4.0 ADVANCED DIPLOMA IN MARKETING MANAGEMENT 8) 9) The end of Advertising we Know it; IBM Institute for Business Value analysis 10) Berman, Dr. Saul J. “Vying for Attention: The Future of Competing in Media and Entertainment.” IBM Institute for Business Value. 2002. 11) Neus, A., P. Scherf and F. Pörschmann. Media Study 2005 (Germany): Consumption versus Interaction. IBM Global Business Services, 2005. 15 12) “Do you still pay for content?” Current TV. Page
  16. 16. Direct communication gaining importance over indirect communication 2009 13) del%20turismo/TOURISM%20INDUSTRY%20IN%20KERALA%20INDIA.PDF 14) Potter, E, 1994, ‘Commercialization of the World Wide Web’, WELL Topic in the Internet Conference on the WELL, November 16. 15) MRI, 2008; Papper, Holmes Page 12 16) Return Path's Reputation Benchmark Report: "5 ways to increase deliverability" , BtoB Magazine , July 2008 16 Page