This document discusses direct marketing and database marketing. It begins by defining direct marketing and explaining the growth of direct marketing due to factors like market fragmentation, advances in computer technology, and the increased availability of customer data. It then discusses how direct marketing has transformed some markets by allowing companies like Dell, First Direct bank, and Direct Line insurance to eliminate intermediaries. The document also explains what database marketing is and how companies can use customer databases to target specific segments, strengthen customer relationships, and tailor their marketing efforts.

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By :
Prof. Amit Kumar
07/04/15

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“A major change that is reshaping the face of selling is the
growth of direct marketing. This session explores the major
changes that are taking place, the key tools that can be
used and how the direct marketing process can be
effectively managed. It begins by explaining the meaning of
direct marketing before discussing the use of database
marketing. The management of direct marketing activities
will then be explored, including setting objectives, targeting,
achieving customer retention and creating action plans”.
ACCMAN
Importance of this course
Direct Marketing Contemporary Direct Marketing
07/04/15

3. Contents
• Reasons for the Growth of Direct Marketing
• How Direct Marketing Can Change Markets?
• What is Database Marketing
• Importance of Database Marketing?
ACCMAN
Direct Marketing Database Marketing
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4. 407/04/15 4
Once upon a time there were people who knew
exactly how to do marketing. They worked at
Procter & Gamble. Then along came the silicon
chip and the old certainties vanished.
ACCMAN
Direct Marketing Database Marketing

5. Research findings….
• In 2005, the Marketing Council surveyed 373 senior UK
marketers. They were asked which firms they rated
highest for their historical importance in marketing.
• The top four were:
– Proctor & Gamble
– Unilever
– Coca Cola
– Mars
• The list suggests the packaged goods boys and girls
know how to do marketing stuff, especially those with an
American accent, and the rest of us better copy them.
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ACCMAN
Direct Marketing Database Marketing

6. Research findings….Things have changed now
• The same respondents were asked who they rated for
their present-day importance. The four companies
mentioned most often were:
– Virgin
– British Airways
– Tesco
– Direct Line
• They…all deal direct with the public, at least in their
main businesses. Respondents clearly recognized these
companies as innovators, not as the master of a
formulaic system of marketing. All four had found ways
to reward customers for their business.
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ACCMAN
Direct Marketing Database Marketing

7. Research findings….ICE Age
• Every ten years 100 times as much information cab ne
compressed onto a disk and the amount of information
that can be transmitted rises equally dramatically.
• The implications of this are immense. It becomes
feasible to know as much about every single customer
as….............But how should we use all this information?
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Big question in marketing today is not ‘Who will buy this
new product?’ nor even ‘Where is there a gap in the
widgets market?’. It is ‘What will our customers want
to buy from us next?’
ACCMAN
Direct Marketing Database Marketing

8. Reason for the Growth of Direct Marketing
Smith outlines five factors that have fuelled the rise in direct
marketing activity:
1. Market fragmentation
2. Computer technology
3. The list explosion
4. Sophisticated analytical techniques
5. Co-ordinated marketing system
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ACCMAN
Direct Marketing Database Marketing

9. 1. Market Fragmentation
The trend towards market fragmentation has limited the
application of mass marketing techniques. As market
segments develop, the capacity of direct marketing
techniques to target distinct consumer groups is of
increasing importance.
Changes in the market place- B2B selling- it has
increased or has seen tremendous growth.
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Reason for the Growth of Direct Marketing
ACCMAN
Direct Marketing Database Marketing

10. 2. Computer technology
The rise in accessibility of computer technology and
increasing sophistication of software, allowing the
generation of personalized letters and messages, has
eased the task of direct marketing.
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Reason for the Growth of Direct Marketing
ACCMAN
Direct Marketing Database Marketing

11. 3. The list explosion
The increased supply of lists and their diversity (e.g.
25,000 Rolls Royce owners, 12000 Audi’s direct
marketing list, 10,oo Range Rover lists) has provided
the raw data for direct marketing activities.
Affordable computing power & growth of databases
(databases used for future purpose of marketing).
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Reason for the Growth of Direct Marketing
ACCMAN
Direct Marketing Database Marketing

12. 4. Sophisticated analytical techniques
By using geodemographic analysis, household can be
classified into neighborhood type (e.g. ‘modern private
housing, young families’ or ‘private flats, single people’).
These in turn can be cross-referenced with product
usage, media usage and lifestyle statements.
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Reason for the Growth of Direct Marketing
ACCMAN
Direct Marketing Database Marketing

13. 5. Co-ordinated marketing system
The High cost of personal selling have led many
companies to take advantage of DM techniques as
direct response advertising / telemarketing, to make the
sales-force more cost effective.
For example, a coupon response advertisement or
direct mail may generate leads that can be screened by
outbound telemarketing, or inbound telemarketing can
provide the mechanism for accommodating enquiries
stimulated by other DM activities.
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Reason for the Growth of Direct Marketing
ACCMAN
Direct Marketing Database Marketing

14. How direct marketing can change markets?
The three classic cases of how direct marketing
can transform markets are Dell Computers, First
Direct’s entry into banking and Direct Line’s
move into insurance.
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ACCMAN
Direct Marketing Database Marketing

15. • Dell computers was founded in 1984 by Michael Dell in
the USA. His conception was to challenge existing
players in the computers market by establishing a direct
marketing operation that would allow customer to dial
Dell to place an order for a computer.
• The computer, which was based upon customer
specification, would be sent direct, eliminating the need
for a distributor. JIT production means that the
computers can be manufactured in four hours.
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How direct marketing can change markets?
ACCMAN
Direct Marketing Database Marketing

16. • First Direct moved into telephone banking in 1989. Its
success was based on customer dissatisfaction with
traditional branch banks that offered short opening
hours, queues and bank charges.
• By centralizing banking operations and offering direct
access by telephone, it was able to offer high level of
customer service at low cost. The new service offered
24-hour access and free banking. The operation has
proved to be a huge success, with the number of
customers far exceeding target and high level of
customer satisfaction of any bank.
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How direct marketing can change markets?
ACCMAN
Direct Marketing Database Marketing

17. • Direct Line saw a market opportunity in motor insurance.
Traditional insurance companies used insurance brokers
situated in towns/cities to provide the link to customers.
• Direct Line placed advertisements on TV, in print media
to persuade prospects to phone their telemarketing
operation with inducement of a much cheaper quotation.
• Entire transaction is conducted over telephone with the
form being sent to the customer simply for signature. By
eliminating broker, It’s cost structure enables it to reduce
costs and pass on some of the saving to its customers.
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How direct marketing can change markets?
ACCMAN
Direct Marketing Database Marketing

18. 1807/04/15 18
‘Advertising’, says Regis McKenna (2011),
‘serves no useful purpose…The new marketing
requires a feedback loop; it is this element that
is missing from the monologue of advertising but
that is built into the dialogue of marketing.’ The
database provides the feedback loop.
ACCMAN
Direct Marketing Database Marketing

19. Database Marketing
• At its simplest, the database answers three questions:
Who? What? And Where?
• If the database gave us no more than the answers to
these questions it would be very useful. But marketers
are demanding and want database to achieve stardom.
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Who?
Where? What?
ACCMAN
Direct Marketing Database Marketing

20. Database Marketing
• Now we can get our database to provide two more
useful answers.
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Who?
Where? What?
Why? How much?
ACCMAN
Direct Marketing Database Marketing

21. Database Marketing
• It is defined as an interactive approach which uses
individually addressable marketing media and channels
(such as mail, telephone and the sales-force) to:
– Provide information to a target audience
– Stimulate demand
– Stay close to customers by recording and storing an
electronic database memory of customers, prospects
and all communication and transactional data.
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ACCMAN
Direct Marketing Database Marketing

22. Database Marketing
• Much DM activity requires accurate information on
customers so that they can be targeted through direct
mail or telemarketing campaigns.
• This information is stored on a marketing database
which comprises an electronic filing cabinet containing a
list of names, addresses and transactional behaviors.
• Information such as type of purchase, frequency of
purchase, value and responsiveness to promotional
offers may be held in database.
• This allows future campaigns to be targeted at those
people who are most likely to respond.
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ACCMAN
Direct Marketing Database Marketing

23. Database Marketing
• A marketing database can also be used to strengthen
relationships with customers. For example, Highland
Distillers switched all of its promotional budget for its
McAllen whisky brand from advertising to DM.
• It build a database of 1,00,000 of its more frequent
drinkers (those who consume at least five bottles a
year), mailing them every few months with interesting
facts about the brand, whisky memorabilia and offers.
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ACCMAN
Direct Marketing Database Marketing

24. Database Marketing
• UK supermarket Tesco has build a huge database
through its successful loyalty card, ‘Tesco Club card’.
• Database is used to define market segments such as
discount-driven ‘price sensitive’, ‘foodies’, ‘heavy
category users’ and ‘brand loyalists’, testing response to
promotions, for example, targeting dog food offers to
dog owners, sending direct mail to specific segments as
‘healthy living’ types and tailoring email campaigns.
• Product assortment in stores can also be fine-tuned
according to the buying habits of customers.
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ACCMAN
Direct Marketing Database Marketing

25. Database Marketing
• A customer profile can be built up by including
postcodes in the addresses of customers and employing
the services of an agency that conducts geo-
demographic analysis, such as A Classification of
Residential Neighborhoods (ACORN).
• Direct mail can then be targeted at people with similar
geo-demographic profiles.
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ACCMAN
Direct Marketing Database Marketing

26. Database Marketing
• Typical information stored on a database includes the
following:
– Information on actual and potential customers
– Transactional information
– Promotional information
– Product information
– Geo-demographic information
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ACCMAN
Direct Marketing Database Marketing

27. Importance of Database Marketing
Importance of DM is reflected in its applications:
• Direct mail
• Telemarketing
• Loyalty marketing
• Campaign planning
• Target marketing
• Distribution management systems
• Marketing evaluation
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ACCMAN
Direct Marketing Database Marketing