Uploaded byMichael Baum
We Are All Direct Marketers Now
The document discusses the evolution and convergence of direct and traditional marketing, highlighting the importance of knowing customers and measuring effectiveness. It emphasizes the challenges faced by direct marketers, such as low barriers to entry, the need for multi-channel coordination, and understanding customer behavior. The content draws on historical insights and current statistics to illustrate how marketing strategies are adapting in response to digital trends.
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We Are All Direct Marketers Now
- 1. We Are AllDirect Marketers Now Mike Baum Principal Sophia Consulting LLC
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- 4. “ I knowthat half my advertising dollars are wasted. “The problem is, I don’t know which half.” John Wanamaker circa 1910
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- 6. Measures of MarketingEffectiveness Brand (mass) marketing Cost per thousand (CPM) Impressions Recall Aided Unaided “ Mindshare” Warehouse withdrawals or scanner data Indirect, time-lagged Direct marketing Response rate Average order value $/piece Direct, immediate
- 7. Direct Marketing ResponseDrivers LIST OFFER CREATIVE
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- 9. “ The Webchanges everything.” Every stock analyst in the world circa 1997
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- 11. Interactive Buying ChannelsMulti-Channel Marketing
- 12. 7 Top OnlineRetailers – 12/07 Source: A.C. Nielsen
- 13. Direct Marketing andTraditional (Brand) Marketing Converge Marketing dollars split 64%/36% direct vs “mass” 74% of branding experts combine DM with awareness campaigns 72% of direct marketers combine awareness campaigns with DM 62% of TV marketers use DM techniques 30% target their ads 28% include a call-to-action 26% include direct response mechanisms Source: Direct Marketing Association
- 14. 2002: 90% ofDigital Photos Printed At Home 2007: 38%
- 15. Lessons from DirectMarketing Know your customer s Measure every (important) thing Make the most of every contact Web Phone Store Sales call Make messages personal
- 16. Challenges for DirectMarketers Today “ We are all direct marketers now” Low barriers to entry Need to coordinate multiple channels Cost of acquisition Response rates Postage Click fees Ease of comparison shopping The “Big Brother” syndrome
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- 18. The Biggest Challengefor Direct Marketers Today
- 19. What Direct MarketersCan Learn from Brand Marketing Everybody has a brand The numbers tell you only what’s working or not working, not why If you don’t really talk with your customers, don’t be surprised when they start fooling around with someone new
- 20. LIST OFFER CREATIVEBRAND
Editor's Notes
- #2 Thank you. Thanks to the IABC for inviting me, and thank you all for coming today. I’m Mike Baum, and I’m a dinosaur. A fossil. A throwback. A Neanderthal. A missing link. An old codger.
- #3 The Artful Home – The Guild – guild.com Our products are mainly three-dimensional art – what’s known as “fine craft” – our biggest three categories are art glass, studio furniture, and artist-made jewelry. Original art direct from the finest artists – internet essential Unlike many dot.coms, the company has always also mailed catalogs, and I have copies of our latest catalog Customer: affluent baby-boomers and Gen X and Y Expensive to build such a company Dot.com funding, Angels, VCs – three rounds so far Challenge: finding people who appreciate this offering enough to keep coming back So OK – I’m a lifelong direct marketer – but why do I say “We are ALL direct marketers now.”
- #4 Some of you probably recognize the title as a takeoff on a famous remark by the late Nobel-prizewinner Milton Friedman Time quoted Milton in 1965 saying “We are all Keynesians now.” Not that everyone agreed with Keynes but that his ideas were pervasive The principles of direct marketing have become so pervasive – partly because of the internet, but mostly because of our ability to acquire and manipulate consumer data – that whether you realize it or not, you are a direct marketer. Or if you aren’t, your competitor is.
- #5 The difference between direct marketing and traditional marketing can be summed up in this quote. One of the creators of the department store and considered the father of modern retail advertising Direct marketers always heard that quote and laughed “ You’d know which half if you were a direct marketer, John – and you wouldn’t be wasting them anymore”
- #6 Historically, there was a great gulf fixed between direct marketers and everyone else. Everyone else: classical marketing, traditional marketing, mass marketing, brand marketing Advertising agencies – Madison Avenue TV, magazines, newspapers Working through channels Intended to create “image” in consumer’s mind
- #7 Energizer vs Duracell Indirect, one-way communication – as business communicators, you know communication should be two-way Direct marketing stats are always based on direct feedback from the customer – so it’s quick and always based on data
- #8 Measurable Testing against control Can be frustrating for creative It’s all about numbers For many years it was all about mail - But with modern technology, that changed And one of the first companies to take advantage of that change wasn’t a direct marketer, and the technology they used wasn’t the internet
- #9 They were a grocery store in England 1995: UK’s second-ranking grocer Today: UK’s largest - fastest-growing European financial services company, only grocer to make online work (Tesco Direct), “Fresh and Easy” in S Cal based on “Tesco Express” 1995 – “Clubcard” – huge demands on data processing for that decade now 80% of shoppers New parents: diapers and beer It’s billed as “customer loyalty” but what it really is: Direct Marketing Focus on the list – and the offer Not the web – not yet
- #10 Our IPO – “why aren’t you on the internet?” Amazon on the roadshow - 1994 - Amazon still has cumulative net income of negative $2 billion. 50% of dot.coms failed. Unfortunately, many investors learned that just because the Internet is a network doesn’t mean it offers significant network effects to every business. “ this is just direct marketing” The first companies to really benefit: traditional direct marketers LandsEnd..com launched in 1995 –– by 2000 visited by 38 million web users The paradigm-shifter turned out to be primarily a new way of shopping – that the Phoenicians would have loved. More than 85% of the world’s internet users purchase online, according to Nielsen – more than half in the past month. - now to China and India too
- #11 Not an “internet business,” “catalog business,” etc Our best customers are the 20% who order via both channels – phone and web – probably depending on the amount of interaction they need in a given situation Paradoxically, this has led to matching problems. When we mail a catalog, we’re also doing email, and getting search orders, etc. Back to “I know half of my advertising dollars are wasted.” But as long as each one you measure is working profitably, and revenues are going up, who cares? An increasing number of retailers add a fourth element to the triad of mail, phone, and web
- #12 The old-fashioned bricks and mortar store LL Bean – 30,000 sq ft store in Chicago suburbs Shop.org says influence of online on retail store visits up 43% in 2007 over 2006, which was up 36% over 2005.
- #13 The top seven online retailers in terms of site traffic in the December holiday season It won’t surprise you to know that the top two were Amazon and eBay. It may surprise you to know that numbers 3 through 7 were Target, Wal-Mart, Best Buy, Circuit City, and my old fellow-dinosaur, Sears According to Forrester Research, online buyers still rank retail stores as their preferred channel by two to one – they buy at retail three times as often, and spend almost twice as much Channel agnostic
- #14 Not limited to retailers: manufacturers Auto companies spent $8 billion in direct marketing in 2007, producing $77.8 billion in sales. 40% are direct-order campaigns – not just driving them to the dealers to shop and eventually buy Photo business: industry completely changed.
- #15 Snapfish – HP direct – 2005 Walgreens – quality, convenience, price Another case where direct marketing is taking the consumer back into a traditional bricks-and-mortar store Via a manufacturer that became a direct marketer and partnered with a drug store founded in 1901. We dinosaurs can evolve
- #16 “ Know your customer” – not just 18-35 Use the data – but don’t drown in it – Tesco learning what mattered
- #17 Data are ubiquitous – not a differential advantage Web businesses can be started for a few thousand dollars Cost and response not a new problem: “Even for J.Crew, the mail-order boom days are over” – NYT – date of article, September 1990 – response rates, postage costs, more reliance on retail – today 176 stores Retention more important than acquisition for first time in e-commerce, at 9% of US commerce Exposure to comparison pricing – airline industry – our recent price changes – online shoppers expect bargains two to one
- #18 Tom Cruise movie “Minority Report” based on Philip K Dick story Consumers recognized by face and offered products based on recent behavior Co-op databases Jaron Lanier – virtual reality – cheap, miniaturized processors and increasingly cheap and accurate visual recognition RFID – products and passports Brave New World or 1984 Fear of data leaks – though only 9% of identity theft is online Salvation: sheer mass of data
- #19 Now that WE ARE ALL DIRECT MARKETERS, - whether they realize it or not - the noise level is higher than ever Consumers tune out Lillian Vernon, Sharper Image Rejection of cellphone marketing No-call lists, no-mail lists With everyone aware of database marketing, with everyone aware of the power of the web, with bigger and bigger budgets being plowed into direct – It’s not enough to know the principles and work the numbers. You have to recognize that the brand people had something, after all
- #20 Groucho Marx You’re recognized – what are you recognized for? spam – “branded” in a different sense “ the company that does those cute ads about the mechanical bunny” Talking to customers – and non customers - and listening – literally Lands End – executives listen to calls Artful Community Artificial intelligence – better than natural stupidity
- #21 Supporting the pyramid