Integrating Direct Marketing and Personal Selling

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©2012 Cengage Learning. All Rights Reserved.

Introductory Scenario: Don’t Mess With Les

Who was Les Wunderman?• He created the Columbia House record

club and “invented” the modern era of direct marketing.

• The genius of his idea was creating a dialogue (monthly response) with consumers which led to building a relationship with the brand.

• This “relationship” created through dialogue resulted in multiple purchases over time.

The Evolution of Direct Marketing

An interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location.

• The scope of direct marketing:

o An interactive dialogue with consumers

o Pursues an immediate, measureable response (e.g. sale or inquiry)

o Identify prospects for future contacts

o Transactions can take place anywhere

o Mail, telephone, Internet

o Availability in the physical and virtual world

Direct Marketing: A Look Back

• L.L. Bean was founded in 1912 on $400.00

• Fundamental strategy:o Commitment to qualityo Descriptive copy that was

informative,factual, and low-key

o Satisfaction guarantee

• L.L. Bean built a good mailing list

• By 1990 L.L. Bean’s sales were $600 million; by 2009, over $1.4 billion

Direct Marketing: Milestones

1450 Invention of movable type

1667 First gardening catalog

1744 Franklin formulates mail-order concept of

“satisfaction guaranteed”

1872 Montgomery Ward catalog

1886 Sears starts mail-order business

1917 Direct Marketing Advertising Association

founded

Direct Marketing: Milestones

1928 Third-class bulk mail introduced

1950 First credit card

1951 Lillian Vernon places first ad

1953 Publishers Clearing House founded

1967 AT&T introduces toll-free 800 service

1992 Over 100 million in U.S. shop at home

Direct Marketing Today

• Rooted in, but much more than just mail-order.

• Many different activities using multiple media

• A complex, diverse tool used by organizations throughout the world.

• Three Principle Purposes:

o Close a sale with a customer

o ID prospects and develop customer database

o Engage customers, seek their advice and generate brand loyalty—remember consumer generated content—how are new technologies being used to do this?

What’s Driving the Growth ofDirect Marketing? • CONVENIENCE for today’s dual income and

single parent households.• Still liberal attitudes toward using credit—

despite

the recent recession.• Greater access to toll-free calling.• Computer technology/new media facilitate

online transactions and database management.

• More precise segmentation.• Opportunity for relationship building.• Cost per inquiry (CPI) and cost per order

(CPO) advantages of direct marketing.

Marketers like the Adirondack

Country Store, use catalogs, toll- free numbers, and the Web to

take advantage of direct marketing

opportunities.

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Database Marketing

• Knowing who the best customers are as well as what and how often they buy.

• Mailing lists:o Internal lists (existing

customers)o External lists

Databases allow firms

to reach their best customers with direct mailings.

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List Enhancement

• Internal lists can be augmented with externally provided lists

• Incorporating information from external databaseso Demographic datao Geo-demographic datao Psychographic datao Behavioral data

The Marketing Database

• Includes data collected directly from individual customers

• Goal: Develop cyber intimacy• Database marketing creates

efficiencies– Targeted versions of catalogs: seasonal, age

specific

Marketing Database Applications

• Includes data collected directly from individual customerso RFM Analysis of customers: recency, frequency,

and monetaryo Past behaviors can be used to predict future

behavior

• Reinforcing and recognizing best customerso Frequency-marketing programs

o Cross-selling

• Stronger position to cultivate new customers through more astute external list purchases

The Privacy Concern

• Privacy concerns result in:o Do not call registry

o Spam blockers

o Opt-out options

• Firms can overcome privacy concernso Nurture the relationship with current customers

with honest, effective service

The Internet has heighted consumer privacy concerns with respect to direct marketing

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Media Applications in Direct Marketing

• Direct response advertising on TV

• Direct Mail• Telemarketing• Email/Mobile marketing• Other media

o Magazineso Newspaperso Infomercials

Direct Mail

Advantages• Selective, flexible, little waste, lends

itself to testing, uses many formats

Disadvantages• Direct mail is expensive

o May cost 15 to 20 times more to reach aperson with a direct mail piece than with aTV commercial

• Mail lists can be plagued with bad addresses

• Mail delivery dates can be unpredictable

Telemarketing• Telemarketing can be a potent tool. As with direct

mail:o Contacts can be selectively targeted.o The impact of programs is easy to track.o Experimentation with different scripts and delivery

formats is simple and practical.o Telemarketing involves live constructive dialogue.

• Telemarketing shares many of direct mail’s limitations:o Very expensive on a cost-per-contact basis.o Names and addresses go bad as people move, and

wide spread use of cell phones has made directories nearly obsolete.

o Telemarketing does not share direct mail’s flexibility in delivery options. When you reach people in their home or workplace, you have a limited span of time to convey information and request some response.

o Telemarketing is becoming a highly maligned practice in consumers.

o The FTC’s “Do Not Call” list has millions of subscribers

Email

• Bulk email is known as “spam”

• Fraudulent email know as “phishing”

• However email is an increasingly popular tool for marketers

• Advantageso Cheap

o Good response rates—better than direct mail

• Netiquette suggests getting consumer permission to send product information (i.e. obtaining opt-in permission)

• Avoid bulk emailings

Direct Response Advertising in Other Media• Magazines use bind-in insert cards• Toll-free 800 numbers are vital to direct

marketers using ads in newspapers and magazines

• Infomercialo Long television advertisemento Range in length from 3 to 60 minuteso Keys to success

- Testimonials, frequent call to actions, ensure same-day response

- New research shows that direct response ads are the least likely to be zapped by DVR users

Magazine ads are ideal for

Direct Response

Advertising.

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Closing the Sale with Direct Marketing and/or Personal Selling

• Functional specialists across several media need to work together.

• Marketing databases can lead to interdepartmental rivalries.

• Growth of direct marketing often means cuts in other promotional budgets.

• One solution: the MARCOM manager

The Critical Role of Personal Selling

• The face-to-face communication and persuasion process

• Most effective with products or services that are:o Higher pricedo Complicated to useo Tailored/customized to users’

needs o Offer a trade-in optiono Judged at the point-of-purchase

Types of Personal Selling

Order taking: Accepting orders for merchandise or scheduling services; deal with existing customers who are lucrative to a business due the low cost of generating additional revenues from them. Order taking is the least sophisticated of selling efforts.

Creative selling: Selling where customers rely heavily on the salesperson for technical information, advice, and service. It is the most sophisticated and complex selling effort.

System selling: Entails selling a set of interrelated components that fulfill all or a majority of a customer’s needs in a particular area. System selling is often executed by a “team” of sales people.

The missionary salesperson: Calls on accounts with the purpose of monitoring the satisfaction of buyers and updating buyers’ needs. They may provide product information after a purchase.

Customer Relationship Management (CRM)

• Salespeople play a critical role in cultivating long-term relationships with customers—which often is referred to as a customer relationship management (CRM) program.

• CRM views the relationship with buyers as a partnership and a problem solving situation.

• Note, newer descriptions of this process use the phrase “customer experience management”