Direct Response and Direct Mail Advertising

Is it effective or merely Is it effective or merely annoying?annoying?

What Is Direct Marketing?

Reflects a distribution approach in Reflects a distribution approach in which the seller deals directly with which the seller deals directly with the consumer. the consumer.

Does not utilize the services of a Does not utilize the services of a retailer or wholesalerretailer or wholesaler

Utilizes the mass media, direct mail, Utilizes the mass media, direct mail, door-to-door sellingdoor-to-door selling

Direct Response Advertising includes any form of includes any form of

advertising utilized in advertising utilized in direct marketingdirect marketing

used to sell goods used to sell goods directly to the directly to the consumer.consumer.

it is action orientedit is action oriented– example: use a example: use a

coupon, call 800 coupon, call 800 numbernumber

Why Use Direct Response Advertising?

targeted communicationstargeted communications– tailor message with demos, psychographics or tailor message with demos, psychographics or

consumption profilesconsumption profiles measurable resultsmeasurable results the message of direct response is personalthe message of direct response is personal

– i.e., direct mail is addressed to you!i.e., direct mail is addressed to you! Direct mail can be personal through one Direct mail can be personal through one

on one communicationon one communication

Direct Marketing Objectives

Direct OrdersDirect Orders– Solicit and close a saleSolicit and close a sale

Lead GenerationLead Generation– Generate interest in a product and provide the Generate interest in a product and provide the

prospective buyer to request additional information prospective buyer to request additional information or qualify for a follow-up or qualify for a follow-up

Traffic GenerationTraffic Generation– Motivate to visit a business to make a purchaseMotivate to visit a business to make a purchase

Why has Direct Response Become so Popular?

Societal FactorsSocietal Factors– working women; increased value of leisureworking women; increased value of leisure– Convenience; targeted approaches to Convenience; targeted approaches to

shoppingshopping TechnologyTechnology

– increased availability of computers , credit increased availability of computers , credit cards and 800 numberscards and 800 numbers

Higher Quality Good and ServicesHigher Quality Good and Services

The Image of the Direct Marketer

Concerns over EthicsConcerns over Ethics– DMA has increased warranties and DMA has increased warranties and

investigated to reduce fraudulent offersinvestigated to reduce fraudulent offers Consumer sensitivity to privacy and list Consumer sensitivity to privacy and list

buildingbuilding Intrusive Nature of the ApproachIntrusive Nature of the Approach

The Many Approaches of the Direct Marketer

Direct MailDirect Mail– utilizes data basesutilizes data bases

– good for identifying new customers and serving good for identifying new customers and serving existing onesexisting ones

– creativity importantcreativity important

TelemarketingTelemarketing– $10 billion spent annually$10 billion spent annually

– $500 billion in sales$500 billion in sales

– Avoidance a problemAvoidance a problem

Forms of Direct Marketing TelemarketingTelemarketing

– Outboard – seek Outboard – seek prospectsprospects

– Inboard – order takingInboard – order taking

– UpsellingUpselling

– 900 #’s (info)900 #’s (info)

– Random Digit DialingRandom Digit Dialing

TV ShoppingTV Shopping– infomercialsinfomercials

– Networks (QVC,HSN)Networks (QVC,HSN)

Radio and Direct Response Advertising

Radio has one distinct disadvantage in Radio has one distinct disadvantage in stimulating direct responses - a lack of stimulating direct responses - a lack of visuals!visuals!

Plus is the relatively small investment Plus is the relatively small investment required by the manufacturerrequired by the manufacturer

Segmentation possibleSegmentation possible Generally a secondary outlet supplementing Generally a secondary outlet supplementing

other forms through cueingother forms through cueing

Magazines and Print Direct Response

Major advantages Major advantages include:include:– Audience selectivityAudience selectivity

– Longer shelf lifeLonger shelf life

– Loyal medium usersLoyal medium users

– Quality, size and Quality, size and color reproductioncolor reproduction

– PrestigePrestige

Direct Sales Offers CatalogsCatalogs

– early retailers found this to be a successful early retailers found this to be a successful way to introduce products to the frontierway to introduce products to the frontier

directed at low and middle income familiesdirected at low and middle income families

– now has sales projected to exceed $65 billion now has sales projected to exceed $65 billion in 1999; Japan - $200 millionin 1999; Japan - $200 million

– primarily successful due to changing social primarily successful due to changing social conditionsconditions

Major Types of Catalogs Retail CatalogsRetail Catalogs Full-Line Full-Line

Merchandise Merchandise CatalogsCatalogs

Business to business Business to business catalogscatalogs

Consumer Specialty Consumer Specialty CatalogsCatalogs

Trends in Cataloging Increasing specialty is reducing revenueIncreasing specialty is reducing revenue higher quality publications are very higher quality publications are very

expensive to publish and mailexpensive to publish and mail looking for alternative distribution looking for alternative distribution

systems - like Sunday newspaper insertssystems - like Sunday newspaper inserts Threat of TV shopping!Threat of TV shopping!

Negative Options Direct Response

You enter into a You enter into a membership membership agreement and receive agreement and receive the merchandise the merchandise unless you indicate unless you indicate you do not want it!you do not want it!

Examples: Columbia Examples: Columbia House, Book of the House, Book of the Month ClubsMonth Clubs

Identification of Prospects

Build leads by emphasizing the offer, not Build leads by emphasizing the offer, not the creative elements - keep your copy the creative elements - keep your copy development shortdevelopment short

Include most important product benefitsInclude most important product benefits Assume you must increase involvement Assume you must increase involvement

levelslevels Try to appeal to everyoneTry to appeal to everyone

Business to Business Aspects

Smaller market than for consumer Smaller market than for consumer goodsgoods

Concentrated buying decisions - Concentrated buying decisions - usually by groupsusually by groups

Higher per purchase expenditureHigher per purchase expenditure Flexibility - target the needs of the Flexibility - target the needs of the

consumer!consumer!

Direct Mail Advertising Lead GenerationLead Generation Mail OrderMail Order Loyalty ProgramsLoyalty Programs Database BuildingDatabase Building Dealer SupportDealer Support

Major Characteristics of Direct Mail

SelectivitySelectivity Personal sellingPersonal selling Longer, more informative copyLonger, more informative copy More Immediate ResultsMore Immediate Results

Direct Marketing and Technology

Advent of computersAdvent of computers Development and Development and

proliferation of credit proliferation of credit cardscards

Increased capability to Increased capability to segment and divide segment and divide customer basescustomer bases

Increased number of Increased number of communications optionscommunications options

Current Trends of Interest

Selective BindingSelective Binding– Newsweek and other publications are introducing Newsweek and other publications are introducing

a printing technology to reach certain groups of a printing technology to reach certain groups of consumers based on purchase behavior and demosconsumers based on purchase behavior and demos

TV and Radio personalizationTV and Radio personalization– cable TV - lifestyle programming; franchising and cable TV - lifestyle programming; franchising and

mini-networksmini-networks– pay per view pay per view – infomercialsinfomercials

Technology Based Marketing and Promotions

Interactive TelevisionInteractive Television InfomercialsInfomercials Home Shopping ChannelsHome Shopping Channels On-Line ServicesOn-Line Services Direct Marketing on the InternetDirect Marketing on the Internet

Interactive Television Shop Interactively by Shop Interactively by

utilizing product menus utilizing product menus and examining specific and examining specific productsproducts

Traditional schedules will Traditional schedules will fall by the way sidefall by the way side– Menu driven Menu driven

programming/viewingprogramming/viewing

Introduction of Demand Introduction of Demand Based AdvertisingBased Advertising

– detailed infodetailed info

Intro of Superior SegmentsIntro of Superior Segments

Infomercials Is this really just a cure for insomnia?Is this really just a cure for insomnia? Self-selected information regarding products and Self-selected information regarding products and

servicesservices Many Fortune 500 companies now utilize (Avon)Many Fortune 500 companies now utilize (Avon) Great way to acquire market research and Great way to acquire market research and

develop data basesdevelop data bases More conversational format, demonstrationsMore conversational format, demonstrations Interactive possibilitiesInteractive possibilities

Home Shopping Channels

Emergence of retail Emergence of retail sponsored channels sponsored channels (i.e., Nordstroms, (i.e., Nordstroms, Macy’s, Sears)Macy’s, Sears)

Expected continued Expected continued penetration of new penetration of new targeted segmentstargeted segments

Instant Access via Instant Access via interactive approaches interactive approaches

On-Line Services AOL, Compuserve, MSN and Prodigy are AOL, Compuserve, MSN and Prodigy are

the leaders in providing access to direct the leaders in providing access to direct marketersmarketers

Prodigy reaches in excess of 2 million Prodigy reaches in excess of 2 million householdshouseholds

On-Line MallsOn-Line Malls– Comp - u - Store’s on line selection exceeds Comp - u - Store’s on line selection exceeds

250,000 products250,000 products

On Line Shopping Phenomena

Ease and convenience, Ease and convenience, simplicity and simplicity and effectivenesseffectiveness

On-Line Banking, ATM On-Line Banking, ATM and investment and investment informationinformation– 25% U.S. households 25% U.S. households

have $ in mutual funds - have $ in mutual funds - why not use PCs to why not use PCs to access and evaluate access and evaluate performanceperformance

Customer Needs - Online Services

Prestige - Prestige - esteem gained through knowledge esteem gained through knowledge and use of technologyand use of technology

ConvenienceConvenience Instant GratificationInstant Gratification Novelty and ExcitementNovelty and Excitement EfficiencyEfficiency Ease of UseEase of Use TimelinessTimeliness - real time information on stocks - real time information on stocks

Business CatalystsDistribution Chain Inefficiencies

Typical Distribution Channel with several Typical Distribution Channel with several intermediaries with the most immediate handler intermediaries with the most immediate handler generating 40 - 60% markups! Is there a perception generating 40 - 60% markups! Is there a perception of lack of value added?of lack of value added?– Manufacturer - $40Manufacturer - $40– Wholesaler - $43Wholesaler - $43– Distributor - $47Distributor - $47– Retailer - $94Retailer - $94

–Consumer - +135%Consumer - +135%

Delayering the Channel of Distribution - Step 1

Manufacturer - $40Manufacturer - $40 Distributor - $44Distributor - $44 Retailer - $88Retailer - $88

Consumer - +120%Consumer - +120%

Delayering - Step 2 Manufacturer - $40Manufacturer - $40 Retailer - $80Retailer - $80

Consumer - +100%Consumer - +100%

Delayering - Step 3Manufacturer - $40Manufacturer - $40

Consumer - $44 - +10%Consumer - $44 - +10%