Direct marketing is a database-driven process of directly communicating with targeted customers or prospects using any medium to obtain a measurable response or transaction via one or multiple channels.
Direct marketing involves direct contact with the customer, but to achieve that, companies must invest in updated databases and must maintain measurable responses from customers. Thus, a direct marketing firm does not only sell, but it also knows when to approach a customer and what kind of information is to be provided.
The business of selling products or services directly to the public, by mail order, telephone, or online sales, rather than through retailers. Direct marketing includes all activities meant to engage customers with the brand, thereby increasing their positive associations with it.
Learn about:- 1. Introduction to Direct Marketing 2. Meaning of Direct Marketing 3. Different Forms of Direct Marketing 4. Steps Involved 5. Types 6. Customer Database 7. Products Sold through Direct Selling
8. Firms (With Examples) 9. Overview of Direct Marketing in India 10. Direct Marketing – Comparison with Multi-Level Marketing 11. Mass Customization 12. Direct Marketing in Pharma Industry 13. Advantages and Disadvantages.
Direct Marketing: Introduction, Meaning, Types, Advantages, Disadvantages, Forms, Mass Customization and Steps Involved
Direct Marketing – Introduction
Peter F. Drucker has rightly observed that there is only one valid definition of business purpose to create and keep a customer. “Companies are not into business to make things,” he said, “but to make customer.” The essence of keeping a customer is to stay in touch. This is also fundamental to Direct Marketing.
On a simplistic note we can say that Direct Marketing is nothing but getting the message through, directly. However the Direct Marketing Association, (U.S.A.) defined it as “an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location.”
In the above definition we identify some key words, which differentiate Direct Marketing (DM) from other marketing communications disciplines.
These key words are:
1. Interactive – One to one communication or interaction between the marketer and the prospect/customer.
2. One or more advertising media – A combination of media used to synergize, often more effective than any single medium.
3. Measurable Response – Possible to measure response, quite accurately.
4. Transaction at any location – May take place by phone, at a kiosk, by mail or by personal visit.
Direct marketing makes use of mail, telephone, fax, e-mail and other non-personal contact tools to communicate directly with or solicit a direct response from specific customers and prospects.
There are many definitions of direct marketing. The simplest definition is – the business of selling products or services directly to the public, by mail order, telephone, or online sales, rather than through retailers. Direct marketing includes all activities meant to engage customers with the brand, thereby increasing their positive associations with it.
Researchers have attempted to synthesize the various definitions available in textbooks and those offered by practitioners. The common elements found in nineteen such definitions were – historical foundations, customer relationship building, database analysis, electronic media, and print media. The researchers then synthesized the academic and practitioner perspectives, and have given the following definition.
Direct marketing is a database-driven process of directly communicating with targeted customers or prospects using any medium to obtain a measurable response or transaction via one or multiple channels.
Direct marketing involves direct contact with the customer, but to achieve that, companies must invest in updated databases and must maintain measurable responses from customers. Thus, a direct marketing firm does not only sell, but it also knows when to approach a customer and what kind of information is to be provided.
Direct marketing companies must maintain a relationship with the customer in order to maximize customer equity, and many do so. The job has become easier with new IT technology, through which customers can be tracked. This includes highly efficient database management systems (DBMS), Internet and social networking, online engagement with customer, and tracking technologies.
Direct marketing does not involve direct selling alone. Companies are increasingly trying to engage customers through activities and contests, thereby increasing brand awareness. Today, direct marketing includes a range of activities that help establish a connection between company and customer.
Direct Marketing – Meaning
Though, of late, the numbers of messages from marketers through mail have increased. Most of the recipients are reluctant to open the so-called junk mail or third-class mail, thus leading them to the waste-paper baskets. It is, therefore, necessary to motivate the customer to open up the mail, go through it and take action on it.
By far, this is the most challenging task, much more challenging than the other components of promotion like advertising, PR and personal selling. It is in true sense a professional job. Direct marketing is not as glamorous as a print or TV commercial and requires more effort.
Direct marketing is not just sending ‘junk mail’ to consumers. It involves identifying the right target audience so as to enter into a direct relationship with it. At the end, we have to test the effectiveness of the entire exercise.
M. S. Geller sketches DM’s growth. She traces its rudimentary origins to first mail catalogue sent by Aldus Manutius of Venice in 1498 offering fifteen books of Greek and Latin published by him.
Direct marketing developed as a major strategy in the late 20th century. Its genesis can be traced to the late 1880s when Sears and Roebuck and Montgomery Ward began as direct marketers. Modern direct marketing is supported by advanced database technologies.
Retail firms such as Quelle and Neckermann in Germany use such technologies. These laid the foundation of mail order businesses such as J. Crew. The Sharper Image and L.L Bean in the USA.
Evaluation of advertising, PR and personal selling is difficult. But direct marketing is easy to evaluate on the basis of responses it generates directly. A direct market campaign is successful only when it generates maximum response at the lowest possible cost.
While approaching the customers in direct marketing, one has to do careful planning. Buyers are studied demographically in terms of age, sex, income, place of residence, education, marital status, etc.
Buyers are also studied psycho graphically in terms of activities, interests, opinions and the ‘why’ of their behaviour. It is not advisable to restrict our study to buyers alone. We should understand our non-buyers and the reasons for their not buying our products.
Mail order selling sometimes works better than personal selling which is face-to-face. It provides anonymity to the buyer. It respects his privacy while buying highly personal product like condoms, bras, panties, sex books, aphrodisiacs, etc. It saves the hassles of going through the process of sale often involving arguments and pressure selling by salespeople. Sometimes, distant products can be bought only by mail, as they are not available locally.
Direct marketing may be used effectively to lessen the antagonism towards the product which the buyer might have nurtured. Buying in this fashion has an element of thrill. Buyers buy by this route either for one valid reason or a variety of reasons.
Direct marketing is basically a part of relationship marketing. It is not just transaction marketing. It is necessary to create rapport with the customers. Their orders must be acknowledged. They must be given a thank-you letter. They may be given access to a special phone-line. If they are not satisfied, they are given an exchange or refund.
According to Lester Wunderman, the main focus of direct marketing is, and will remain, the creation of customers who make repeat purchases rather than on prospecting for product trials. Direct marketing can be called successful only when it creates share-of-market rather than share-of-mind.
DM communicates with the customers on one-to-one basis to get a response and then to work further to convert into the result. DM means the right message to the right people at the right time.
Our messages are carefully drafted. They appeal to rationality and emotions. The emotional magic works always. Our message must relate to the buyer.
There are some prospects who take direct mail easily. There are some who are diehard opposers of this concept. Some are fence-sitters, who might buy through direct marketing under some conditions. Perhaps, they are not aware of our products.
M.S. Geller in her latest book, Response on Direct Marketing lists four advances in favour of DM computers for database, credit cards, communications and women in workplace, meaning less time for shopping.
In marketing, according to Stan Rapp, three windows are opening up to future – the new intermediaries relationship, the one-of-a-kind relationship and the net centric relationship. In 21st century, marketing has become individualised.
Experience is the primary driver and perception though important, is not dominant. One-to one marketing is called 121. The aim is to build lasting customer relationships by integrating all four Ps. All this is to be done at a lower cost by squeezing out inefficiencies.
Direct Marketing – 4 Different Forms of Direct Marketing
Following are the four different forms of direct marketing:
i. Direct Mail and Catalogue Marketing:
Direct mail marketing involves single mailings that include letters, ads, samples and other ‘sales people on wings’ sent to prospective customers. The mailing lists are generally developed from customer lists. Direct mail is popular because it permits high target-market selectivity, can be personalized, is flexible and allows easy measurement of results. Direct mail has proved very successful in promoting books, magazine subscriptions and is being used to sell gift items, clothing and industrial products.
Catalogue marketing involves selling through catalogues mailed to selected customers. Consumers can buy just about anything from a catalogue. Recently specialty department stores have started sending catalogues to cultivate upper-middle-class markets for high priced merchandise. Several major corporations in the USA have also developed mail-order divisions.
Telemarketing means the use of the telephone to sell directly to customers. It has now become an important direct marketing tool. Telemarketing is used in business marketing as well as consumer marketing.
The recent explosion in unsolicited telephone marketing has disturbed many consumers who object to the almost daily “junk phone calls” that put them away from the dinner table. But there are other consumers who appreciate many of the offers they receive by telephone.
Television marketing takes two forms. The first is direct response advertising. Direct marketers air television spots, often 60 or 120 seconds long that persuasively describe a product and give customers a toll-free number for ordering. Direct response advertising works well for magazines, books, tapes, and many other products.
The major form of electronic shopping is videotext, a two-say system that links consumers with the seller’s computer data banks by telephone lines. The videotext service makes up a computerized catalogue of products offered by producers, retailers, banks and so on. Consumers can use an ordinary television set with a special key board device connected to the system by two-way cable.
Direct Marketing, Direct Mail, Mail Order, Direct Response Advertising – Many relate Direct Marketing to a medium (Direct Mail) or a technique (Direct Response Advertising) or a channel of distribution (Mail Order). In fact DM is all the three, and much more.
Direct Response Advertising in any medium including Mail is that which offers a measurable response and/or transaction at any location. It is any advertising used to sell directly to customers; be it an advertisement with a coupon in a newspaper or magazine or even a telephone solicitation.
Direct Mail is a medium through which a pre-defined and pre-determined number of selected consumers are addressed through the form of mail. Using computers, letters are easily personalised to make the maximum impact on the person receiving it. This medium becomes very effective in respect to selectivity of consumers, timings and the ability for the customer to respond using coupons or pre-paid reply envelopes.
It is one of the media, the others being newspapers, magazines, television, radio, telephone and such others used for Direct Marketing.
Mail Order is a method of selling that relies on Direct Response Advertising to effect a measurable response and/or transaction by mail, telephone or other interactive media. Mail order usually means the sale of products or services to a customer or to industrial users by means of catalog or Direct Response Advertising. In many cases, the medium used in Direct Mail and the fulfilment is also by mail. As distinguished from Direct Mail, which remains one of the several advertising media used by Direct Marketers, Mail Order is a selling method.
The buyer personally visits the sellers’ location to effect a transaction. The seller calls at the buyer’s location in person or by telephone to effect a transaction.
Even though Direct Mail is only one of a number of Direct Response Techniques, yet it is the category most associated with Direct Response Advertising in terms of both format and execution. It is rare that major advertising campaigns do not at least consider Direct Mail as media vehicle.
According to the American Association of Advertising Agencies, Direct Mail offers five primary advantages.
The market that the marketer wants to tap can be identified and covered in the way he wants it to be. Elimination by region, by state, by market, and by individuals is possible. The medium offers the benefit of minimum waste and maximum efficiency. The entire market can be hit with a single mailing or the market can be segmented and some prospects can be mailed six times as often as the others. Through a continuous process of selecting mailing lists, testing them and segmenting them, targeting can be made more effective.
2. Ideal for Response:
A ready to use, pre-addressed, postage paid reply card or envelope can be included to promote maximum response. Hence, it is an action-oriented medium.
3. Personal Impact:
The Personal “One-at-a-time” quality of Direct Marketing implies that the prospect reads the communication without competing intervening messages.
When mailing is done by name, copy and offers can also be adjusted to fit things known about the recipient. The computer letter has made a number of creative possibilities available to copywriters who want to individualise the letters they write. Addressing the person by name instead of addressing him as “Dear Friend” can make a significant difference in bridging the gap between the sender and the receiver of the message, leaving an enormous impact.
4. Flexibility of Format and Timing:
Minimum standardisation of format is required and each Direct Mail package can be made interesting through the use of various devices.
Direct Mail lends itself to precise calibration of results. In a lead getting effort, the number of prospects converted into sales can be found out. An analysis of responses by variables such as list, copy approach, offers can be made.
The four primary objectives of an effective Direct Mail campaign are:
1. Building Sales – It can be used to introduce sales people, promote other forms of advertising or announce a product introduction. It can also be used to make a sale.
2. Cultivating Customers – It should be effectively used to build customer relationships in the long run.
3. Supporting Dealers – Direct Mail can alert dealers to future customer promotions, educate them on service problems and survey them concerning their needs.
4. Providing Internal Benefits – It can also be used to build company morale. Internal newsletters and other employee communication are often used to personalise large corporations.
To depict two Direct Mail Packages, we would like to take examples of the Reader’s Digest.
The key to successful Direct Mail is reaching the right person. The best product, the most creative message and even the lowest price are all wasted on a non-prospect.
Information about who the prospective buyers are, what they buy, how often they buy, whether they buy by phone or by mail, how much they spend and by what methods they pay, becomes crucial to any Direct Marketer. These databases are the secret weapons of most Direct Marketers.
In the ’90’s, the key word in Direct Marketing will be ‘Database Marketing’. The process is one of feedback between the sellers and their customers to more precisely define the latter’s interest and purchase intentions and its constant updation. In its simplest form, database marketing is a method of identifying the best prospect for a product from a larger pool of prospects.
Outfits like Reader’s Digest and Bull Worker have built up exhaustive databases which are very closely guarded. The Kamat’s Club has built its database by asking the consumers to staple their business cards to the Coupon Response advertisements which are to be mailed back. This technique has also been applied by the Travel Corporation of India.
The major sources of input for databases are the mailing lists. They are simply a way to organise otherwise random material into market segments.
There are basically four types of lists:
1. Compiled Lists:
This is a list of names, addresses and information about the prospects combined usually by some common interests. Examples of such-fists include telephone directory listings, the newly born, public records’ such as voters’ lists. There are other extensive compilations in the business, professional, educational, technical and agricultural markets.
These lists are generally less valuable and less expensive than response lists as they do not offer a previous record of direct response purchase. Many see them as a supplement to response lists. They represent a source of external data.
2. Response Lists:
Mailing list houses may rent lists of people who have ordered something by direct mail or who have responded to an advertisement for further information. The people on response lists are those who are prone to order by mail and therefore these lists are more productive than compiled lists. A mail-derived list can either be a house list (Internal data or a list of customers/inquiry rented from other companies).
3. House Lists:
These are the finest asset of any Direct Marketer. The customers on these lists are those who may have bought by mail, have dealings with the company, have confidence in its integrity and merchandise. Such house lists active customers, inactive customers, inquiries and referrals represent additional value at no extra cost. House lists can be made more productive if these are looked at as specific segments in terms of geographic, demographic and psychographic segmentation.
4. Rental Lists:
In effect, these are house lists of other business houses. Magazine publishers like the Reader’s Digest can be a valuable source of information for such lists since they lend to reach certain demographic groups.
Within the Response Lists, there are certain factors which determine the likelihood of getting a response. Catalog giants, Sears and Wards have suggested the RFM-Recency, Frequency, Monetary-formula as a criterion to effectively and cost efficiently promote such an effort. It is based on the premise that recent responders are better prospects than prospect from long ago. Again, frequent responders are better than less frequent responders and, last but not the least, high volume purchasers are better than low volume purchasers.
The RFM formula forms a basis for manipulating the databases to extract the more profitable segments.
Another important factor affecting responses is seasonality for most products. The same Direct Mail package sent to the same list may have widely varying responses depending upon the time of the year it is mailed.
Reader’s Digest are pioneers in running Direct Mail campaigns during Diwali and New Year seasons.
Regardless of the nature of the lists, they should be clean and up-to-date. The contents of the list must be ‘as described’ or wasted mailing will occur. Names and addresses that are undeliverable clearly result in wasted expenditure.
Such a file maintenance procedure will involve continuous updation with regard to addition of names, change of addresses, recording new orders and requests etc.
A serious problem faced by Direct Marketers in compiling and maintaining lists is the potential for duplicating the same individual or organisation not only within the house list but also without and between the response lists and even between the house lists and response lists.
Such a problem is removed by the data-processing operation of “MERGE- PURGE” wherein the computerised lists are merged together and duplicate names are purged so that what is obtained finally is only a list of net names and addresses along with a unique source key that will enable responses from each list to be tracked. This also avoids damage to the goodwill of the public.
Other Direct Mail Techniques:
1. Package Inserts:
These are used to promote additional purchases of products sent to customers or to promote other items in their product line. They do not involve additional postage costs and are directed at proven customers who have just made a direct mail purchase since they are sent along with the packages of the recently ordered goods.
Ride along are inserts which are sent along with packages of other companies after careful negotiations with them at a fraction of the original costs.
2. Co-Operative Mail Advertising:
This may be pursued in an attempt to share expenses keeping in view the high cost of mailing. However, such a mailing may be highly impersonal since each advertiser’s message will have to be very short. Secondly, it is difficult to reach specific customers through joint mailing and hence this also decreases the value of mailing.
3. Syndicated Mailing:
Here, the marketer may though prepare the piece himself but may make financial arrangements with other mail order companies to mail the offer under their letterhead.
Direct mail can be used appropriately under any of the following circumstances:
i. When sampling would be both practical and desirable.
ii. When the advertising message is too complicated or too detailed to be conveyed efficiently in other media.
iii. When a specific, selected market is desired and other media can provide it only at the cost of waste circulation.
iv. When personal, personalized, or confidential communication is desired.
v. When the format or color that an advertiser’s marketing strategy requires can’t be carried in other media.
vi. When a specific market area needs to be covered with a minimum of slop-over into adjacent areas.
vii. When specific timing or frequency of contact is desired.
viii. When couponing is desirable.
ix. When controlled research is called for (for example, measuring of effectiveness within certain markets; ascertaining prospect profiles; or testing price, packaging or logical users for new products).
x. When controlled mailing is desirable (mailings will go only to certain income groups, owners of certain makes of cars, boat owners, etc.).
xi. When Mail Order (sale of the product directly to the prospect, without retailers, dealers or other media) is desirable.
As suggested above the variety of forms or devices that can be mailed is limited only by one’s imagination.
Among the more popular forms are the following:
7. Postal cards
8. Mailing cards
10. House magazines
12. Price lists
13. Sale and informative manuals
16. Sales, research and informative bulletins
24. Printed novelties
25. Business cards
26. Order forms
27. Reply cards and envelopes.
Effective communication is vital to corporate survival and success and the telephone is becoming the most important part of the communications strategy. In many areas, it is replacing post and personal contact as the most efficient way to send, receive and process information. The combination of database information and effective telemarketing techniques can help to develop a powerful competitive edge. Many companies now recognize that telemarketing can help them make the most effective use of the telephone- increasing revenue, reducing costs and improving customer service.
Although telephone technology is advancing rapidly and sophisticated telemarketing systems are available for small, medium and large businesses, companies are still reluctant to take advantage of the marketing opportunities.
BT’s Business News quotes research that shows people are increasingly keen on buying by phone. 67%-80% of those interviewed, claimed they found telephone ordering easy and convenient. Telephone ordering is used successfully in a wide variety of industries, including computer hardware and software, car insurance, office stationery components and catalogue-based products.
The telephone is probably the most important interface between your organization and your customers. It is vital for increasing sales, taking orders, handling enquiries, delivering customer service or collecting payments. Here is how two leading companies are using telemarketing.
The Importance of the Telemarketing Database:
Telemarketing offers considerable business benefits but the database is crucial to success.
It has three main roles:
1. To provide customer information to operators so that they can improve customer handling.
2. To provide a basis for proactive selling to the customer.
3. To help gather and use additional customer information via the telephone.
At minimum, a telemarketing database should contain the following information:
iii. Account number.
iv. Purchase history.
v. Preferences/special requirements.
vi. Products and services bought.
vii. Frequency of purchase.
viii. Contact history.
The operator has all the key information to hand whether it is an outbound sales call or an inbound call handling orders or enquiries. By linking telephones and computers, for example, staff can handle calls quickly and efficiently and provide a highly personalized service. With Computer Technology Integration (CTI), calls can be co-ordinated with computer-based business applications. Information screens can be transferred simultaneously. This improves both productivity and customer service.
CTI can also be used to generate outgoing calls automatically and intelligently, again with screen information. This can increase the productivity and efficiency of telemarketing staff, particularly in intensive outbound applications.
Direct Marketing – 6 Steps Involved in the Direct Marketing Stages
Direct marketing involves identifying customers, planning, approaching customers, and making presentations. The process starts from prospecting for clients, planning, contacting, making presentations, handling queries and objections, and negotiating, before getting orders.
Below the steps are described showing the tasks involved in each stage:
i. Identification and qualification of prospects – companies qualify the leads by contacting them by mail or phone to assess their level of interest and financial capability
ii. Giving details of interested prospects to the field sales force
iii. Giving details of prospects who are somewhat interested to the telemarketing unit
2. Preparation and Planning:
i. Learning as much about the customer as possible by the company representatives at this stage
ii. Preparation of the sales pitch by the representatives
iii. Setting call objectives.
3. Initiating Contact:
Making phone calls to get appointments with the prospects to make demonstrations
4. Sales Presentation:
Informing prospects about the benefits, advantages, and features of the product
5. Handling Objections:
With customers tending to pose psychological and logical resistance, salesmen try to answer all possible questions about the product and doubts at this stage.
Salesmen negotiate on issues such as price, terms of contract, quality, warranty, etc.
Direct Marketing – Top 7 Types
Direct marketing involves directly communicating with customers. There are several ways of doing this. Apart from deploying salesmen who give demonstrations of products and book orders, companies use various ways of engaging customers. The effort is not just to sell but to also involve the customer with the brand. Innovative methods are increasingly being tried to achieve this.
Type # 1. Internet Marketing:
The Internet allows everyone to be a direct seller. Companies need not send out mailers but simply host a site that allows them to send e-mails for selling products, or allows people to buy online. It has truly revolutionized direct marketing for promoting the sale of products and services to targeted audiences. Access to the Internet provides users with services in four basic areas – information, entertainment, shopping, and individual and group communication.
Instead of sending mailers or catalogues, companies provide information on their websites, including pictures and videos of products. Then, to build traffic to the site, they use various tools such as sending e-mails or launching contests. Some companies link their websites to social networking sites like Facebook, Twitter, and YouTube, thereby engaging customers and driving traffic-to their site.
Orders can be placed on the websites and secure payment gateways allow customers to feel safe while paying online directly. These gateways—like the ones provided by Visa and MasterCard—allow people to pay by credit or debit card. Banks provide the facility of online banking, whereby people can pay by directly debiting their bank accounts. Further, the Internet allows companies to build relationships with their customers through several techniques, including using social media.
Users share a lot of their data on social media sites. Information on demographics, educational background, family, the kind of things they like, and their friends are usually available on these sites. Further, data on browsing habits can be made available by service providers.
By crunching this vast amount of data, the Internet makes direct marketing easier, more targeted, more flexible, more responsive, and more affordable. However, it is debatable whether it can achieve the same volumes that mass marketing can achieve. Also, there are concerns over privacy as firms track and measure activities of people.
Type # 2. Face-to-Face Selling:
The traditional way of selling is to employ salesmen who approach customers directly. This direct marketing method involves a company’s sales force personally contacting potential and existing consumers. Some companies have used this method exclusively to build their brands.
While Eureka Forbes employs salesmen to visit homes and demonstrate the use and utility of vacuum cleaners, direct marketing companies like Amway employ people on part-time basis, who are office goers and can earn extra income by selling the company’s products. They sell to their friends and seek contacts from them.
Type # 3. Direct Mail:
Companies use direct mail to send catalogues or information about a special offer, product or sale announcement, service reminder, or other communications to people. Historically, direct mail has existed in the form of printed materials, but now companies use e-mails, CDs, audio tapes, video tapes, fax, and voice mail in their effort to woo customers.
Direct mail permits high target-market selectivity and it can be personalized. It is also flexible, and allows testing and response measurement to take place. A good and accurate mailing list often determines the success of direct mail efforts to enhance response rates and control costs. The flip side of direct mail is that people get irritated with unwanted mails and may not open them at all. Such e-mails may be marked as spam and deleted without even being read.
Type # 4. Catalogues:
Product catalogues are another version of direct mail where catalogues show products, along with sizes and colours, and customers can place an order on an order form attached to the catalogue. Catalogues may be in the form of physical booklets or as CD-ROMs. Websites also serve as catalogues. The most common use of this approach involves featuring a variety of products targeting the needs of a specific audience.
People living in remote areas show an inclination to order from catalogues. In the US, catalogues are very common. It is estimated that the average US household receives over 50 catalogues each year, ranging from general merchandise from stores such as Spiegel and J. C. Penney to specialty goods such as Pottery Barn and PC Connection.
Catalogues are also used by a number of business-to-business marketing companies. However, in India, B2C catalogues are not very common and are used rarely because the costs of their production and distribution are very high.
Type # 5. Telemarketing and SMS:
Through telemarketing, people are contacted over the telephone and an attempt is made to sell products and services to them. With the rise of business process outsourcing (BPO) in India, telemarketing has seen an exponential growth. People are contacted on the phone for products from banks, credit card companies, timeshares, etc., as also by sellers of services.
The database is usually the telephone directory, but telemarketing companies also purchase telephone numbers from data aggregators. Successful telemarketing campaigns depend on a good calling list, an effective script and contact structure, and well-trained people that are compensated and rewarded for making calls that result in sales.
Companies also use the short messaging system (SMS) to send messages to their customers. The advantage of SMS is that it is very cheap – bulk SMS costs as little as 1 paisa per message. While many SMS are un-targeted, new technology is able to send sharply targeted messages to customers. For instance, when one goes to a store in a shopping mall, one may receive a discount coupon for spending in that store, thereby encouraging purchase.
However, with telemarketing companies turning aggressive, their calls are increasingly seen as too intrusive. People complain that they receive calls at odd times on personal mobile phone numbers and the sales pitch is also very aggressive. As a result of over- exploitation of the technique, many countries maintain ‘Do Not Call’ registries.
In India, the telecom regulatory authority of India (TRAI) maintains a national do not call registry (NDNC registry) that contains list of telephone numbers of the subscribers who do not want to receive unsolicited commercial communications.
Type # 6. Direct-Response Advertising:
Direct-response advertising comes in two ways – distributing leaflets which carry discount coupons and ‘infomercials’ that are aired on television. Infomercials are long-format television commercials, typically five minutes or longer. They are also known as paid programming or teleshopping, and are shown during non-peak hours.
In the first method, a company distributes leaflets with discount coupons in a locality. Customers can cut these coupons and approach the retail outlet from where they get a discount. Usually, these coupons are distributed along with newspapers but companies may also distribute directly. The Internet also provides discount coupons and a customer can simply print it out or download a code on one’s mobile phone and use the code while buying, in order to get the deal.
The second method is infomercials, i.e., communicating through television, radio, magazines, and newspapers. A product is shown on television, along with illustration of its operation and usage. The prospective consumer watches, hears, or reads about the product or service and calls a toll-free number to place an order. National TV channels air these infomercials during the less popular hours, and dedicated channels, such as HomeShop18, air infomercials on various brands throughout the day and night.
The products offered cover a wide array from computers and digital cameras to medicines for hair growth, and religious products that guarantee the warding off of the evil eye. Such infomercials range from 5 to 30 minutes, during which the product is explained in detail and a demonstration is also given.
Customers can place orders by telephone or through the Internet. A TV commercial, on the other hand, is a short advertisement, usually 10 seconds long, which contains a brief message. It is aired during prime time between programmes and costs a lot.
Type # 7. Kiosk Marketing:
Kiosks are small, stand-alone booths, or computer terminals that are used in areas with heavy foot-fall for marketing purposes. They may be either temporary or permanent. Kiosks give a multiplier effect to the distribution of products and services. Examples of kiosks are computer terminals placed in stores from which customers can place orders on a company.
Such terminals are placed in high traffic sites like airports, railway stations, and popular stores. A combination of these direct marketing techniques may offer the optimal revenue generation solution.
Banks use kiosk marketing by placing automatic teller machines (ATMs) in convenient and high traffic areas. ATMs are now found in shopping malls, airports, and railway stations and serve as kiosks. This works out well for them, as it costs much less for a bank to service a client off-site through an ATM than through a personal banker at a branch of the bank. Through kiosks, banks are able to extend their reach even in areas where they do not maintain branch offices.
Many countries also have e-kiosks, where companies put up dedicated computer terminals on which customers can access the information that they require. For instance, hotels might place such kiosks at airports and railway stations from where visitors can make booking for an accommodation, prices, and route details.
Personal interaction in all the above methods varies. At the same time, the company also has to balance the interaction with the cost to company. Face-to-face sales, for instance, help in establishing customer relationships but are very expensive.
Direct Marketing – Customer Databases Used by Companies
Effective direct marketing begins with a good customer database. The database can be used to locate good potential customers, tailor-made products and services to the special needs of targeted consumers and maintain long-term customer relationships. A customer mailing list is simply a set of names, addresses, and telephone numbers. A customer database contains much more information.
In business-to-business marketing, the salesperson’s customer profile might contain the products and services the customer has bought, past volumes and prices, key contacts, competitive suppliers, status of current contracts, estimated customer spending for the next few years, and assessments of competitive strengths and weaknesses in selling and servicing the account.
In consumer marketing, the customer database might contain a customer’s demographics, psychographics, buying behaviour, and other relevant information. Armed with the information in their databases, companies can identify small groups of customers to receive fine-tuned marketing offers and communications.
Companies use their databases in many ways:
i. They can use a database to identify prospects and generate sales leads by advertising products or offers,
ii. Companies can use a database to deepen customer loyalty; they can build customers’ interest and enthusiasm by remembering buyer preferences and sending appropriate information, gifts, or other materials,
iii. Alternatively, they can use the database to profile customers based on previous purchasing pattern and to decide which customers should receive particular offers.
Like many other marketing tools, database marketing requires a special investment:
i. Companies must invest in computer hardware, database software, analytical programmes, communication links, and skilled personnel,
ii. The database system must be user-friendly and available to various marketing groups, including those in product and brand management, new product development, advertising and promotion, direct mail, telemarketing, web marketing, field sales, order fulfillment, and customer service.
A well-managed database should lead to sales gains that will more than cover its costs.
Direct Marketing – Products Sold through Direct Marketing
Direct selling is popular in B2B situations. In B2C situations, many companies are using the direct route to reach their customers. Some companies sell exclusively through direct marketing. New products, which would not move quickly from retail shelves, are usually introduced through the direct selling route. FMCG companies are using direct selling to achieve deep market penetration.
The products most commonly sold through direct marketing are listed as follows:
i. Health and personal care products – Trial purchase of health and personal care products is encouraged through direct methods. The customer can try the product and get the answers to his queries from the sales representative. Indeed, many companies sell cosmetics and personal care products through direct methods.
ii. Insurance – Insurance is traditionally sold directly. Companies recruit agents to sell policies directly. In recent years, these companies have adopted telemarketing and online selling as well.
iii. Financial services – Selling of mutual funds, granting of loans by banks and finance companies, financial advice, and other related services are sold directly by qualified agents without any middlemen.
iv. Household products – Cleaning and scouring products, kitchen products, and similar products which sometimes require a demo as well, are sold directly. The sales representatives either give demos to individuals or to a group of consumers and encourage trial purchase of such products.
v. Farm products – Catering to the demand of fresh farm products, most cities and towns allow the sales of farm products directly by farmers. They bring the produce directly to consumers and are able to sell at a somewhat cheaper rate than traditional channels.
vi. Luxury products – Many rich and famous people do not like to go to shops but prefer to shop in the privacy of their homes. For such consumers, companies organize ‘trunk shows’ where only select customers are invited or have the show for a single customer only. This method is popular all over the world.
Direct Marketing – Examples of Companies that Use Direct Marketing
Direct marketing firms come in many shapes and sizes. Many individuals start such services in towns and cities, helping companies to launch their direct marketing campaigns. The business is quite disintegrated. Many direct marketing firms are small outfits who act as contractors.
They provide manpower and local information required to conduct direct campaigns. Advertising agencies have also started divisions that provide services of direct campaigns to companies.
Larger companies have their own sales force, while direct marketing companies recruit people locally who act as agents and sell during their spare time. Many foreign companies like Amway, Oriflame, Tupperware, and Mary Kay cosmetics operate in this fashion. These companies are governed by laws. Joint ventures with Indian companies are also governed by laws that must be followed.
Examples of companies that use direct marketing include the following:
i. Eureka Forbes – The company pioneered door-to-door selling of vacuum cleaners and water purifiers in India.
ii. Amway – A direct selling FMCG company which manufactures and sells consumer products. Amway India offers over 115 products in 5 categories—personal care category, home care category, nutrition and wellness category, cosmetics, and great value products.
iii. Tupperware – Manufacturer of innovative and branded plastic products including kitchen storage, food products, canisters, containers, freezer bowls, water bottles, and other goods.
iv. Mary Kay Cosmetics – Mary Kay Cosmetics sells a range of skin care, make up, body care, and fragrances. It offers women a chance of selling Mary Kay cosmetics and become independent. It has a mission statement, ‘Enriching Women’s Lives’.
Companies that use direct marketing along with other marketing channels include:
i. Dell Computers:
Dell pioneered direct selling of personal computers. Customers could configure their machines on the Dell website or by telephone and order it for quick delivery. In 2007, Dell started selling its desktop and notebook computers in retail locations like Walmart. It is also selling some of its notebook and desktop computers in more than 900 Best Buy stores across America. Dell products are now available at retail stores in India as well.
ii. Bata India Ltd:
Bata India has stores all over India selling a range of footwear and fashion products under the brand name ‘Power’. It started an online store that provides consumers the option of browsing the range of footwear sold by it and buy them online.
An online travel portal, Yatra has opened offices in various parts of the country to provide services directly to customers. Thus, the company can offer a ‘cash on delivery’ option for tickets, booked online in the cities where it has offices. The offices also help in attracting customers who have queries and also help organize customized tours.
iv. Hindustan Unilever Ltd:
The FMCG giant Hindustan Unilever Ltd (HUL), which sells through indirect channels, has its own direct selling arm as well. Launched in 2003, Hindustan Unilever Network (HULN) is a multi-brand direct selling business. HULN’s multi-level direct selling module provides training and support through HULN Centres and HULN Academy.
This module, pioneered by Unilever, is known as Partnership Marketing. It provides an opportunity for the unemployed to become agents and earn their livelihood. It has helped the company to expand into rural areas through its Project Shakti and also helped in social upliftment.
Direct Marketing – Overview of Direct Marketing in India
Direct marketing in India consists of small firms that provide local services and act as contractors to big companies. Event management companies assist in BTL campaigns. Direct sales companies operate through their own salesmen or agents, while advertising agencies have their own direct marketing divisions. Some companies undertake direct marketing activities on their own in addition to other channels.
The various types of direct marketing companies include the following:
i. Small direct selling firms – Local firms who supply manpower and act as contractors to bigger companies who take up direct marketing campaigns.
ii. Event management companies – Specialize in organizing events in towns and cities. They also take up campaigns on contract basis.
iii. Direct sales companies – Companies that operate only through direct selling route, like Amway, Tupperware, Mary Kay Cosmetics, and others.
iv. Arms of advertising agencies – Advertising agencies have their direct marketing arms like Mudra Max and HT Direct which organize direct marketing campaigns for their clients.
v. Multiple channel route – Companies take up direct marketing along with existing channels to increase their penetration.
The Indian Direct Selling Association (IDSA)—Ernst & Young Annual Survey 2009-10 estimated the size of India’s direct selling industry to be Rs. 4,120 crore for the year 2009-10, representing a 24 per cent growth over the previous year.
The industry is growing rapidly, showing the preference of many companies to take the direct marketing route. The organized sector accounted for Rs. 3,750 crore and the unorganized sector for Rs. 370 crore.
Companies increased their product coverage with four different product categories being marketed by more than 30 per cent of the surveyed companies. These are health, personal care, household goods, and consumer durables. Health was the most prominent category, encompassing nearly 47 per cent of the entire market size and involving nearly 35 per cent of the major direct selling companies. Health and personal care categories saw robust growth of 74 per cent and 66 per cent, respectively.
IDSA estimates that the direct selling industry would grow to Rs. 7,100 crore by 2012-13. Southern India was the hub of the direct selling activity followed by western India. The presence of a large base of independent sales consultants combined with a high level of awareness of the direct selling concept contributed to the growth of direct selling in southern India.
Revenues from tier-II cities and others reported a robust growth, increasing from 14 per cent of the overall market in 2008-09 to 38 per cent in 2009-10. However, the share of metros reduced from 57 per cent to 38 per cent in the same period. The contribution of tier-I cities also went down from 29 per cent to 24 per cent of the total market in the same period.
A key impact made by direct selling activity is visible in the number of independent sales consultants (ISCs) currently participating in the industry. Over 3 million individuals are involved in direct selling activity across India compared to 1.8 million in 2008-09. Of these, 2.1 million ISCs were women (up from 1.2 million in the previous year), indicating that women are able to enhance their income through direct marketing. In fact, women form the core of the industry worldwide, with 67 per cent in Asia/Pacific, 82 per cent in Europe/ Africa, and 83 per cent in US/Canada.
The growth of the industry is expected to continue in the future. Bigger companies have tried to increase penetration through direct marketing. Small and startup companies would also add to the pie of direct marketing in their effort to try and reduce their media costs through direct marketing campaigns.
Mass media advertising has emerged as a new trend in the industry. Companies are realizing the impact of advertising campaigns to gain customer attention and brand recall. With growing Internet penetration and increase in the number of people using the web, web-based ordering portals have caught the attention of companies. Even as the customer can order online, the sales are routed through an independent sales consultant to prevent any channel conflict.
Some of the key findings of the IDSA-Ernst & Young Annual Survey are summarized as follows:
1. Product coverage has increased with four different product categories covered by more than 30 per cent of the surveyed companies, compared to two categories in 2008-09.
2. The four product categories are health, personal care, household goods, and consumer durables.
3. While fewer companies are present in the category of household goods and select consumer durables, they have shown strong growth of 24 per cent and 12 per cent, respectively.
4. South India remains the hub of the direct selling activity, followed by western India.
5. Smaller towns emerged as key markets at 38 per cent of overall industry value.
6. New trends emerged—rural focus, advertising, and web-based ordering.
7. Direct selling industry is expected to reach Rs. 7,100 crores by 2012-13.
Why direct marketing?
A major reason that companies use direct marketing is that it is cheaper. Media costs have increased rapidly, so that only companies with deep pockets can buy space in popular media during prime time. Most of this spend is also wasted as the message goes to a large number of people who are not part of the company’s target audience. As such, direct marketing is a one-to-one method, and may turn out to be cheaper in approaching potential customers.
Further, it allows companies to build relationships with customers. In the 1980s, database marketing was one of the buzzwords of the direct marketing industry. Known by many names such as relationship marketing, relevance marketing, or bonding, the common theme of database marketing was—and still remains—strengthening relationships with existing customers and building relationships with new ones.
It has other advantages too and that is the reason that companies are taking the direct marketing route. They can reap the many advantages through direct marketing.
Advantages of Direct Marketing:
i. Cost Savings – Direct marketing is much cheaper than mass marketing. It costs less to communicate with individual customers rather than to buy advertising space in the print media or television. Much of the media spend is wasted, as mass media goes much beyond the targeted market. In contrast, sending e-mail or SMS messages costs next to nothing.
ii. Focused targeting – Through direct marketing, manufacturers can achieve focused targeting. They can choose to sell in a particular geographical area, or identify prospective customers on the basis of age, education, income group, and so on. This means that such campaigns will get better success rates.
iii. Multiple uses – Direct marketing can be used to test new markets or for the trial of new products. Samples can be distributed and customers can be encouraged to buy/use trial packs. Direct marketing is also used to reward existing customers, to offer loyalty schemes, and to collect information for future campaigns.
iv. Repeat sales – Once a customer has been acquired, companies can benefit from highly profitable repeat sales. Offers can be customized for repeat customers and a relationship can be built with them. It is a way to build customer equity.
v. Control and accountability – Results can be measured directly as the company knows how many people were contacted. Conversion rates are easily calculated, and efforts can be made to improve these rates.
vi. Flexibility – It is easier to modify the sales plan or the sales pitch in direct marketing campaigns at any time. Thus, such campaigns are flexible. In mass media campaigns, changing plans mid-stream is often a difficult task and consumes much time, energy, and money. In telemarketing, the results of a conversation can be logged immediately and scripts adjusted instantly to improve results.
vii. Quick delivery – Many companies ensure that deliveries are made within a few days of the booking of the order; this being done by delivering through a local depot or distributor, thus, serving the customer better.
viii. Better customer relationships – Companies often try and build a relationship with customers through sales personnel. From the outset, companies have a direct relationship with customers—whether they are approached by salesmen or catalogues—which can also be used as part of a push/pull strategy to stimulate demand for retailers.
ix. Digital targeting – Companies can have different messages for different users based on their prior usage of particular sites. Websites can display different images to different users and send customized offers by personalizing mailers.
Disadvantages of Direct Marketing:
Though direct marketing has several advantages, it has to be used properly to be effective. At the outset, the efforts of some companies to connect with their customers are rather crude. Repeated SMS messages, fake prize draws, spam e-mail, and persistent telephone calls are likely to turn away even the most loyal customers.
Direct marketing means targeted customers, but when companies buy mailing lists from data suppliers and send messages to everyone, the very purpose of direct marketing is lost. ‘Think of the junk mail clogging your letterbox, or those annoying cold calls during supper, and direct marketing seems a modern curse’, wrote The Economist (1999), adding that many attempts at direct marketing remain crude.
A direct marketing campaign requires a refined and updated database. Misspelt names and wrong addresses add to costs. Britain’s Direct Marketing Association admits that its members spend £30,000 a year sending mailings to dead people. Yet, the task of updating and maintaining databases is either not done or left to disinterested employees.
Mentioned below are some of the disadvantages that direct marketing has:
i. Privacy Issues- Today, customer habits can be tracked through Internet cookies and data mining. As data collection techniques improve, concerns have been raised about customer privacy. For instance, the health data of a person may be sold to an insurance company, who may then charge higher premium from him. Companies may refuse to offer jobs to candidates who have posted about their habits on social networking sites. Concerns about privacy are being raised all over the world, including in India.
ii. Lack of Trust- Aggressive selling by salesmen has caused people to start distrusting them. As a result, many people are loath to open doors for salesmen, and some residential areas actively restrict their entry. Telemarketing companies have to counsel their employees who cannot cope with rude customers angered by unwanted calls.
iii. Unread Mail- Much of direct marketing messages are unread. Mailers are thrown away without being opened, and in the case of e-mail, the messages are delivered in spam folders, never to be read, and are deleted automatically.
iv. Municipal Laws- Laws in many urban areas prohibit the distribution of leaflets and putting up stalls to distribute information. Many direct marketing companies have been fined for organizing events in markets without taking appropriate permissions. This is a major disadvantage as many customers cannot be reached otherwise.
v. Measurement Techniques- Metrics exist for measuring the reach of the media and marketing managers can assess the number of people their message is reaching. Direct marketing involves a much longer-term strategy where the results are uncertain. It is often unclear whether direct marketing is alienating more customers than it is creating.
vi. Volumes- Direct marketing cannot generate the volumes that mass production requires. Direct marketing is a slow process and is best suited for small manufacturers or suppliers of niche products. To achieve volumes, companies have to depend on mass marketing techniques. For instance, the direct marketing company, Amway, aims to achieve large volumes in India. To do this, in 2007 the company started using mass marketing methods, running its first TV commercial; it also advertises in the print media.
vii. Delivery Delays- Companies book orders either through direct sales or through the Internet and, if the product is to be dispatched from the factory, there may be delays in delivery. If the local depot is out of stock, the re-ordering process may take some time. In such cases, customers may lose patience and ask for their money back. Moreover, sending individual packets have the danger of delayed deliveries, damages in transit, or wrong deliveries. Direct marketing companies must be geared to tackle such issues on a real time basis or they may earn bad publicity.
viii. Inappropriate Claims- Sometimes companies may make exaggerated claims to book sales. When customers get the actual product, they may find that the product does not match the image or promise made by the company. This may cause problems for the company as claims may be made in consumer courts.
ix. Guarantees- Some products require after-sales service and companies also provide guarantees to customers. But when companies send goods directly to customers they often do not have facilities to provide an after-sales service in all geographical areas. Further, if the customer looks for replacement, he will have to send the goods back to the company. These considerations limit direct marketing efforts.
x. Operator Credibility- According to IDSA, lack of barriers to entry, coupled with absence of a robust regulatory mechanism, have made the direct selling space in India vulnerable to fly-by-night operators whose sole purpose is to maximize their revenues through membership fees without generating actual product sales. Such schemes end up eroding the trust of the people.
xi. Trained Personnel- Attrition rates in direct marketing companies are traditionally very high. Retaining quality human resources and constantly motivating them is another key challenge that companies in the direct selling space face today. The problem is further compounded by the fact that very often individuals leave networks, taking entire teams of people with them. This leads to greater costs, such as the ones due to repeated training requirements.
xii. Complaint Handling- Many companies do not have systems for complaint handling. The salesman sells the product but when the customer approaches the customer care department, either he/she is unable to get through, or is not given a satisfactory reply. A look at complaints posted on the Internet shows companies lack in this, which prevent them from building sound customer relationships.
Due to the aforesaid reasons, companies need to continue building trust and lasting relationships with their customers. The industry has to focus on developing and selling differentiated products that address customer issues and can leverage the power of modern tools such as mobile and Internet connectivity to reach out to customers.
Companies also need to focus on building human capital to improve prospects of sales consultants in the industry and reduce attrition. In order to build long-term relationships with customers, it is important that companies retain their sales personnel. A sales person leaving a company means that he takes the customer database with him.
Direct Marketing – Comparison with Multi-Level Marketing
Direct marketing should not be confused with multi-level marketing (MLM) schemes. Direct marketing schemes are those in which a person is recruited by a company to sell products of the company on part- or full-time basis. He earns commission and incentives on the quantity of business achieved.
MLM is also known as network marketing and referral marketing. MLM schemes recruit office goers and encourage them to sell to their friends on a part-time basis and generate extra income for themselves. In MLM schemes, people pay a fee to become members and each salesman appoints sales people under him. As more people join in, there is more money to go around.
The sales force is compensated not only for sales they personally generate, but also for the sales of the others they have recruited. Thus, a pyramid of sorts is created, with a hierarchy having multiple levels and multiple levels of compensation. The higher a person is in the hierarchy, the more commission he earns through the efforts of others lower down in the system.
However, pyramid schemes are not successful in the long run because no operation can earn such large commissions as to be given at various levels of sellers.
Pyramid schemes are also known as Ponzi schemes. These schemes have little or no legitimate earnings and depend on a constant flow of money from new recruits to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of recruits cash out. Many investment schemes in the past have operated in this fashion and collapsed.
In India, as in other countries, pyramid companies have been involved in many scandals. Sales people are recruited by offering hefty commissions and promise of earning large sums of money. The commissions are paid for a few months but then the companies close down and the promoters vanish, leaving the investors in a lurch.
Direct Marketing – Changing through Mass Customization Technique
Direct marketing is changing in important ways. As companies build a ‘learning relationship’ with their best customers, they try to improve it with every transaction, keeping a record of customer preferences in detail. As computers become cheaper, every preference is registered and is used to encourage the customers to buy more. For instance, amazon.com recommends books to customers based on their past choices.
It not only tracks the books purchased by a customer, but also keeps a record of the ones that are browsed but not bought, to help it recommend other books to you. Information from its e-book reader, the Kindle, is probably even richer – how long a user spends reading each page, whether he takes notes and so on. Through data mining, or the digital trail left behind as people browse the Internet, companies get a very good idea about the profile of individuals.
Other companies are also compiling masses of data on people, their activities, their likes and dislikes, their relationships with others, and even where they are at any particular moment. For example, Facebook tracks the activities of its 400 million users, half of whom spend an average of almost an hour on the site every day. Google and eBay too collect personal information through data mining.
How is this data used? Companies may use the stored data to get rid of service-intensive customers. Telephone companies use their database to sell additional services to the most likely customers—young adults can be sold value-added services and corporate users can be sold mobile Internet packages.
The future of direct marketing is mass customization. For instance, Dell sells customized computers by allowing customers to configure their own systems and simply ships them the box. Such initiatives will increase as companies begin to serve customers as per their individual choices.
Levi Strauss has introduced web-linked kiosks in its stores, where customers can design their own pair of jeans, choosing their styles, colours, shapes, and sizes. The information is instantly relayed to its Tennessee factory, where the jeans are cut individually. Japan’s National Bicycle Company turns out bikes in any size, colour, or style without any increase in costs or delivery time.
Direct marketing is also changing in many ways, thanks to technology. Flexible computer- aided manufacturing systems allow companies to produce custom output. Such systems combine the low unit costs of mass production with the flexibility of individual customization. Mass customization is the new frontier in business competition for both manufacturing and service industries.
Companies can, thus, have a tremendous increase in variety and customization without a corresponding increase in costs. It may be defined as the mass production of individually customized goods and services.
Mass customization is already working in the music industry. Do-it-yourself compilation CDs enable customers to create their own playlists from the entire catalogue of songs. This has become very popular, as it attracts people who don’t enjoy record stores and people who feel ripped off by filler tracks on compilations available in music stores. Websites such as www(dot)hamaracd(dot)com (a division of Saregama) allow customers to audition tracks and put those they want into their playlist. When the credit card order is confirmed, an e-mail is automatically dispatched to the server, which copies the recordings from the hard disc and makes a disc image.
A blank CDR is lifted into the burner, burned, and then lifted to the printer for the customer’s track listing and dedication to be printed onto the surface. Another server keeps a track of the royalties owed to performers for each sale of their recording. The only human intervention comes in packaging the CD.
Mass customization is also offered to customers while buying stationery, mugs, T-shirts, mouse pads, and similar products. One can choose from clickable graphics on screen, and select the options and web forms, and receive delivery of customized stationery.
Such systems are likely to increase the role of direct marketing systems in the future. The challenge facing marketing companies is how to provide individually for the next generation of demanding customers. The paradigm of mass production is shifting away.
Direct Marketing in Pharma Industry
The innocent-looking red letter-box of any street corner is the world’s most widely used advertising medium. In the West, more and more money is being spent on direct mail advertising. In the US, a significant 11% of total ad expenses are being spent on direct mailings.
The most important constraint on direct mailings in India is the lack of data-bases of good quality.
A data-base or a mailing-list is the list of the names and addresses of specific target segments, e.g.:
(i) Doctors of category A, B, C
(v) Clinical/non-clinical labs etc
There are few efforts in India to organise data bases. The lists do not have even minimum demographic details. O & M has set up O & M Direct for direct marketing since 1987.
Let us remember that direct is though a still new media for other businesses has been quite established in the pharma industry.
Direct marketing is much more demanding in terms of detailing at every stage than any other method of promotion.
Acolytes of direct marketing herald it as the new messiah and the panacea of all marketing evils. Others are less generous and call it derisively as ‘junk mail.’ All said and done, it is true that direct marketing is the ‘in’ thing today. What Ries and Trout did for positioning, Rapp and Collins seem to have done for direct marketing?
Does direct marketing work? Sure it does. At least 40 per cent success in direct marketing can be attributed to getting the target (database) right. The rest, say 30 per cent depends on the communication offer (or the incentive) and another 30 per cent on the creative communication of the offer to the identified individual/doctor.
Direct Marketing – Advantages and Disadvantages
Direct marketing is a form of advertising where organizations communicate directly to customers through a variety of media including cell phone text messaging, email, websites, online adverts, database marketing, fliers, catalogue distribution, promotional letters and targeted television, newspaper and magazine advertisements as well as outdoor advertising. Among practitioners, it is also known as direct response.
Advantages of Direct Marketing:
There are a range of advantages of direct marketing, these are summarised below:
1. Builds loyalty – A well-run direct marketing campaign can build brand loyalty by continual brand messaging on direct marketing channels. This is particularly effective where multichannel messaging is used, e.g. Email, direct mail, SMS, etc. all in one consistent joined-up coherent campaign.
2. Direct – As the name suggests this technique is direct. This engagement directly with the customer eliminates price hikes due to “middle men” and provides a direct approach. This has benefits as the organisation is totally in charge of the contact and can apply in-house CRM techniques to effectively manage the relationship.
3. Effective – Direct marketing when managed well has a long-standing reputation for high profitability and great ROI
4. Monitorable – Tracking and monitoring can be put in place to effectively analyse the results of a campaign. Strengths can be accentuated and weaknesses eliminated, with a view that through continual tweaks/enhancements campaign ROI and metrics will only continue to grow in the medium-long term
5. Personalised and targeted – Direct marketing can be personalised based on actual experience of working with a customer and/or socio-economic factors. Even for prospects personalisation can achieved through techniques such as customer segmentation and data profiling.
6. Reduced competitor awareness – Competitors will have a much lower level of awareness with direct marketing as it is direct to the customer. Other marketing techniques such as TV, Radio, Internet advertising, etc. are public and open to counter-moves by competition.
Disadvantages of Direct Marketing:
There are some disadvantages of direct marketing, these are summarised below:
1. Environmental impact – Some of the direct marketing channels are associated with having an environmental impact (most noticeably direct mail). This can be reduced by targeted direct mail campaigns and using environmentally friendly materials. This marketing technique is no worse than many indirect marketing methods (e.g. billboard posters)
2. Image impact – It’s a common perception that image can be adversely affected by some direct marketing campaigns (direct mail and telemarketing in particular). Whilst this is true for poorly managed campaigns, the effects can be avoided by ensuring contacts are opted-in and happy to receive marketing messages (which is beat practice anyway!)
3. Limited reach – This is a “perceived” disadvantage of direct marketing to many. The limited reach is due to the fact that mass broadcast techniques (e.g. TV, Radio, Internet Advertising, etc.) are not used. Although it’s true the reach is less, the reach achieved is more specific and targeted. Reach can be extended by buying high-quality targeted opt-in additional contacts from reputable sources such as Baker Goodchild.