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PRINCIPLES OF MARKETING
University of Management and Technology
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Module 14: Direct and Online
Marketing: Building Direct
Customer Relationships
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Copyright Warning
This presentation is the intellectual property of Pearson Education
Inc. 2011. Students are hereby advised that they may not copy or
distribute this work to any third party
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Rest Stop: Previewing the Concepts
Define direct marketing and discuss its benefits to customers and
companies.
Identify and discuss the major forms of direct marketing.
Explain how companies have responded to the Internet and other
powerful new technologies with online marketing strategies.
Discuss how companies go about conducting online marketing to
profitably deliver more value to customers.
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Overview
the public policy and ethical issues presented by direct
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marketing.
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First Stop
Amazon.com – The Wal-Mart of the Internet
Background
How Did They Do It?
Success: Since its inception in 1995,
Amazon.com has grown to sales of
more than $19 billion today, and profits
have increased 18-fold, with 50% of
sales coming from overseas.
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Merchandise: Amazon has expanded
its merchandise beyond books to
include music, videos, electronics,
tools, housewares, shoes, groceries,
and more. Amazon boasts, “We have
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the Earth’s
biggest selection!”
Customer-driven: Amazon offers a
better store, easier shopping, greater
variety, more information and low
prices. Small retailers can sell via
Amazon. Innovative services include
Amazon Prime, Kindle, music
downloading, & shopping applications
for iPhone.
Customization: Amazon’s site greets
customers by name and offers
personalized, relevant
recommendations. Users can share
opinions and reviews, chat online and
more.
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Direct Marketing
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Connecting directly with
carefully targeted individual
consumers to both obtain
an immediate response and
cultivate lasting customer
relationships.
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The New Direct-Marketing Model
The new direct-marketing model:
Direct marketing has undergone a dramatic transformation.
Most firms use direct marketing as a supplemental channel or medium.
For many companies, direct marketing constitutes a new and complete
model for doing business.
Some firms employ the direct model as their only approach (e.g., Geico,
Amazon, eBay).
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Marketing in Action
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Amazon.com obssesses over making each customer’s experience uniquely
personal. Customers, like author Gary Armstrong, are greeted on their
personalized home page which also features customized recommendations.
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Growth of Direct Marketing
Direct marketing:
Fastest growing form of marketing.
10% of U. S. economy ($ 2.1 trillion) is generated by direct marketing
sales.
Direct marketing sales are expected to grow at 5.3% annually through
2013.
Direct marketing continues to become more Web-oriented and Internet
marketing is the fast-growing form of direct sales.
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Marketing in Action
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Southwest Airlines uses techie direct marketing tools – including a widget and a
blog – to inject itself directly into customers’ everyday lives in a way that media
advertising just cannot achieve.
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Benefits of Direct Marketing
Benefits to buyers:
Convenient.
Easy to use.
Private.
Ready access to products.
Ready access to wealth of
comparative information.
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Immediate and interactive.
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Benefits of Direct Marketing
Benefits to sellers:
Powerful tool for building customer relationships.
Offers a low-cost, speedy way to reach markets, including business
markets.
Offers lower costs, improved efficiencies, and speedier handling of
channel and logistics functions.
Offers greater flexibility.
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Gives access to buyers that could not be reached through other
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channels.
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Customer Database
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An organized collection of
comprehensive data about
individual customers or
prospects, including
geographic, demographic,
psychographic, and
behavioral data.
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Marketing in Action
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USAA uses its extensive database to tailor its services to the specific needs of
individual customers, creating incredible customer loyalty.
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Figure 14.1:
Forms of Direct Marketing
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Forms of Direct Marketing
Direct-mail marketing:
Involves sending an offer, announcement, reminder, or other item to a
person at a particular physical or virtual address.
Largest direct marketing medium.
Well-suited to one-to-one communication.
Use of traditional forms may decline as marketers switch to newer
digital forms.
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Can be used effectively in combination with other media, such as web
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sites.
Often perceived as “junk mail”.
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Marketing in Action
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Combining direct mail with personalized URLs cost JDA only $60,000 but yielded a high
response rate and $13 million in sales.
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Forms of Direct Marketing
Catalog marketing:
Direct marketing through print, video,
or digital catalogs that are mailed to
select customers, made available in
stores, or presented online.
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Forms of Direct Marketing
Catalog marketing trends:
More and more catalogs are going digital:
Minimizes costs, and web space is unlimited.
Allows real-time merchandising.
Print catalogs are still the primary medium.
Drives web traffic and can create an emotional connection to the consumer.
Expected catalog sales in 2013 = $182 billion.
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Forms of Direct Marketing
Telephone marketing:
Accounts for 17% of all direct-marketing driven sales.
Used in both consumer and B2B markets.
Marketers use outbound and inbound calls.
Outbound: Sell directly to consumer.
Inbound: Toll-free ordering or order faxing.
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Do-not-call legislation has impacted
theinfotelemarketing industry.
Many telemarketers have shifted to other forms of direct marketing.
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Marketing in Action
Marketers use toll-free 800
numbers to receive orders
from TV and print ads,
direct mail, or even
catalogs. Direct response
ads always feature a call
to action, as shown in the
ad at right.
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Forms of Direct Marketing
Direct-response TV marketing:
Direct-response television
advertising (DRTV):
TV spots that are 60 or 120
seconds long.
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Ads for products like Snuggies
have become DRTC classics.
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Forms of Direct Marketing
Direct-response TV marketing:
Infomercials:
A 30 minute or longer advertising program for a single product.
Home shopping channels:
Entire cable channels dedicated to selling multiple brands, items, and
services.
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Forms of Direct Marketing
Kiosk marketing:
Information and ordering machines
generally found in stores, airports, and
other locations.
E.g., Redbox operates more than
15,000 DVD rental kiosks nationwide.
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Forms of Direct Marketing
New digital direct marketing
technologies:
Mobile phone marketing:
Mobile ad spending is expected to
grow.
Watch this YouTube video
to see more examples!
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Forms of Direct Marketing
New digital direct marketing technologies:
Podcasts and vodcasts.
Purina Petcasts.
Interactive TV (ITV):
Viewer engagement is much higher than with regular TV ads.
Online marketing is the final form of direct marketing.
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Online Marketing
Company efforts to market
products and services and
build customer relationships
over the Internet.
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Online Marketing
Marketing and the Internet:
Usage continues to grow with
Internet household penetration
equaling 72.5%.
33% of American consumers chose
the Internet as the second-mostessential medium in their lives.
Online marketing efforts are
expanding.
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Online Marketing
Click-only companies:
So-called dot-coms, which operate only online without any brick-andmortar presence.
Types of click-only firms:
E-tailers (Amazon).
Search engines and
portals (Google).
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Transaction sites (eBay).
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Content sites (ESPN).
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Online Marketing
Click-and-mortar companies:
Traditional brick-and-mortar
companies that have added online
marketing to their operations.
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Online Marketing
Click-and-mortar business trends:
Almost all traditional companies have set up their own online sales and
communication presence.
Many click-and-mortar firms are having more online success than their
click-only competitors.
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Figure 14.2:
Online Marketing Domains
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Online Marketing
Business-to-consumer (B2C) online marketing:
Businesses selling goods and services online to final consumers.
Trends:
Online buying continues to grow.
The Internet influences 35% of total retail sales; 50% of US households
shop online.
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B2C consumers differ from off-line consumers because customers
initiate and control the Internet exchange process.
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Marketing in Action
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People now go online to buy just about anything. Where else but the Web could
you find a place that specializes in anything and everything bacon?
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Online Marketing
Business-to-business (B2B) online marketing:
Businesses using B2B Web sites, e-mail, online catalogs, online trading
networks, and other online resources to reach new business customers,
serve current customers more effectively, and obtain buying efficiencies
and better prices.
Most major B2B marketers offer online product information, purchasing,
and support.
Many firms use the Internet to build stronger customer relationships.
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Online Marketing
Consumer-to-consumer (C2C) online marketing:
Online exchanges of goods and information between final consumers.
Auction sites such as eBay offer marketplaces to buy or exchange
goods.
Blogs and forums facilitate information interchanges.
Marketers are tapping into blogs as a medium for reaching carefully targeted
consumers.
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Firms should monitor blogs for what is being said.
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Online Marketing
Consumer-to-business (C2B) online marketing:
Online exchanges in which consumers search out sellers, learn about
their offers, and initiate purchases, sometimes even driving transaction
terms.
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Marketing in Action
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GetSatisfaction.com has created a user-driven customerservice community where can discuss product and service
problems.
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Online Marketing
Corporate web sites:
Marketing web sites:
Designed to build customer
goodwill, collect customer
feedback, and supplement other
sales channels, rather than to sell
the company’s products directly.
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A web site that
engages consumers in
interactions that move them closer
to a direct purchase or other
marketing outcome.
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Online Marketing
Corporate web sites:
Marketing web sites:
Designed to build customer
goodwill, collect customer
feedback, and supplement other
sales channels, rather than to sell
the company’s products directly.
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A web site that
engages consumers in
interactions that move them closer
to a direct purchase or other
marketing outcome.
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Figure 14.3:
Setting Up for Online Marketing
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Online Marketing
Online marketers should pay careful attention to the seven Cs of
effective Web site design:
Context.
Content.
Community.
Customization.
Communication.
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Connection.
Commerce.
Constant change helps encourage repeat visits.
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Fuel For Thought
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Visit the www.nps.gov web site.
How well does this web site fulfill the 7 “C’s” of effective web site design?
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Online Marketing
Placing ads and promotions online:
Forms of online advertising (follow link for examples):
Banner ads.
Interstitials.
Pop-up or pop-under ads.
Rich media ads.
Search-related ads (contextual advertising).
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Online Marketing
Placing ads and promotions online:
Other forms of online promotion:
Content sponsorships (sponsoring special content).
Alliances and affiliate programs (work with firms to promote each other).
Viral marketing (Internet version of word-of-mouth).
Burger King’s Subservient Chicken campaign was a huge success.
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Marketing in Action
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OfficeMax’s ElfYourself.com viral web site logged 193 million visits with no
promotion at all. One-third of the site’s visitors were influenced to shop at
OfficeMax.
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Online Marketing
Creating or participating in online social networks:
Also called web communities.
E.g., MySpace, Facebook, YouTube.
Marketers can participate in existing online communities or set-up their
own.
More focused niche social networks are emerging which can be used to
target special interest groups.
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Online Marketing
Using e-mail:
79% of all direct marketing campaigns employ e-mail.
Enriched e-mail messages can grab attention.
Spam accounts for 90% of all e-mail sent.
Permission-based e-mail marketing is key.
E-mail can produce an ROI 40-50% higher than other forms of direct
marketing.
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Marketing in Action
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StubHub no longer spams indiscriminately. It now lets customers opt in for e-mail,
and sends only event and ticket information that is relevant to consumer interests.
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Public Policy and Ethical Issues in Direct
Marketing
Irritation, unfairness, deception, and fraud:
Direct marketing excesses may offend consumers.
Direct marketing has been accused of taking unfair advantage of
impulsive or less sophisticated buyers.
Internet fraud and phishing are growing concerns.
Internet shoppers have online security concerns.
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Marketers often find it difficult to restrict access by vulnerable or
unauthorized groups.
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Marketing in Action
Internet fraud has increased
dramatically in recent years.
The FBI’s Internet Crime
Center provides consumers
with a convenient way to alert
authorities to suspected
violations.
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Public Policy and Ethical Issues in Direct
Marketing
Invasion of privacy:
Database marketing allows customers to receive offers closely matched
to their interests.
Critics worry whether marketers know TOO much about consumers.
Online privacy (particularly for children) is of particular concern.
If marketers don’t prevent privacy abuse, legislators may step in.
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Fuel For Thought
Many people feel that marketers know more about their current and
potential customers than they really should. How do YOU feel about the
following?
Should credit card companies be allowed to share data with
merchants who accept the cards? What about selling their data to
other businesses?
Is it ethical for credit bureaus to compile and sell lists of people
who have recently applied for credit cards?
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Rest Stop: Reviewing the Concepts
Define direct marketing and discuss its benefits to customers and
companies.
Identify and discuss the major forms of direct marketing.
Explain how companies have responded to the Internet and other
powerful new technologies with online marketing strategies.
Discuss how companies go about conducting online marketing to
profitably deliver more value to customers.
info
Overview
the public policy and ethical issues presented by direct
info
marketing.
Page 54 of 54
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