Transcript Direct Marketing : An Overview

Direct Marketing : An Overview
Ron Rymon
Marketing Communications Program
Spring 1999
IDC, Herzliya
Overview
• What is Direct Marketing
• Direct Marketing vs. General Marketing
• DM Campaigns : Design and Implementation
• The Marketing Database and Applications
• Direct Marketing in the U.S.
Q: What is Direct Marketing?
?
Definition
“Direct Marketing is an interactive system
which uses any advertising media to effect
a measurable response and/or transaction
at any location”
“Where all transactions are recorded in a database”
Direct Marketing Association (DMA)
Interactive Communication
• Two-way communication between marketer
and prospective customer
– In: direct mail, telemarketing, any other medium
– Out: exclusive use of mass media (TV, print)
• A response is required:
– In: marketing effectiveness (# sales, leads, visit)
– Out: communication effectiveness (awareness,
recall)
Measurable Response !!!
• Response/sale is associated with individual
prospect and specific communication
• Effectiveness can be analyzed in order to
improve targeting
• The Marketing Database is cornerstone of
DM activity
Targeted Customer-centric Marketing
• Direct and continuous contact with end-customer
• Relationship marketing
– New customer acquisition is very costly
– 20% of customers account for 80% of revenue
– Customer as the hero, less focus on product and brand
• Targeting best customers/prospects
– one-to-one communication/relationship
• Personalized everything:
– offer, message, media, timing
Only Three Types of Companies
• DM drives the business
– Mail order, catalogs, direct insurance, credit card
• DM drives the marketing strategy
– Airlines, gas stations, dept stores,
• DM used as a communication strategy
– All others
Examples
Examples
•
•
•
•
•
•
•
•
Catalogues
Direct mail, telemarketing
Magazine ads, mail-in cards
Home Shopping Channel (TV, call-in ads)
Internet banners, free sites (register, ad, and refer)
Clubs, negative-option clubs
Promotions, cross-selling to existing customers
Cents-off coupons (newspaper, mailboxes)
Response Required, Info Collected
• Clear offer
– product
– price/discount
• Response required
– mail + toll-free phone
• Collect customer info
– for future offers
Response Cards
• Image ads as triggers
• Enticements to collect info
• Your customer is your best
salesmen
Coupons generate store traffic
• Requires response
– store visits
• Measurable response
– which store
– which publication/distribution
• Entice customer
– often loss-leaders
Clubs
• Loyal customers
– 80-20 rule
– lower cost of sale
• High acquisition cost
– marketing (ads, gifts,
specials), screening
Monthly Selection Clubs
• Negative option
• Personalization
Personalized Offering
DM- vs. Image-oriented Ads
Direct Marketing vs. General Marketing
Direct Marketing is part of the overall Marketing Strategy
General Mktg. vs. Direct Mktg.
• Communication
–
–
–
–
Mass media
Impersonal
Visible to competitors
Controlled by cost
–
–
–
–
Directly to customer
Personal
Less visible
Cost controlled by success
• Customer response
– delayed
– no clear association
– immediately required
– directly associated
General Mktg. vs. Direct Mktg.
• Effectiveness
– Measured indirectly:
awareness, intention to
buy, panels
– Measured directly
• Level of Analysis
– at segment level
• Control
– decision making based on
samples, indirect
measures
– at individual level
– decision making based on
concrete measured results
Summary: DM Key Competencies
• Direct, continuous contact with end-customer
• Precision (cost-effective) targeting
• Personalized offer and message
• Call for immediate action
• Measurable success/failure
• Long term customer relationship
• Less visible strategy
DM Campaigns:
Design and Implementation
Direct Marketing Campaigns
• Target:
– Current customers vs. New customers
• Goal
– Order, and/or Response, and/or Visit to store
• Implementation : Decision variables
– Offer, Creative, Audiences and media,
Timing/sequencing, Customer service
Current Customers vs. New Customers
• Retain best customers
– relationship marketing
• Increase revenue
– entice upgrade
• Target best customers
– based on past response
– personalized offers
• Referrals
• More of same
– based on current best
• New market segments
– also based on current
– testing new ideas
• Acquisition incentives
– based on LTV
Goal(s)
• Sale Generation (order)
– impulse decisions, or identified need
• Lead Generation (response, survey)
– expensive or complex products
– lead qualification (short survey)
• Traffic Generation (visit to store)
– Store coupons, promotional catalog
• and also… Relationship Maintenance
– Product announcement, clubs
DM Decision Variables
• The Offer
• Creative
• Audiences and Media
• Timing (and sequencing)
• Customer Service
The Offer
• Required elements
– product / positioning
– Terms (time frames, payment)
– Risk reduction mechanisms (free return, service,
upgrade)
– Required action
• Optional elements
– Incentives, Multiple offers, Customer obligations
Creative
• Emphasize key selling concept
– need addressed (+/-) and solution
• Overcome primary marketing difficulty
– targeting, consumer price sensitivity, ...
• Choose message strategy
– target market, positioning, benefits, risk reduction
• Indicate desired action !!
• … while adhering to corporate constraints
– legal, consistency, etc.
Choice of Audience
• Input
– Customer database (house file)
– External lists and databases
• Use
– Segmentation techniques to identify and target
key segments, each with own DM mix
– Predictive models to drive mailing/contact
Choice of Media
• Direct mail
– leader in sales to consumers
• Telephone marketing
– leader in business-to-business sales
•
•
•
•
Catalogs
Print media (newspapers, magazines)
Broadcast media (TV, Radio)
Internet !
Other Factors
• Timing
– High recall of problem/need, positive attitude
– Seasonality
• Sequencing
– First info request, then sale/call
– “Curriculum Marketing”
– Pulsing vs. steady flow
• Customer Service
– Make it easy
– Reduce risk
Example: Design a Solicitation Campaign for
a Credit Card Issuer
• Extremely competitive industry in the U.S.
– Most Americans hold several cards
• Significant economies of scale
– In processing, cost of information
• Revenue sources
– Interest on revolving balances
– Use of credit card (merchant fees)
– Usage fees, penalties (consumer)
Example of a Credit Card Solicitation
• Highly
targeted
• Attractive
offer
Example: Define Target Audience and Goal
• Target : “revolvers”
– New customers that carry significant balance
• Goal: direct “sale”
– provide heavy revolvers with our card
– have them transfer their balances to our card
Example: Decision Variables
• Offer
– Risk reduction: pre-approved
– Convenience: hefty line of credit
– Value incentives:
• low interest rate for 6 months
• double points for immediately transferred balance
• Creative
– emphasize savings afforded by lower rate,
convenience of consolidated loan
Example: Decision Variables (cont.)
• Audiences:
– Create profile: extract characteristic features of
revolvers from current customers
– Use credit bureau information to select based
on profile
• Media:
– Direct mail
– Telemarketing to top 5% candidates
Example: Decision Variables (cont.)
• Timing / sequencing
– Telemarketing before direct mail
– Two direct mail campaigns:
• Initial solicitation
• “How much you could have saved if …”
• Customer service
– Just sign your name
– Easy balance transfer procedure
– Service and perks that come with the card
Test, Test, Test !!!
• Very hard to predict success of a given mix
– regular market research methods + experience +
common sense
• Temporal effect
– changing consumer preferences
– natural dwindling of good segments
– new opportunities appear, or are discovered
• Set and evaluate goals: cost of sale/lead/visit
• Use split runs to test new ideas
Survey:
What’s most important to a DM success?
Right Person
Right Offer
Right Ad Elements
Right Timing
20%
10%
50%
20%
“DM Marketplace”, Direct Marketing, 1986
The Marketing Database
The Marketing Database
• Comprehensive collection of interrelated data ...
• Arranged around each customer ...
• Allow timely and accurate retrieval ...
• Support analytical, predictive, operational needs ...
• Serving multiple applications …
Both Strategic and Tactical Applications
• Strategic: Management Level
– Segmentation to design product, communication
– Market Intelligence
– Personalization of product and offering (tactical?)
• Tactical: Operations Level
– Target new/existing customers
– Personalize communication
– Manage resources/risk
The U.S. DM Industry
The U.S. DM Industry
• Total Sales: $1.2T
– Consumer=$685B, B2B=$542B
– grows faster than total U.S. sales, expenditures
• Total expenditure: $153B (8% cagr)
–
–
–
–
–
57.8% of total spending on advertising
More than 50% of telephone call volume is toll-free
Generate leads=56%, order=32%, traffic=12%
Total employment: 23 Million
Internet spending: $275M to 2.8B in 2000 (66% cagr)
DM and General Advertising
(U.S. 97, by media, total $153B, 58%)
100
DM
Other
80
60
40
Other
Radio
Teleision
Magazine
Newspaper
Telephone
0
Direct
Mail
20
Growth of DM-related Sales
(U.S ‘97 $Bil)
1992
1996
1997
1998
2002
Direct Order
161
211
225
238
314
Lead Generation
226
308
331
356
489
Traffic Generation
93
121
129
136
175
Total DM Sales
480
640
685
731
979
Total U.S. Sales
4445
5462
5739
6029
7343
Percentage
10.8% 11.7% 11.9% 12.1% 13.3%
U.S. DM: Return on Investment
• ROI = $8.01 per $1 investment
• Consumer=$8.96, B2B=$7.07
• Media:
–
–
–
–
–
$10.42 for direct mail
$7.31 for telephone
Newspaper=$11.54, Magazines=$8.40
Television=$4.90, Radio=$5.83
Other=$4.80
U.S. DM : Key Industries
• Consumer
–
–
–
–
–
Retailers : dept stores, catalogs
Finance: lenders, brokers, credit card, insurance
Manufacturing: auto, food, home
Services: education, real estate, healthcare
Charity
• Business to Business
– Services: financial, insurance, healthcare
– Wholesalers
• Really: almost every company (see Bressler)
Reasons for Growth
• Social reasons
– Fragmentation of society, individualism
– New communication alternatives
– Consumer sophistication/demands
• Business reasons
–
–
–
–
Need to reach out to more customers
Reduced and accountable distribution costs
Customer loyalty reduces high acquisition costs
Lower technology cost/barriers to implement DM strategy
Other Interesting Facts (DMA)
•
•
•
•
•
•
•
•
70% of U.S. adults order by phone/mail every year
Catalogs are most frequent order generators
Magazines are the most popular DM offering
Direct mail attracts the most DM dollars
Coupons are most common promotion (5.8B/year)
Average consumer receives 21 mail pieces a week
Almost half mailers sell/rent their lists
10% of U.S. adults are members in book clubs
DM and The Internet
• Interactivity
• Measurability
• Low-cost 24-hour communication, customer service
– web site, e-mail
• Virtual communities / clubs
– loyalty
– easy segmentation
•
•
•
•
•
Personalization: communication, offering, coupons
Push technology
Targeted advertising in related sites
Tracking and analysis of web site traffic
Global market reach
19 Things All Successful Direct Marketing
Companies Know (Wunderman)
• Direct Marketing is a strategy, not a tactic
– commitment to getting and keeping best customers
• The Consumer, not the product, is the hero
– product must satisfy their unique needs
• Communicate with each customer/prospect
– segments of one
• Answer the question: “Why should I?”
– incentivize consumer to take an action
• Advertise to change behavior, not just attitude
19 Things All Successful Direct Marketing
Companies Know (Wunderman)
• The next step: profitable advertising
– accountable results, an investment in profits
• Build the “brand experience”
– total service of individual needs, all the way
• Create relationship
– relationships grow, encounters don’t
• Know and invest in each customer’s LTV
– loyal car buyer = $332,000 over life time
• “Suspects” are not “prospects”
– prospects are able, ready, and willing to buy.
19 Things All Successful Direct Marketing
Companies Know (Wunderman)
• Media is a contact strategy
– Out: “reach”, “frequency”, In: “contacts”
• Be accessible to your customers
– so they can tell you what they want
• Encourage interactive dialogues
– listen, let them “advertise their needs”
• Learn the missing “when?”
– Avoid the “Not Now”=“Not This” syndrom
• Create an advertising curriculum
– teach, one step at a time, why your product is superior
19 Things All Successful Direct Marketing
Companies Know (Wunderman)
• Acquire customers intending to loyalize them
– promotions attract wrong buyers, repeat buyers are best
• Loyalty is a continuity program
– retention is cheaper, more effective, than acquisition
• Profit = share of loyal customers, not market share
– 90% of profits come from repeat customers
• You are what you know
– Data is expense, knowledge is a bargain