Transcript moriarty8e_overheads_15

Advertising Principles
and Practices
Direct-Response
Marketing
The Gecko Goes Direct
• The GEICO spokes-creature gets
attention and communicates a
marketing-savvy audience.
\ advertising including
• Heavy TV
the cavemen and customer with
celebrity testimonials prove
that direct response sell a
to a broad audience.
• Their share of premiums
grew from 4.6–6.25%
from 2001 to 2005.
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What is direct marketing?
• A multichannel system of marketing using various
media to connect sellers and customers who deal
with each other directly rather than using an
intermediary, like a wholesaler or retailer.
• Designed to elicit an immediate response.
• Uses marketing research to develop strategy.
• Builds databases to target customers, prospects.
• Uses a variety of media, including new media.
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Direct Marketing Industry
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Advantages of Direct Marketing
• Can be personalized to be more
persuasive.
• Results are measurable; ROI is
more easily known.
• Relevant customer information
can be collected to produce more
useful databases and selective
reach, reducing waste.
• Convenient to purchase; not
restricted to a location.
• The marketer (not wholesaler or
distributor) controls product until
delivery.
• Advertising with direct-mail
components is more effective.
• Flexibility in form and timing.
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Disadvantages of Direct
Marketing
• Consumers are reluctant to
purchase a product they
can’t touch or feel.
• Annoyances associated
with direct marketing
(junk mail, telemarketers).
• Customer privacy, data
sharing, and identity theft
issues.
• Tension between building
long-term brand image and
driving short-term sales.
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The DirectMarketing
Process
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Database Management Process
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Key Players: (1) Advertisers
• Companies whose
primary business is
selling products and
services by mail or phone,
or direct response
advertising.
• Retail stores who use
direct marketing as a
supplement to other forms
of marketing.
• Dell, GEICO.
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Key Players: (2) Agencies
• Advertising agencies—
department or separate
direct-response company
owned by the agency.
• Direct marketing agencies —
independent, full-service
agencies specializing in
direct response.
• Service firms—printing,
mailing, list brokering, data
management.
• Fulfillment houses—
store/ship requested
information/products.
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Key Players: (3) Media Companies
• The media that deliver messages by phone,
mail, or the Web.
• Used to make an offer with a prospect
– U.S. Postal Service
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Key Players: (4) Customers
• Dislike intrusiveness, but appreciate
convenience
• Types of customers
– Push-button shopper (phone)
– Mouse-clicking shopper (computer)
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The Tools of Direct Marketing:
(1) Direct Mail
• A print advertising
message for a product or
service, delivered by mail
• Most popular method
• Variable data use digital
printing to highly
personalize messages
• Uses bulk mail rates
• Response is 2–3%
• Fairly high CPM, but
easy to calculate payout
rate
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Table 15.1
Advantages of Direct Mail
Advantages
Description
Tells a story
The medium offers a variety of formats and provides enough space to tell
a complete sales story.
Engages attention
Because direct mail has little competition when it is received, it can
engage the reader’s attention.
Personalizes message
Because of the use of databases, it is not possible to personalize direct
mail across a number of consumer characteristics, such as name,
product usage, purchase history, and income.
Builds in feedback
Direct mail is particularly conducive to marketing research and can be
modified until the message design matches the needs of the desired
target audience.
Reaches the unreachable
Direct mail allows the marketer to reach audiences who are inaccessible
by other media.
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Table 15.1
Disadvantages of Direct Mail
Advantages
Description
Negative perceptions
The main drawback of using direct mail is the widespread perception that
it is junk mail. According to a Harris-Equifax Consumer Privacy Survey,
about 46% of the public see direct-mail offers as a nuisance, and 90%
consider them an invasion of privacy.
Cost
Direct mail has a higher cost per thousand than mass media. A great
deal of this high cost is a result of postage. (However, it reaches a more
qualified prospect with less waste.) Another cost factor is the
maintenance of the database.
Mailing list
To deliver an acceptable response rate, the quality of the mailing list is
critical. It must be maintained and updated constantly.
Response rates
Because of the changing nature of mailing lists, as well as the difficulty of
keeping relevant data in the database, the response rate can be a slow
as 2 or 3%. Even with that low response, however, database marketers
can still make money.
Vulnerability
Direct-mail delivery is vulnerable to natural disasters as well as
catastrophes such as the 9/11 terrorist attacks.
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The Tools of Direct Marketing:
(2) Catalogs
• A multiple-page direct
mail publication showing
a variety of merchandise
• Increasing in number;
even while marketers are
refining databases, cutting
back on number of
recipients
• Catalogs can drive
e-commerce, Web site
purchases
• Specialty catalogs are
growing in number
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Table 15.2
Advantages and Disadvantages of Catalogs
Advantages
Description
Targeted
Can be directed at specific market segments.
Engages attention
Employs high-quality design and photography (see Alsto’s cover).
Complete information
Extensive product information and comparisons are provided.
Convenience
Offer a variety of purchase options.
Disadvantages
Description
Negative perceptions
Catalogs are viewed as junk mail by many recipients.
Costs
The cost per thousand of catalogs is higher than mass media.
Response rate
The response is relatively low at 3 to 4%.
Mailing list
Databases must be constantly maintained.
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The Tools of Direct Marketing:
(3) Telemarketing
• Almost as persuasive as
personal sales, but a lot less
expensive.
• Inbound vs. outbound
• Message must be simple,
compelling, and short
• Issues include intrusion,
privacy, and fraud
– Predictive dialing can call even
unlisted numbers
– Fraudulent behavior has
tarnished telemarketing’s image
– Do Not Call registry, “Privacy
Manager,” and Caller ID restrict
access by telemarketers
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The Tools of Direct Marketing:
(4) Direct-Response Advertising
• Print Media
– Ads in newspapers and
magazines feature a coupon,
order form, address, toll-free
number; ask for response
• Broadcast Media
– Radio provides targeted
audiences, especially mobile
audiences
– Cable is targeted to particular
interests
– TV uses infomercials and
direct-response ads
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The Tools of Direct Marketing:
(5) Internet
• Combines strengths of direct
mail and telemarketing
• Moves marketers closer to
one-to-one marketing.
• Combines database
information and email
technology for highly
personalized, low-cost
messages to mass audience.
• Spam is an issue.
• Permission marketing gives
recipients the choice to “opt
in” or “opt out.”
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Publishing as Prentice Hall
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