Introduction to Direct Marketing

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Chapter 1

• Introduction to Direct Marketing

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Mass marketing to one on one

• Mass marketingMass marketing is marketing with
  limited discrimination whereby everyone in the
  targeted audience receives the same message and
  offer to buy goods or services.
• Direct marketing Direct marketing is an
  interactive system of marketing which uses one or
  more advertising media to effect a measurable
  response and transaction at any location.

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Six key elements

• Direct marketing Direct marketing is an
  interactive system of marketing which uses one or
  more advertising media to effect a measurable
  response and transaction at any location.

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Mass marketing vs. direct marketing
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Generation of Change

• Postwar 1950s Australian companies followed a
  production-based philosophy.After the war the
  weapons factories were converted to produce
  consumer and business products such as packaged
  foods,furnishings,office equipment,white goods
  and so on.
• Decade of selling 1960sBy the 1960s there was an
  over supply of many goods in the Australian
  market.warehouses were full of products and these
  far exceeded the needs of an already saturated
  market.

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Generation of Change

• The 1980s deregulation Despite a mild recession
  in the early 1980s there were high wages, high
  inflation and high demand for all sorts of
  products.
• Globalization
• New Marketing Environments
• The last of the millennium The 1990s commenced
  with the worst depression in Australia since the
  1930s. Along with these cuts businesses were
  looking for more cost effective ways of marketing
  their goods and services.

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Media Developments

• Magazine consumption it also has some of the
  largest classified advertising newspapers in the
  world.
• Outdoor media
• Direct mail growth Direct mail growing at an
  incredible rate of popularity as a very
  personalized medium for communication, as is the
  telephone.
• Mass Information

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The database

• Sophistication of computers and software
• Examples
• Visa card
• Motor vehicle service history
• Student records
• Opportunities to gather more information

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Direct Marketing Trends

• Growth of direct marketing
• Direct marketing and the marketing mix

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Direct marketing and the marketing mix

• The term marketing mix describes the combination
  of the 4 elements that are the core of an
  organization's marketing system. When product,
  price, place and promotion are successfully
  mixed, they form a marketing program that
  provides need/want-satisfying goods and services
  to an organization's market.
• Promotional activities form the separate sub-mix
  that we call the promotions mix or the
  communications mix in an organization's marketing
  program.
• Direct marketing is a total marketing system and
  the marketing mix is just as important as it is
  with general/mass marketing.

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Direct marketing strategic activities

• Integrated database marketing sales
  promotion
• Direct mail and mail order
  telemarketing
• Direct response broadcast marketing
  telesales
• Direct response print marketing
  direct selling
• Catalogue marketing
  automatic marketing
• Internet marketing
  online shopping

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The marketing and direct marketing mix
Product mix Features brand benefits packaging quality Place mix Marketing channels
services style warranties size Distribution channels Reach and accessibility transportation
Price mix Offered price Discounts or incentives Special allowance Geographic price penalties Credit terms Promotion mix Advertising Personal selling Sales promotion Public relations
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The Role of Direct Marketing

• Building strong bonds of trust credibility
• Provide up to date market intelligence
• Begins at the prospect stage
• The compelling factor, a call for action
• Coping with Change in the 21st Century
• The Internet and virtual advertising what next?
• The risk is lack of skills to cope
• Potential for information overload

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Summary

• Mass marketing to one to one is about the
  evolution of marketing from targeting the
  millions to targeting a few thousand, and
  yielding similar or better results.
• Direct marketing is more personal, response
  oriented, discreet and measurable.
• One of the most significant influences in the
  growth of direct marketing has been the growth of
  service industries.
• Business are using the latest in technology to
  simplify operations and diminish costs.
• Regulation are changing sometimes.
• Direct marketing is used from the prospecting
  stage through the order taking and delivery stage
  and onto the follow up and repeat business stage.
• The basic philosophical strategy of a marketing
  mix hasnt really changed, but the ratios of the
  elements of that mix have changed to suit the
  more direct approach to marketing.

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Chapter 2

• Segmentation through list selection and database
  management

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Learning objectives

• This chapter gives an overview of the main issues
  involved in the management and development or
  mailing lists and database marketing techniques.

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Content

• Segmentation
• Lists
• List management
• Databases
• Database management

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The importance of good lists

• Mailing lists are the key to success of any
  direct marketing program. Access to a wide
  variety or quality mailing lists in Australia is
  possible
• There is a greater availability of lists than
  ever before, particularly in the business to
  business sector.
• Within this environment there continues to be an
  upsurge in direct in Australia and an increase in
  mailing list activity.

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Types of mailing lists

• Response lists
• Response lists are also known as buyers lists
  or mail order lists. Response lists are made up
  of people who have indicated a willingness to
  subscribe, buy ,donate or respond by mail.
• Compiled lists
• These are names and addresses drawn from
  telephone books, directories, electoral roll,
  registrations at seminars, memberships at
  associations, birth notices, new home owners,
  boats owners, credit card holder, building
  society members, insurance policyholders and so
  on.

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Types of mailing lists

• Business lists
• Business lists, also known as vertical lists,
  are classified by the type of activity.
• House lists
• A house list or internal list is a companys
  own
• in-house list (or database)

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The role of list manager

• In many instances, list owners appoint list
  managers to maintain and promote rental of
  mailing lists. List managers perform all the
  following functions
• Are the clearing house for rental availability,
  that is, initial contact point
• Handle all administration in the rental of the
  list
• Promote them to likely users
• Process list rental orders
• Clear sample mailing pieces with list owner

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The role of list manager

• Clear mailing dates with list owners
• Invoice renters on behalf of list owners
• Collect payments and remit them to list owners,
  less commission/management fees
• Assume responsibility for all promotions
• Provide list owners with regular detailed
  activity reportsincluding invoicing details
• Liaise with other list brokers
• Assume responsibility for the maintenance of
  lists , if required, either in-house or with
  outside computer service bureaus

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List rental sources

• Direct mail house many mailing houses also
  compile and manage mailing lists, particularly
  for industrial markets. This allows them to
  provide one-stop marketing service
• List owners Many list owners rent their lists
  directly to users. However, many list owners
  prefer to leave all rental arrangements to a
  third party, such as a list broker, list manager
  or direct mail house.
• Computer bureaus A computer bureau that
  maintains a mailing list on behalf of an owner
  may have the responsibility of arranging rentals
  to prospective users.

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Placing a list order

• Checklist of information
• The following indicates the type of checklist of
  vital information that should be gathered and the
  questions that should be answered prior to
  placing a list order.
• List description
• Quantity /Selectivity
• Coding applications
• Rental rates
• Deliverability guarantee
• List formats
• List usage
• Delivery instructions

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List rental procedures

• Thirteen steps to successfully renting and using
  a mailing list
• Step One
• You approach the rental contact to discuss the
  list and confirm your desire to rent it
• Step Two
• The rental contact requests a sample of your
  mailing package
• Step Three
• You provide a sample of your mailing package
• Step Four
• The list owner approves the sample

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Thirteen steps to successfully renting and using
a mailing list

• Step Five
• The rental contact prepares and sends the list
  rental agreements to you, the renter
• Step Six
• You check, sign and return the list rental
  agreement to the rental contact
• Step Seven
• The rental contact orders your list selections
• Step Eight
• The ordered address diskette is sent or data
  emailed to the mailing house or list
  manager/broker

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Thirteen steps to successfully renting and using
a mailing list

• Step Nine
• You dispatch the components of your mailing
  package to the mailing house
• Step Ten
• The mailing house assembles and addresses the
  mailing packages and lodges them with Australia
  Post or an alternative carrier
• Step Eleven
• The mailing house invoices you for the processing
  and postage
• Step Twelve
• The rental contact invoices you for the list
  rental charges
• Step Thirteen
• You return the undeliverables dead mail to
  the rental contact

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List Rental Costs, Terms, Conditions

• Rates higher are for names of proven mail order
  buyers
• Rates are lower for inquirers or inactive names
• Rates for high profile personalised contacts may
  fetch as much as 30 above normal
• Electronic media
• Sheet listings (hard copy)

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Mailing List Security

• Storage
• Seeding
• Safeguards against misuse
• General

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List Processing

• Merge/purge A merge/purge program is the
  matching of two or more mailing lists by computer
  to remove duplications so that each addressee
  receives only on mailing piece.
• List suppression

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Mailing list maintenance

• Coding mailing list data
• There are many variables that can be keyed to a
  name and address, such as
• Sex
• Job function title
• Division or department
• Company name
• Telephone number
• Geographics
• Type of product purchased
• Length of time on file
• Source
• Date of last transaction

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Standard Industry Classification (SIC)
Code Industry
01-09 Agricultural, Forestry, Fisheries
10-14 Mining
15-17 Construction
20-39 Manufacturing
40-49 Transportation, Communication, Electric, Gas and Sanitary
50-51 Wholesale Trade
52-59 Retail Trade
60-69 Finance, Insurance, Real Estate
70-89 Services
91-97 Public Administration
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Example
Code Industry Quantity
7310 Advertising 2100
7311 Advertising Agencies 1520
7312 Outdoor Advertising Services 338
7313 Radio, Television Advertising Service 242
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Introducing Databases

• A database is any collection of data organised
  for storage in a computer memory and designed for
  easy access by authorised users
• The data may be in the form of text, numbers, or
  encoded graphics

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A Customer Database

• More than a mailing list
• Evolves over time
• Best way to talk to existing customers
• Means for building relationships with customers
• Ideal for loyalty marketing
• Relevancyinformation and customers
• Right messages for the right people

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What is Database Marketing?

• Creating data records about customers
• Using this data to analyse customer patterns
• Then promote them benefit of brand loyalty
• Use in low cost sales methods (telemarketing etc)
• Subdivide into special segments
• Tailor offers to individuals or businesses
• Compare customers with non-customers
• Identify prospects most likely to become
  customers

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Database Characteristics

• Potential actual customers all become
  identified as records
• Records contain marketing information
• All information is accessible during
  communications
• It records responses to all initiatives
• Information is critical for marketers
• Used to ensure approach is coordinated
• It can often replace some market research
• Automatic processing assessing

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Database Design

• Optimum field size must be determined
• All data to conform to consistent rules
• Data must include postcodes
• Data should include account coding
• Data should always be verified
• Data should be updated regularly

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Use of databases

• A database facilitates such direct marketing
  tasks as selecting market segments, increasing
  repeat purchases by building customer
  relationships, enhancing cross-selling and
  gaining competitive superiority.

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Selection of market segments

• Databases make possible the implementation of
  sophisticated market segmentation based on such
  characteristics as demographics, geographic
  location, previous, purchase behaviour and the
  likelihood of repeat business. Targeted segments
  are more responsive to a companys direct
  marketing efforts, which leads to increased
  productivity and lower costs.

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Cross selling

• When a company owns several businesses that share
  a common database, it can use that data to
  cross-sell.

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Competitive superiority

• As can be seen with the RACV model, a business
  can establish a position of competitive
  superiority by building and exploiting a database
  containing information about its existing and
  potential customers. Databases can even become a
  competitive weapon when they are used in
  marketing efforts directs directed at owners of a
  particular competitors product.

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Database management with recency, frequency and
monetary values

• Recency, frequency and monetary (RFM) values
  define a companys best customers. That is ,
  those who are most likely to purchase again
  because they have bought most recently , bought
  most frequently , or spent a specified amount of
  money.

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The strengths of database marketing

• It is measurable
• It can be tested
• It is selective
• It can be personalised
• It is flexible
• Databases Weaknesses

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The weaknesses of database marketing

• Expense associated with establishing and managing
  databases
• Difficult and time consuming to keep records up
  to date
• Strengths outweigh weaknesses

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Forms of Segmentation

• Geographic
• Demographic
• Geo-demographic
• Psychographic
• Attitudinal
• Behavioural

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Geo-demographics

• Geo-demographics is a form of segmentation based
  on the premise that a blend of socio-economic
  characteristics lead to attitudes which lead to
  consumer behaviours

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Census Collection District (CCD)

• Objectives
• Profiling
• Selections
• Targeting
• Site location planning
• Modelling

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advantages of geo-demographics

• It is relatively inexpensive method of accessing
  a segmented market
• It is a powerful data enhancement to existing
  customer records
• It produces high value , low cost and relatively
  quick market research output
• It is very actionable
• It is successful and effictive

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When to use them and not to use geo-demographics

• The use of geo-demographics adds most value where
  there is little customer information
• The use of geo-demographics also adds value where
  transactional and behavioural data are weak.
• The use of geo-demographics adds value where
  internal demographic information is poor.
• The use of geo-demographics adds value where
  acquisition is a key focus in marketing activity.
• However, geo-demographics is unlikely to be
  useful where the relationship with individuals is
  primarily business to business rather than
  business to consumer.

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Summary

• Good mailing lists are essential for direct
  marketing programs. To stay useful they must be
  regularly maintained, updated and refined.