Direct

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Direct Electronic Marketing

• James E. Coleman, CPA, CFP, Ph.D.

http//ssbea.mercer.edu/coleman
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Why We Hate Telemarketers!

• They are not selective.
• They are aggressive.
• They dont understand NO.
• They are inconsiderate.
• Does this sound like a winning customer relations
  strategy?
• www.donotcall.gov or 1-888-382-1222
• Now that you know what NOT to do

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Marketing Evolution
Mass
Target
Direct

• Mass Marketing
• Make something and try to sell it to everyone.
• Target Marketing
• Segment into large groups based on demo-graphics
  what they say they want.
• Direct Marketing
• Segment into relatively large groups based on
  actual recent behavior.
• Customer Relationship Marketing
• Individualized customized communications

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Mass Marketing vs. CRM
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Integrated Marketing

• Outbound Communications Integration
• similarity of image message in all media
• Organizational Integration
• rapid, accurate info flow among operations,
  marketing and customers
• Process Integration
• two-way communication, promotion plus data
  gathering

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Conceptual IntegrationA plus B

• Brand
• Psychology
• The only thing about your product that absolutely
  cannot be duplicated

• Database
• Technology
• Knowledge of customers is the most important
  asset

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Traditional Direct Marketing

• Relies Heavily on RFM Analysis
• Recency, frequency monetary value
• Strengths
• Past best indicator of future (purchases)
• Measurable results
• Weaknesses
• May de-emphasize search for new customers
• May drop customers as purchases decline

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Relationship Marketing

• Use Intimate Customer Knowledge to
• Stimulate profitable behavior
• Build barriers against competition
• Improve profitability of under-performing groups
• ID triage hopelessly unprofitable customers
• Recapture lost customers intelligently
• Find new customers intelligently

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Key Retention Formulas

• Churn Rate
• number of customers lost during the year divided
  by the number of customers gained
• (number of defections) Churn
  ----------------------------------
  (number of new customers)
• example if 350,000 customers leave in a year
  while you attract 500,000 new customers, the
  churn rate is 70

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Key Retention Formulas

• Defection Rate
• the percentage of your customer basethat leaves
  you in one year
• (number of lost customers)
• defection -------------------------------------
  -
• (average customer base)
• example if 8 out of 21 accounts leave, your
  defection rate is 38.

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Key Retention Formulas

• Customer Average Life
• average length of time a customer regularly
  purchases from your company
• 1
• customer life ---------------------------------
  --
• (percentage defection rate)
• example if the defection rate is 38, then your
  average customer life is 2.6 years

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Key Retention Formulas

• Customer Life Time Value (LTV)
• also known as the long-term value, LTV is the
  total amount of profit from a customer during
  their average life
• LTV (average annual profit) x (customer
  life)
• Normally calculated using the NPV approach.

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Data-Based Relationship Marketing

• If you track responses as you continuously modify
  your messages, offers and products, you will be
  guided by the marketplace to the best or most
  preferred status

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Electronic Interactive Communications

• FOD (fax on demand)
• CD-ROM Diskettes (AOL)
• Kiosks (airlines, Dell, Wal-mart)
• www. whatever-you-want.com
• In 2001, mail order sales began to decline while
  online sales continued to grow rapidly
• (see Remote Shopping Research article)
• Online now exceeds traditional mail order

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Key Success Factors

• Uses an existing customer base
• Improves effectiveness of existing market
• Diminishes impact of physical separation
• Easily accessible, wide distribution
• Decision support info/value added service
• Ability to close the sale direct
• Sufficient funding
• Biggest problem for most of the dot.coms

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Who are the online leaders?

• Online Sales Revenues for Top 300 US
  Retailers(2003, Billions Dollars)
• Type of company
• Retail chain 16.38 40.9
• Web-only company 9.72 24.2
• Consumer brand manufacturer 8.14 20.3
• Catalog/call center 5.85 14.6
• Total 40.09 100.0
• Source Internet Retailer via eMarketer
  (2004)Remote Shopping Research article

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Website Guidelines

• Provide valuable info
• Good copy graphics
• Quick download easy navigation
• Frequent updates
• Survey capture visitor info
• Track hits path and click-thru rate
• Link to other similar sites (maybe)
• Offer a reasonable value good service
• Just like with any business!

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Email The Next Logical Step(compared to direct
postal mail)

• Higher response rate
• DM 1-3, Banners .05-4, EM 5-20 (dated)
• Much lower cost
• Pennies rather than dollars per recipient
• Much Faster
• 3-5 days vs. 4-20 weeks
• But, When the feed is scarce, the chickens will
  scratch at anything.Or, Timing is everything.
• Now just another tool in the kit.

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The Current Magic Bullets

• Multi-Channel Marketing (see Tinkering with the
  Media Mix article)
• "spending more on public relations, significantly
  more on online and more in 'viral' or 'buzz'
  marketing" - as well as "less on traditional
  broadcast TV." CMO Wachovia
• Long Tail Marketing (see Long Tail Marketing
  article)
• The shift from mass markets to niche markets, as
  electronic commerce aggregates and makes
  profitable what were previously unprofitable
  transactions.
• Business Blogging (see Blogs Marketing
  article)
• search engines are paying attention to
  them--even if few others take the time to read
  them. A blog is the most cost-efficient way you
  can improve your search engine rankings. It's
  nothing short of amazing," said Debbie Weil,
  (http//blogwrite.blogs.com)

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QUESTIONS?