Chapter 10-Direct Response and Database Marketing (1) PDF

KCOM 328 Chapter 10 Direct Response and Database Marketing Ludi Koekemoer Aim of the chapter To focus on the definitions of direct response marketing, its evolution, the differences to general marketing, its advantages and 01 dependence upon a database, the structured...

KCOM 328 Chapter 10 Direct Response and Database Marketing Ludi Koekemoer Aim of the chapter To focus on the definitions of direct response marketing, its evolution, the differences to general marketing, its advantages and 01 dependence upon a database, the structured process for planning a campaign and the selection of media,and looking at the future trends of direct response marketing (DRM) in the digital era. 9 Basic steps in Marketing Communication Planning Explain the definitions and concepts of 1 direct response and database marketing; 5 Plan a campaign using a structured sequential process; Discuss how direct marketing evolved, Analyse media options 2 and explain its growing potential; 6 available for a DRM campaign; Identify the differences between general Discuss the potential of 3 and direct response marketing and the 7 the digital era for DRM; and role DRM can play in IMC; Identify the advantages and drawbacks of Discuss the future trends 4 DRM, and understanding the importance 8 and opportunities for DRM. of a database underpinning all activities; 10.2 What is Direct Marketing? According to the American Direct Marketing Association: “An interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location” Elements of Definition Direct marketing is interactive Direct marketing uses one or more advertising media Direct marketing stimulates behaviour Direct marketing uses a database  Types of Response Action Direct Order Lead Generation Traffic Generation response mechanism to all information required motivate prospect to visit complete transaction for decision-making is and purchase given buyer has means to request and receive additional information client details obtained for database 10.2.2 What is a marketing database and why has it become so critical? ‘A marketing database is a comprehensive collection of interrelated data serving multiple applications, allowing timely and accurate on- demand retrieval of relevant data, and having a data management system independent of applications,’ Combining General Advertising and Direct Response Marketing Direct response advertising General advertising more effective in areas of more effective in areas of secondary values – primary values – inducing purchase decision awareness and education or closing the sale Combined strengths of both can be used to full potential Decision Variables of the Direct Marketing Mix Target Market (database/list/media) Offer Timing/Sequencing Creative/format Customer service ○ types ○ levels Decision Variables of the Direct Marketing Mix Seamless Marketing General and direct marketing both aim to create and keep customers Strategic approach to integration includes both general and direct marketing May be opportune to abandon ‘above-the-line’ and ‘below-the-line’ and practice ‘across- the- line’ Combine strengths of all approaches Seamless Marketing Key features: 1 Consumer focus 2 Use all available tools and touchpoints 3 Build relationships 4 Focus on affecting behaviour Seamless Marketing 10.5 Advantages of Direct Response Marketing and Database Marketing Selective reach Timing Segmentation Personalisation Advanta ges Frequency Costs Testing Measurability 10.5 Disadvantages of Direct Response Marketing and Database Marketing Do-not-contact Image factors requests Disadvanta ges Accuracy Clutter 10.5.3 Database Marketing A database itself has its advantages and disadvantages. But the first step is to distinguish between lists and databases, as these two terms are frequently misunderstood and misused. List Classifications Compiled lists Business lists (telephone directory) (company information Response lists House or (enquirers) Organisation lists (basic information an organisation is prepared to sell) Databases: A database has a much wider usage for marketers. When deciding what data needs to be captured, it is advisable to split it into: o Descriptive data, which describes the customer: and o Predictive data, which uses existing information to forecast what may happen in the future. Advantages of a Database Segment and target the best customers; Identify future prospective customers, and future market trends; Know customer response patterns to promotions, and know why they respond to specific promotions; Communicate with customers relevantly with appropriate offers; Focus on the lifetime value of customers for repeat business, and not just a one-off sale; De-duplicate and verify data to ensure an individual customer’s records are not captured in the database in several different places to save costs and avoid irritating clients; and Flag customers to track how many times they have been contacted,and capture their response pattern. The Value of a Database: Identification of the most profitable customers, which can lead onto cross-selling; Re-activation of past customers who are still valid prospects; Identification of the most profitable products and appropriate pricing policy; Analysis of channel effectiveness to maximise opportunities; and Measurement of the results of a campaign to determine its effectiveness and decide whether to make any changes and conduct a future roll out. 10.6 Planning the direct/database marketing campaign DRM campaign objectives There are three broad categories of key DRM objectives: Improving Acquisition Retention profitability of customers. 10.6.2 Steps in a DRM campaign 10.6.2 Steps in a DRM campaign Step 1: Step 3: Step 2: Step 4: Step 5: The The The The The Product or Target Competition Offer Media service market Step 10: Step 6: Step 7: Step 8: Step 9: Evaluation The Timing Fulfilment Budget of the Response campaign 10.7 DRM media and CRM Direct Response Marketing Media: Various media are used in direct response marketing. Before deciding on which options to select, it is necessary to consider the respective qualities of each medium. Qualities to consider: Ability to reach the target market; Level of personalisation required; Format effectiveness for imparting the message; Appropriateness for including a response option; Cost per contact; and Degree of wastage.  10.7.2 Direct personal selling Direct personal selling It has been successful This form of sales is is a face- to-face for companies such as often referred to as process. Avon and Tupperware network marketing that focus on direct sales using distributors and end users. 10.7.3 Direct Mail What is direct Advantages Disadvantages mail? Any promotional effort Most targetable medium Expensive using the postal service Personalisation Declining response rates or other direct delivery Space and unlimited Complex service, for distribution choice of formats Size and format of the advertising Sell per item or whole restrictions message ranges Postal services erratic and No interference from other unreliable messages Involves the prospect The future of direct mail It is likely that the use of direct mail as a customer recruitment medium will decline. Instead, a mix of other media (such as print, TV, radio, and the internet) will be used for recruitment. Direct mail usage for retention of existing customers will become absolutely crucial. Print Also called ‘run-of-page’ General print (newspapers & magazines) and specialist print media Offers many advantages The advantages of print media for DRM include: A wide selection of publications, allowing direct marketers to reach mass markets or highly targeted specialist markets with the ability to deliver complex explanations; Magazines and newspapers are and have a longer shelf life; Unlike direct mail, which is usually uninvited, print media brought into the home or office by consumers so there is more trust, which spills over to the advertisements; and the print medium allows for relatively inexpensive testing, for example, in a specific region or via A/B splits. The disadvantages of print for DRM include: Its inability to target by name; Its slow response, which makes it difficult to test accurately; and Compared to direct mail, print is an impersonal medium. 10.7.5 Direct response television Television has become an important direct-response medium because it allows the marketer to demonstrate products. This is particularly important when consumers are buying at a distance. Also, television tends to lend credibility to products, as well as helping to build awareness Advantages of television Is a visible, powerful medium; Responses are rapid, especially when combined with inbound telemarketing. Marketers can quite literally know the results of a test within a few minutes of the TV commercial being flighted. Disadvantages of television Very expensive compared to most other media. Extremely transient medium. 10.7.6 Radio This is due to the deregulation of Radio is growing as a broadcasting, which medium for direct This has made radio has spurred the response marketing in more targetable. development of South Africa. smaller, local and specialist stations. Advantages of Radio It is increasingly targetable due to growth of special- interest stations; It is an exciting and compelling medium that, because it is not visual, can stimulate the consumer’s imagination more effectively than TV or print; Production times are very short and allow for quick penetration to the market; and Radio is relatively economical both for tests and full campaigns The advantages of print media for DRM include: Like TV, radio is a transient medium; Listeners can switch stations quickly and easily; There is no visual re-enforcement of the message; It is not possible to demonstrate products; There is no built-in response device; and It is difficult or impractical to respond to. 10.7.7 Telemarketing Telemarketing demonstrates the classic advantages of direct marketing principles. Advantages of telemarketing It is fast and direct; Different offers to different types of It is personal and two-way; people can be handled in small quantities; Allows instant feedback and direct New products can be tested at a communication between company relatively low cost; and and customer; Different scripts can be tested Highly targetable before use in a full campaign. It is highly flexible It is highly measurable Disadvantages of telemarketing Expensive Visuals cannot be used Only verbal communication is possible Invasive It often takes several attempts to reach a customer Highlights of DM options 1. Print media - impersonal, lack of targetability and control 2. Inserts - more flexibility, control and targetability, but expensive and perceived as “junk” 3. Television - important direct response - allows for demonstration and infomercials, but expensive 4. Radio – targetable and economical, but no visual re-enforement 5. Direct mail - targetability, flexibility and ability to personalise communication - but low response rate 6. Telemarketing – fast, direct, targetable, but invasive  DRM and CRM The UK Institute of Direct CRM focusses on retention of Marketing defines customer customers relationship management (CRM) as the discipline of organising business resources to enhance and personalise each customer encounter as part of a long- term strategy of profitable retention. 10.8 DRM in the digital era Huge demands are put on companies from consumers as they become more empowered and connected. 10.8.1 Is digital just another channel? Digital is not merely another channel. It is at the cross-roads of all existing channels. It will require a new approach by marketers. Digital cannot be considered as a lone silo, and budgets and communication strategy should be spread on a cross-platform, integrated basis. Marketers must learn to separate key consumer signals from the general noise and clutter. 10.9 The future role of DRM/database marketing DRM/database marketing will be different in the digital world of tomorrow. A mix of economic and societal trends, developments in technology and changing demands for skills will all have impacts on the future of DRM, and any company involved with DRM. The impact of information and big data Big data has been used to convey all sorts of concepts, including huge quantities of data, social media analytics, real- time data, and more. Organisations globally now have to face the issues of processing and analysing vast amounts of structured and unstructured data from multiple sources. It is a business priority for all industries. The convergence of data and marketing Data scientists will need an The future challenge will be the 01 shortage of skills. 03 understanding of a range of marketing skills. Industry will need data scientists Marketers will need to expand with a combination of math, their understanding of these 02 statistics, programming skills and 04 overall data skills, in addition to understanding financial analysis, analytic ability. and the profitability of customers. Brand loyalty and social analytics Social media will become Be able to analyse the more integrated as brands data of their audiences become aware of the need from this range of sources. to understand user behaviours across the various social media platforms; and Digital Trends As fast as the technology is developing, marketers must also learn the requirements of successful communication through these channels, where messages have to be simple and short, yet have sufficient impact to create an action. Data security and privacy This will become a priority as there is great public concern over the gathering of vast amounts of data, and the resulting potential threat to personal privacy Data integrity Smith defines data integrity as: ○ ‘Managing and using data according to a code or set of values, with honesty, with the aim of presenting data without bias, and refusing to allow data to support one point of view to the exclusion of any competing view.’  Ethics Social media communication and This will become another issue for increased consumer awareness the future, as more companies will will drive the expectation for be held to account for the way they companies to adhere to required conduct their business. levels of corporate ethics.