Direct Marketing - Chapter 1 History and Background PDF

Chapter Outline 1. What is direct marketing? 2. History of direct marketing. 3. The growth of direct marketing. 4. Why direct marketing?  FR Topic 1: What is Direct Marketing? Direct marketing is an "interactive system of marketing which use...

Chapter Outline 1. What is direct marketing? 2. History of direct marketing. 3. The growth of direct marketing. 4. Why direct marketing?  FR Topic 1: What is Direct Marketing? Direct marketing is an "interactive system of marketing which uses one or more advertising media to affect a measurable response and/or transaction at any location." 4 Topic 1: What is Direct Marketing? Direct marketing: is a technique to communicate straightly/directly to the consumer through mailing trade catalogues, telephones, and ads to the customers post box. With the change in technology, the traditional mails were replaced by electronic mails and this marketing technique has emerged as a very profitable and cost-effective option for all kinds of business. 5 Topic 2: The History of Direct Marketing The history of DM starts How old is direct When mail-order houses with two traditional marketing? began to aggressively elements that still play a  Catalogs were known to compete with local role in many direct be distributed in the stores, their marketing marketing campaign: American colonies contest focused on three 1. mail-order shopping, before the revolutionary major issues: price, 2. direct mail. war. inventory, and It is important to  Mail-order shopping of assurance. The very distinguish direct consumer goods entered factors that made mail- marketing from direct a period of growth in the order houses/shopping mail or mail order 1880’s. successful. business. Topic 2: The History of Direct Marketing Richard Warren Sears Jhon Caples (1863-1914) Mailed his first Started his single-sheet flyer Wrote the first catalogue Mailed his first direct-response advertising his business in 1872. flyers in the advertisement Maine hunting 1880’s. for a music boots 1913. correspondence Aaron Montgomery school 1926. Ward (1843-1913) Leon Leon wood Bean Stages of 1. Direct Marketing started 2. 1950’s & 1960’s developments in 3. Appearance of development early 1900’s – with door to direct mails, telephone marketing, e-commerce, of direct door selling & limited direct and a more professional approach to websites, and IT marketing: mail. personal selling. applications.  Topic 2: The History of Direct Marketing FR These catalogs had a liberating effect on 19th-century consumers. Consumers were no longer captives of their local stores or their high prices with the advent of mail-order. Because: 1. Consumers could get attractive goods and prices, whether they lived in the middle of the city or a remote rural setting. 2. Local stores charged higher prices, because the stores weren't big enough to receive large volume discounts from their suppliers 3. Limited inventories in local stores. 4. Huge inventories offered by mail-order shopping. 5. Catalogers offered a wider variety of goods. The postal system allowed direct-mail companies to operate on a national basis! Mail order houses could undercut the pricing of local stores. For example: In 1897 bicycles were selling for $75 to $100 and more, until Sears started offering them for $5 to $20 in its catalog. Sears could offer these low prices because it sold thousands of bicycles every week. Mail-order firms protected consumers with powerful guarantees. Such as:  Montgomery Ward was one of the first companies to offer a “Money-back guarantee”, And Sears, made “Satisfaction guaranteed or your money back“. 8 Topic 2: The History of Direct Marketing FR By developing a history of offers and responses, direct marketers acquire knowledge of their prospects and customers, resulting in more effective targeting. “Measurability” allows direct marketers to test a variety of lists, offers, media (virtually any aspect of a campaign) in order to allocate marketing resources to the most effective combination of elements. Direct marketing uses a variety of media, including mail, magazine ads, newspaper ads, television, and radio spots, etc. In direct marketing, the transaction may take place at any location and is not limited to retail stores. The transaction may take place in the consumer's home or office via mail, over the phone, or through interactive television and others. 9 Topic 3: The Growth of Direct Marketing The effectiveness of Direct Marketing started to grow in the 1980’s and 1990’s. There were many factors contributing to the growth of direct marketing & mail-order catalogs. Direct marketing expert Jim Kobs selected five as the most important factors which are: 1. The changes in lifestyles.  As the number of working women jumped from 42% to 58% between 1980-1990. Letting consumers receiving all kinds of offers at their homes. 2. Increased cost associated with personal sales calls.  The average cost of a single sales call was estimated to be about 30% higher annually. 10  Topic 3: The Growth 3. Technological growth & computer-based technologies.  New computer technologies allowed direct of Direct Marketing marketers to be more precise in the analysis of results, in the targeting of messages and even in  Other socioeconomic factors contributing to the creativity of direct-mail packages. the growth and acceptance of direct marketing includes: 4. The growth in the number of available products and Population, income, more single households, services. and the growth of the "me" generation.  Has made direct marketing more attractive than mass marketing.  External factors include: The rising cost of gasoline (to reduce 5. Increased consumer acceptance of the telephone. environmental pollution), the availability of  Helped direct marketing achieve phenomenal toll-free telephone numbers, the expanded growth In placing orders. use of credit cards, and the widespread  Telephone-based ordering is a faster way, and it availability of mailing lists. eliminates delays that previously related to mail order. Topic 3: The Growth of Direct Marketing What are the Basic Reasons for the Growth of Direct Marketing? I. Changing marketplace. II. Changing role of direct marketing & business focus. III. Changing cost structure. 1. Changing Market Place: Growth of delivery systems and media fragmentation. Affordable computing power & growth of databases (databases used for future purposes of marketing). 2. Changing Role of Direct Marketing & Business focus: Building & maintaining customer relationship. To maximize sales. To maximize customer loyalty. Topic 3: The Growth of Direct Marketing 3. Changing Cost Structures: It is getting to be more expensive to use mass-media. Increasing clutter in the media. Technological development: (Advances & Innovations) Changes in the marketplace (B2B selling) it has increased or has seen massive growth. The change place of the market, Such as: home, office ,etc. Alternative distribution of channels. Changing lifestyles and demographics. Evolving economy & international competition. 13 Topic 4: Why 1. 2. More complex environment. The bargaining power of consumer has increased. Direct 3. 4. The market has become more competitive. Cost of marketing a product has increased. Marketing? 5. 6. The retail shelf cost at outlets in major cities is costly. Advertising budgets are high. 7. Less customer loyalty. 8. Direct marketing helps companies focus on their marketing efforts. 9. Consumer lifestyle has changed. Today, customers look out for convenience in shopping. 10. Tele-shopping, home shopping, catalog marketing and online marketing cater to core customer value. 11. Globalization has facilitated the growth of direct marketing. 12. Niche markets with distinct preferences. 13. Technology changed and enhanced direct marketing activities. 14