Direct Marketing Overview PDF

01 Handout 1 STS122 OVERVIEW OF DIRECT MARKETING Direct selling is more relevant than ever: Avon on attracting a new generation (Alex Long, 2021) Avon is using a t...

01 Handout 1 STS122 OVERVIEW OF DIRECT MARKETING Direct selling is more relevant than ever: Avon on attracting a new generation (Alex Long, 2021) Avon is using a test and learn approach to attract a younger team of representatives as it continues on its digital transformation journey. Starting in 1886 with the ambition of giving women the ability to earn an independent income, Avon pioneered a model of direct selling via local representatives which has grown into a network of 5 million women across more than 50 markets. Think of Avon now and you’ll likely think of the brand’s ‘Avon ladies’, pushing the brand’s products on its behalf in return for a cut of the sale. But with ecommerce having skyrocketed through the Covid-19 pandemic and consumers able to buy from a multitude of large and small beauty brands at the click of a button, direct selling might seem a little outdated. However, according to Avon’s chief commercial marketing officer, Alex Long, the business model continues to make sense for the brand. “We think it’s honestly more relevant and more vibrant than ever,” Long tells Marketing Week. “Look at all the big trends that you see in the marketplace today around entrepreneurial culture, people setting up their own businesses, the trend in media towards micro influencers. All of these are what direct selling has been doing for years. We’re really conscious that there’s a generation of women who may not be as aware of the Avon story, or may see it in a particular way. And some of them haven’t really had an opportunity to work with brands.” (marketingweek.com) Direct selling data from around the world “absolutely backs that up”, Long adds. In 2019, direct selling was a $180.5bn industry worldwide, encompassing 119.9 million independent representatives, according to the World Federation of Direct Selling Associations. In Europe alone, industry sales hit $37.9bn. However, while Germany and France rank among the top 10 markets for direct selling, the UK does not. And over the year ending December 2018, Avon’s last financial results filed with Companies House, turnover relating to underlying UK direct selling activities fell from £210.4m to £182.1m, which the business attributed to a -17.6% reduction in its number of UK representatives. Long acknowledges that there are limitations of the model in terms of reach, also noting that while Avon’s awareness across its mature markets such as the UK and US is very high, the brand has become “a little tired”. This is in direct contrast to Avon’s perception in newer markets like South Africa, he says, where the brand is considered “young and trendy”. In 2018, Avon was voted “coolest makeup brand” as part of South Africa’s Sunday Times Next Generation Awards, for example. To help counter this problem and increase the brand’s market penetration in the UK, Avon is hoping to recruit a younger generation of digital-savvy representatives to reach a new cohort of consumers. RMBAY2425_DIRECT MARKETING Page 1 of 8 01 Handout 1 STS122 What is Direct Marketing? Direct marketing is a type of advertising strategy that involves communicating directly with a targeted group of potential customers, aiming to elicit a direct response or action, such as making a purchase, signing up for a service, or providing contact information. Unlike traditional mass marketing (such as television or radio ads), direct marketing focuses on individualized outreach, allowing businesses to track responses and measure the effectiveness of their campaigns more precisely. Key Features of Direct Marketing 1. Targeted Audience - Direct marketing targets specific individuals or groups based on data such as demographics, purchasing behavior, or preferences. For example, female customers who are entering inside Watsons are offered products such as new launch lipstick etc. 2. Personalization - Messages are often personalized to appeal to the specific needs or interests of the recipient. This is due to a signed up application or form wherein a person provide his/her information such as contact number and email address. For example, a person used his/her yahoo mail to log on to an application (e.g. Shopee, Lazada, SHEIN, Grab Food, Amazon) 3. Direct Call to Action - Campaigns typically include a clear, immediate call to action. For example, “Buy Now”, “Shop Now”, “Message”, “Call for a Free consultation”, “Subscribe”. 4. Measurable Results - The success of a direct marketing campaign can be easily tracked and measured through response rates, conversions, sales, or number of calls. Terms in Direct Marketing Direct marketing has several key concepts and terminologies that are essential for understanding how the strategy works. Here's an overview of the most important ones: 1. Target Audience The specific group of individuals or businesses that a direct marketing campaign is aimed at. The target audience is defined by factors such as demographics, purchasing behavior, interests, and other relevant criteria. 2. Call to Action (CTA) A clear instruction in the marketing message that prompts the recipient to take a specific action, such as "Buy Now," "Sign Up," or "Download the eBook." The CTA is one of the most important elements in a direct marketing campaign as it drives the desired response. 3. Response Rate RMBAY2425_DIRECT MARKETING Page 2 of 8 01 Handout 1 STS122 The percentage of recipients who take the desired action in response to a direct marketing campaign. For example, if 1,000 people receive an email and 50 of them make a purchase, the response rate is 5%. 4. Conversion Rate The percentage of recipients who not only respond to the campaign but also complete the desired action, such as making a purchase, signing up for a service, or filling out a form. This is a key metric for evaluating the success of a campaign. 5. Cost per Acquisition (CPA) The cost associated with acquiring one new customer or lead through the marketing campaign. CPA is calculated by dividing the total cost of the campaign by the number of conversions. It's a key metric for measuring the efficiency of a direct marketing effort. 6. Lifetime Value (LTV) The total revenue a customer is expected to generate for a business over the entire duration of their relationship. This concept helps businesses understand the long-term value of customers gained through direct marketing efforts. 7. List Segmentation The practice of dividing a larger customer or prospect list into smaller groups based on specific criteria, such as geographic location, purchase history, or interests. Segmentation allows for more personalized marketing messages and often leads to higher engagement rates. 8. Personalization Tailoring the content of the marketing message to fit the individual characteristics or preferences of the recipient. Personalization might involve using the recipient’s name, addressing specific needs or preferences, or providing customized product recommendations. 9. Opt-in/Opt-out Opt-in: The process by which a customer voluntarily agrees to receive marketing communications from a business, often by signing up through a form or providing consent. Opt-out: The process by which a customer chooses to stop receiving marketing messages, typically by clicking an "unsubscribe" link in an email or indicating their preferences in account settings. 10. A/B Testing RMBAY2425_DIRECT MARKETING Page 3 of 8 01 Handout 1 STS122 Also known as split testing, A/B testing is the practice of sending two or more variations of a marketing message to a small portion of the audience to see which version performs better. The winning version is then sent to the rest of the list. 11. Customer Relationship Management (CRM) A system or software used to manage and analyze customer interactions and data throughout the customer lifecycle. CRM tools are often used in direct marketing to track customer behaviors, manage leads, and tailor future campaigns based on customer history. 12. Lead Generation The process of identifying potential customers (leads) for a product or service. Direct marketing campaigns often focus on generating new leads by encouraging potential customers to provide their contact information or express interest in the offering. 13. Remarketing/Retargeting A strategy that involves targeting individuals who have previously interacted with a brand, often through online ads or emails. Retargeting helps to remind potential customers of a product or service they showed interest in, often leading to higher conversion rates. 14. Lifetime Value (LTV) The total monetary value a customer is expected to bring to a business over their entire relationship. Understanding LTV helps businesses optimize their marketing budget by ensuring they're acquiring high-value customers. 15. Multichannel Marketing The practice of using multiple channels (e.g., email, direct mail, social media, phone calls) to communicate with prospects and customers. Multichannel marketing helps ensure that a brand reaches its audience through the preferred medium and maximizes response rates. 16. Campaign Tracking The process of monitoring and analyzing the performance of a direct marketing campaign, often through unique tracking codes, links, or pixels. This allows businesses to measure the impact of each marketing effort and adjust strategies accordingly. 17. Cross-selling and Upselling Cross-selling: Encouraging customers to purchase additional or complementary products along with the primary product. Upselling: Encouraging customers to purchase a higher-end version of the product they are considering. 18. Data Cleansing RMBAY2425_DIRECT MARKETING Page 4 of 8 01 Handout 1 STS122 The process of reviewing and updating marketing lists to ensure the information is accurate and up-to-date. This includes removing duplicate entries, correcting errors, and removing contacts who have opted out of communications. 19. Return on Investment (ROI) The financial return generated from a direct marketing campaign relative to the cost of the campaign. It’s one of the most important metrics for evaluating the success of direct marketing efforts. 20. Lead Nurturing The process of building relationships with potential customers (leads) over time through ongoing communication and engagement. This can involve sending relevant content, follow-up messages, and personalized offers to move leads closer to making a purchase. 21. Customer Segmentation Breaking down a customer base into groups based on specific characteristics such as demographics, purchase history, or behavior. Segmentation helps in targeting specific groups more effectively in direct marketing efforts. Understanding these concepts is crucial for planning, executing, and measuring direct marketing campaigns effectively. Each term plays a role in the overall strategy and can influence the success of a campaign. Benefits of using Direct Marketing Direct marketing offers businesses a powerful way to connect with their target audience in a personalized and measurable way, but it requires careful planning and execution to be effective. It encompasses specific advantages: ❖ Highly Targeted: Businesses can reach specific customer segments with tailored messages, increasing the likelihood of a response. ❖ Cost-Effective: Many direct marketing methods (like email or SMS) are relatively inexpensive compared to traditional advertising channels. ❖ Measurable ROI: Direct marketing provides detailed insights into customer behavior, enabling businesses to measure the return on investment (ROI) for their campaigns. ❖ Personalization: The ability to customize messages increases the relevance to the recipient, making the marketing more effective. Challenges in the Implementation of Direct Selling ❖ Consumer Skepticism: Many consumers may view direct marketing as intrusive or spammy, leading to lower engagement rates if not done carefully. ❖ Legal Restrictions: There are various laws (like GDPR in Europe or CAN-SPAM in the U.S.) that govern direct marketing practices. RMBAY2425_DIRECT MARKETING Page 5 of 8 01 Handout 1 STS122 ❖ Cost of Acquisition: While it can be cost-effective, poorly executed campaigns may result in wasted resources. ❖ Data Privacy Concerns: With the rise of data protection regulations (such as GDPR), businesses must ensure they handle personal information responsibly and comply with laws. ❖ List Management: Keeping marketing lists updated and relevant requires effort to ensure campaigns are reaching the right audience. The Evolution of Direct Marketing Direct marketing continues to evolve, particularly with digital tools that allow for greater precision and automation in targeting customers. The history and evolution of direct marketing traces back centuries, adapting over time with advancements in communication technology. Its core principle—directly reaching out to consumers with a call to action—has remained consistent, but the methods have drastically evolved. Early Beginnings 18th and 19th Centuries: The earliest forms of direct marketing can be traced to catalogs and mail-order businesses. For example, in the 18th century, Benjamin Franklin used print advertisements in newspapers to promote his printing services, which can be considered an early form of direct marketing. By the 19th century, businesses like Montgomery Ward and Sears in the U.S. revolutionized the concept by using catalogs to market products directly to consumers in rural areas. 20th Century: Expansion and Mass Adoption Post-War Boom: After World War II, direct mail advertising gained popularity. In the Philippines, businesses began using mail-order catalogs to reach consumers across islands, providing access to goods that were previously difficult to obtain outside of major cities. Telemarketing: With the rise of telephones in the mid-20th century, companies began using telemarketing as a direct channel to communicate with consumers. By the 1980s and 1990s, this practice became widespread globally, including in Southeast Asia, where telecommunications infrastructure was expanding. The Digital Revolution Email Marketing (1990s): The advent of the internet in the 1990s led to the rise of email as a powerful direct marketing tool. This was especially significant in the Philippines, where increasing internet penetration allowed companies to market directly to consumers via email and online promotions. Companies began sending promotional RMBAY2425_DIRECT MARKETING Page 6 of 8 01 Handout 1 STS122 emails, newsletters, and product information directly to consumers, using databases and customer lists. Mobile Marketing (2000s): With the rapid adoption of mobile phones, particularly in countries like the Philippines, SMS marketing became a popular form of direct marketing. Local businesses and global brands alike took advantage of this to send promotional messages and discounts directly to consumers' phones. The Philippine market, with its high mobile phone penetration, became an ideal environment for SMS- based direct marketing, especially in the retail and fast food sectors. Social Media and Digital Ads (2010s) Social media: Platforms like Facebook, which has a huge user base in the Philippines, changed the way direct marketing was done. Companies began using targeted ads on social media, leveraging user data to send highly personalized marketing messages. For example, Filipino e-commerce platforms like Lazada and Shopee use direct marketing strategies on Facebook and Instagram to reach their audience with tailored promotions and flash sales. Data-Driven Marketing: In the digital age, data has become crucial for direct marketing. Companies use data analytics to segment audiences and personalize messages, making marketing campaigns more effective. This shift is evident in how Philippine businesses use platforms like Viber and WhatsApp to send personalized messages, discounts, and event updates to their customers. Evolution in the Philippines Homegrown Tactics: In the Philippines, direct marketing has also taken unique forms, such as the widespread use of text brigades, where local companies use mobile text messaging to announce promotions, product launches, or events. This method has proven effective due to the high number of mobile users and the local preference for mobile communication over email. E-commerce Boom: In recent years, the direct marketing approach in the Philippines has become more integrated with e-commerce platforms. As online shopping surged, especially during the pandemic, businesses used email, SMS, and social media to send flash sale announcements and exclusive promotions, driving immediate responses and sales. Direct marketing has continuously evolved alongside technological advancements, becoming more personalized and data-driven. From simple print catalogs to sophisticated digital advertising, the evolution of direct marketing reflects broader shifts in RMBAY2425_DIRECT MARKETING Page 7 of 8 01 Handout 1 STS122 communication and consumer behavior. In the Philippines, this journey has been shaped by the rapid adoption of mobile and internet technologies, making the country an exciting landscape for the future of direct marketing. Overall, direct marketing offers businesses a powerful way to connect with their target audience in a personalized and measurable way, but it requires careful planning and execution to be effective. References Kotler, Philip, and Kevin Lane Keller. Marketing Management (15th Edition) Stone, Bob, and Ron Jacobs. Successful Direct Marketing Methods (8th Edition) J. Paul Peter, James D. Jr., 8th Edition. Marketing Management Knowledge and Skills. McGraw- Hill International Edition https://www.marketingweek.com/avon-new-generation/, https://directiveconsulting.com/resources/glossary/direct-marketing/ RMBAY2425_DIRECT MARKETING Page 8 of 8