Electronic Commerce and Direct Marketing

Electronic Commerceand Direct Marketing MKT 3900-01

Direct Marketing • Once the ugly stepchild of marketing, DM now garners 25% of US marketer’s budgets surpassing newspapers and broadcast TV • Direct marketing started fairly simply with early American colonists ordering seeds and other products not available in the Colonies. • Rural America has always favored direct marketing to enable access to everything from prefab homes and barns to clothing.

Marketing Trends in Direct Marketing • 90% of marketers, agencies and other providers use non-catalog direct mail and 46% state it is their primary promotional channel • Responses primarily from the Internet(93.7%), phone (79.5%), internal sales force (70.8%)

Trends in Direct Marketing • B2C Businesses selected the following results for best ROI for Direct Response techniques • Direct mail 34% • Email 25% • B2C owners showed optimism with 33 1/3% increasing marketing budgets vs. 14% decreasing • Contact/Retention for B2C highest with Direct Mail (37%), email (31%), telemarketing (7%) and social media (6%)

Trends in B2B Expenditures • B2B businesses found email (44%) to be the strongest ROI for customer retention • 29% B2B owners increased marketing budgets while 16% decreased budgets • Direct Mail is expected to fall 39% in the next 5 years as email begins to eclipse direct mail (to $29.8b) • Local use of email really anticipated to grow because cheaper and growing effectiveness

Direct Marketing • Direct Marketing today is at the center of a communications revolution • The Internet is now the essential tool and an essential part of everyday living • Marketer’s now demand their funds are used efficiently to provide customer centric communications • ROI is demanded

Direct Marketing Growth • Recent growth in non traditional businesses • Credit card companies, banks, investment firms, insurance companies • Telecom, cable, utilities now heavily involved • Airlines, automobile manufacturers and the travel industry are all users • Very few industries are not touched by direct marketing

Direct Marketing Defined So what is direct marketing exactly? • The interactive use of advertising media to stimulate an immediate behavior modification in such a way that this behavior can be tracked, recorded, analyzed, and stored on a database for future use and retrieval.

Fundamental Definition Components • Interactive – One on one communications between the marketer and prospective customers/customers. Two way interactions are the building block of DM • Use of Advertising Media • Combination of various media complements the overall effectiveness of the marketing efforts • Track, Record, and Analyze • Measurability is the hallmark of DM. Marketers now demand it! • Stored in a Database for Future Use and Retrieval

Basics of Direct Marketing • Seeks to generate a measurable response to an offer • A call back, an order, website research • The organization wants to generate leads and encourage relationship building • Elements of Promotion • Copy 15% List/Media 40% • Timing 10% Offer 20% • Layout/format 15%

Components of Promotion • Media/List • One of the keys to producing a response • All a matter of exposure • Segmenting and targeting vital • Getting together the buyers/sellers • Media mix vital – TV, radio, Internet, newspapers Geography, demos, psychographics • Offers • Relevance to TM vital; motivation important • Expenses lower than advertising so offers and incentives can be more generous

Components of Promotion • Creativity • Copy - compel me to respond • Benefits, description, support copy and facilitators or sweeteners • Layout – enhance eye flow patterns, easy to read and process, highlight significant items and tell the story

Efficiency in Direct Marketing • Do you attempt to capture a certain % of the market share or a % of your segment? • Many direct marketing products experience different product life cycles • Changes media and offer strategies  (i.e., fads) • New Objectives • Building and maintaining customer loyalty • Costs 5-10x more to generate a new customer than retain • 90% of profits from 10% of customers – Olgilvy • Reducing customer defections by 5% could increase profits 25-85%

One to One and Customer Relationship Marketing • One to One – • Direct interaction with the individual customer • Mass Customized treatment of the consumer • Difference with Direct Marketing is how solutions are approached • Enables information collection and insight • Enables creation of products for the consumer • Direct Marketing • Traditionally behaviorists • Results oriented (the sooner the better) • If you buy outdoor equipment, sell the lists, bombarded with catalogs!

Integrating Communications • Phase One – moving away from mass marketing messages … one commercial for everyone watching a particular program (TM) • Identifying customer segments and sending messages per segments • Integrating DM into an overall communications program • First understand insights and consumer motivations • Matching audiences, media and technologies avail • Generate effective messages per audience

Trends in Direct Marketing • Recent results show that email metrics remain strong • Click rates (5.2%) declined slightly over last quarter but remain in line with same quarter last year • Average volume per client increased by 16.2% from Q1 • Unique click conversion rates increased 14.6% over Q1 2011 and 6.2% over Q2 2010 • $163B spent in 2011 on DM; 168.5B forecast for 2012 • Captures 53% of advertising expenditures • $1 investment in DM yields $11.63

Direct Media via Postal Mail • Postal Mail Advertising (p-mail) – any advertising matter delivered by the USPS to the person to be influenced • Catalogs, letters, postcards, programs, videocassettes, order blanks, menus, etc. • B2B heavy users of p-mail • Rising cost of TV (and less for $) • Unparalleled targeting of messages • Measureable results

Biggest Advertisers

P-Mail Distinctive Features • Targetability – precisely targeting a defined group of people. Example, Saab selected just 200,000 consumers to receive mailings on the Saab 9-5. These included 65,000 current Saab owners and 135,000 prospects who satisfied income and car ownership requirements. (and p.s. GM’s poor management eventually bankrupted Saab) • Measurability – how many mailings went out, how many responses; one downside is that sending a message to a household does not guarantee the target will receive it

P- Mail Features • Accountability – easy to assess outcomes for brand manager • Flexibility – quick and easy to change with environmental factors • Efficiency – targeting saves money over national ads

Catalogs and Audiovisual Material • More than 10 billion distributed annually in US • More than 2/3 recipients visit company’s website • Sales to catalog recipients more than 150 times greater than those not receiving the catalog • Marketers look at them as an effective and efficient way to reach prime prospects

Why do consumers dig catalogs? • Saves time – no parking spot hunting, travel, in-store crowds • Convenience – 24/7 browsing, decision making and ordering • No concerns about crime in certain areas • Liberal returns, online purchases accessible, 800 numbers enhance ease of shopping experience • Quality merchandise • Guarantees

Audio Visual Advertising • Videotapes, DvDs CD-Roms • Capture key visuals and audio information about the brand and distributing this information to business consumers and end users to project on computers or tv • Limited research on this form of marketing • Yet often the result of requests to the company enhancing targeting and effectiveness • Some evidence less likely to be thrown away vs p-mail • Expensive unless can lead customers to online downloads

Use of Databases • Access to database information of addresses, email contacts and phone information essential to the success of direct marketing campaigns. • Additional pertinent demographic information necessary to best target • Comparison to mass media advertising • “Broadcast media send communications; addressable media send and receive.” Shimp 2010.

Benefits and Uses of Databases • Allows firm to identify the best prospects for products and services • Allows varied messages to different groups of customers • Enables the creation of long term relationships with customers • Enhances advertising productivity • Enables calculation of lifetime value of customers

Data Mining • Sizes range into the millions of addresses with dozens of input variables for each entrant • Inexpensive software allows the segmenting of entrants based upon variables of interest • Relations among variables to enable co-op marketing • Depth of understanding in buyer wants, purchases, uses

Data Mining Example • Credit card companies analyze your purchases • You disproportionately spend on exotic vacation purchases • A promotion designed around winning an exotic vacation may very well generate a response from you  • Furniture company mining its database identifies that families with two children do not buy furniture within two years of purchasing a car, they acquire automobile purchase lists to better refine their promotions

Business, Strategic and Direct Marketing Planning • What actions will achieve efficient, effective and expected outcomes? • Strategy and planning give organizations the framework for choosing the right tools and techniques to maximize the variety available in DM • Goal of Planning to stay on track, stay up to date with emerging technologies and optimize resources

Three Key Strategic Questions • First, Where should we focus the greatest effort and why? • How does the company generate revenue? • Focus on where generate the greatest reward • What do we bring to the table? • What are our core competencies and distinct capabilities? • Do our core capabilities suit our position? • Can the firm sustain this position over time? Avoid developing competencies that do not garner a competitive advantage

The Strategic Business Plan • Designed to draw in investors and support financing needs • Provides information to the investors that are the “customers” for the plan • Describe the key concepts of the business • Establish that there is a market for the products and services the company sells • Outline the organizational structure • Include financial projections that show the company’s expected sales and growth over a 3 year period

Elements of the Strategic Business Plan • Introduction • Executive Summary • Mission and Vision Statement • Market Analysis • Customer Analysis • Business Description • Organization and Management • Integrated Marketing and Sales Plan • Funding Request • Financial Projections • Appendices

Breakdown of Elements of BP • Introduction • Short description (no more than a page) as to why the plan is being written, its audience, business objectives and purpose as well as business concept • Executive Summary • Clear picture of what the business is about including the mission statement, the start date of the business, founders’ names and functions, # of employees, location of headquarters and any branch offices, description/size of facilities, the products and services category, current investors (bank names), growth summary and plan, financial highlights, market potential and summary of management plans

Breakdown of BP • Mission and Vision Statements • Central purpose of the business and its planned activities, major objectives, key strategies and primary goals • Market Analysis • SWOT • Description of competitive environment, • Identification of prospects (how was TM identified?) • Market share sought and held

BP Breakdown • Customer Analysis • Who buys the product/service? • Potential target growth in the marketplace • Are their multiple buyers, decision makers and buying authorities involved? • Business Description • What business are you in and what are the trends in the industry? • Description of products and services offered and competitive advantages of these goods (trademarks, patents, brand names) • Accountability – easy to assess outcomes for brand manager • Flexibility – quick and easy to change with environmental factors • Efficiency – targeting saves money over national ads

BP Breakdown • Organization and Management • Organizational structure • Staffing needs • Job descriptions of top management • Triggers for additional staffing requirements • Include an organizational chart • Details of compensation • Incentives • Benefit plans • Bios of management and BOD • Founder information

BP Breakdown • Integrated Marketing and Sales Plan • Detailed summary of the marketing plan • Methods of selling, distribution plan, mix for advertising(and rationale), DM, Internet, sales promotion, PR and events • Discuss efforts in relation to competitors • Credit and terms for receivables, credit approval process, pricing guidelines, markups, competitive response analysis, budgets and timing. • Discussion of revisions if growth is not met • Funding Request • Details of the request and the potential sources, terms, ROI

BP Details • Financial Projections • Detailed accounting of how much money needed, when it is needed and when investors can expect a ROI • Balance and Income Statements • Cash Flow Projections • Cash In • Cash Out • Timing of each • Appendices • Info relating to text of the business plan • Research plans, tables, detailed market or sales projections, analyses, exhibits

Strategic Plan • Brings together an organization’s management, employees, stakeholders, and customers by communicating a common understanding of where the organization is going, how employees are involved in this common purpose, and how to identify benchmarks for progress and success • Are we a customer driven business? • How do we hear the voice of the customer?

The Strategic Plan • Introduction • Executive Summary – summarizes key elements of the plan • Goals and Objectives – highlights achievements for next 1-3 yrs • Situation Analysis – competitive , environmental and market analysis • SWOT Analysis – key strengths and weaknesses, market analysis • Mission Statement – what does business do and hope to do • Vision Statement – what will co look like in 3 years • Business Values – principles that govern the company • Key Strategies – identifies what success looks like, build strengths or resolve weaknesses? • Action Plans • Financial Plans – goals and objectives • Performance Measures - benchmarks

The Multichannel Direct Marketing Plan • Seeking to reach a symmetry and symbiotic relationship between direct marketing tools and the Internet and newer technologies • Similarly developed to the Business Plan and the Strategic Plan • It just is a narrower scope in vision • It is a promotions plan reflecting only the visions and actions for direct marketing

Multichannel Direct Marketing Plan • Intro • Plan’s purpose • Intended Audience • Executive Summary • Summary of plan’s contents • Objectives, marketing strategies, key target groups and mkt segments • Elements of tactical plan and budget • Situation Analysis • Macroenvironment of marketplace • Demo trends, economic indicators, political and social issues • Competitive situation • Target group analysis • Distribution channels • Product situation • Research

DM Plan • Opportunity and Issue Analysis • Elements of SWOT germane to the marketing plan • Goals and Objectives • Marketing and financial objectives • Specific and measureable • Benchmarks (click throughs, creation of customers) • The Marketing Strategy • Positioning discussions • Aligning needs and wants of customers to offerings • Clear understanding of the prospect • Tactics • Details of each marketing event and action planned • Media and mailing list planning's

Electronic Commerce and Direct Marketing