Chapter 1 Introduction to Direct Marketing

 Mass marketing to one on one Mass marketing ： Mass marketing is marketing with limited
discrimination whereby everyone in the targeted audience receives the same message and offer to
buy goods or services.
 Direct marketing: Direct marketing is an interactive system of marketing which uses one or more
advertising media to effect a measurable response and transaction at any location.

Six key elements

Direct marketing: Direct marketing is an interactive system of marketing which uses one or more
advertising media to effect a measurable response and transaction at any location.

Mass marketing vs. direct marketing

Generation of Change

 Postwar 1950s; Australian companies followed a production-based philosophy. After the war the
weapons factories were converted to produce consumer and business products such as packaged
foods, furnishings, office equipment, and white goods and so on.
 Decade of selling 1960s; By the 1960s there was an oversupply of many goods in the Australian
market. Warehouses were full of products and these far exceeded the needs of an already
saturated market.

Generation of Change

 The 1980s deregulation; Despite a mild recession in the early 1980s there were high wages, high
inflation and high demand for all sorts of products.
 Globalization;
 New Marketing Environments
  The last of the millennium: The 1990s commenced with the worst depression in Australia since
the 1930s. Along with these cuts businesses were looking for more cost effective ways of
marketing their goods and services.

Media Developments

 Magazine consumption; it also has some of the largest classified advertising newspapers in the
world.
 Outdoor media;
 Direct mail growth; Direct mail growing at an incredible rate of popularity as a very personalized
medium for communication, as is the telephone.
 Mass Information

The database

 Sophistication of computers and software

Examples: Visa card – Motor vehicle service history

 Student records

 Opportunities to gather more information

Direct Marketing Trends

 Growth of direct marketing;

 Direct marketing and the marketing mix

Direct marketing and the marketing mix

 The term marketing mix describes the combination of the 4 elements that are the core of an
organization's marketing system. When product, price, place and promotion are successfully
mixed, they form a marketing program that provides need/want-satisfying goods and services to
an organization's market.
 Promotional activities form the separate sub-mix that we call the promotions mix or the
communications mix in an organization's marketing program.
 Direct marketing is a total marketing system and the marketing mix is just as important as it is
with general/mass marketing.

Direct marketing strategic activities:

 Integrated database marketing sales promotion

 Direct mail and mail order telemarketing
 Direct response broadcast marketing telesales
 Direct response print marketing direct selling
 Catalogue marketing automatic marketing
 Internet marketing online shopping
The marketing and direct marketing mix

The Role of Direct Marketing

 Building strong bonds of trust & credibility

 Provide up to date market intelligence
 Begins at the prospect stage
 The compelling factor, a call for action
 Coping with Change in the 21st Century
 The Internet and virtual advertising: what next?
 The risk is lack of skills to cope
 Potential for information overload

Summary

 Mass marketing to one to one is about the evolution of marketing from targeting the millions to
targeting a few thousand, and yielding similar or better results.
 Direct marketing is more personal, response oriented, discreet and measurable.
 One of the most significant influences in the growth of direct marketing has been the growth of
service industries.
 Businesses are using the latest in technology to simplify operations and diminish costs.
 Regulations are changing sometimes.
 Direct marketing is used from the prospecting stage through the order taking and delivery stage
and onto the follow up and repeat business stage.
 The basic philosophical strategy of a marketing mix hasn’t really changed, but the ratios of the
elements of that mix have changed to suit the more direct approach to marketing.

Chapter 2 Segmentation through list selection and database management

Learning objectives: This chapter gives an overview of the main issues involved in the management and
development or mailing lists and database marketing techniques.

Content:

Segmentation

 Lists
 List management
 Databases
 Database management

The importance of good lists

 Mailing lists are the key to success of any direct marketing program. Access to a wide variety or
quality mailing lists in Australia is possible.
 There is a greater availability of lists than ever before, particularly in the business to business
sector.
 Within this environment there continues to be an upsurge in direct in Australia and an increase in
mailing list activity.

Types of mailing lists

 Response lists

 Response lists are also known as “buyers’ lists” or “mail order lists”. Response lists are made
up of people who have indicated a willingness to subscribe, buy, donate or respond by mail.

 Compiled lists
 These are names and addresses drawn from telephone books, directories, electoral roll,
registrations at seminars, and memberships at associations, birth notices, new home owners,
boats owners, credit card holder, building society members, and insurance policyholders and
so on.
 Business lists
 Business lists, also known as “vertical lists”, are classified by the type of activity.

 House lists

 A house list or “internal list” is a company’s own in-house list (or database)

The role of list manager:

In many instances, list owners appoint list managers to maintain and promote rental of mailing lists. List
managers perform all the following functions:

 Are the “clearing house” for rental availability, that is, initial contact point
 Handle all administration in the rental of the list
 Promote them to likely users
 Process list rental orders
 Clear sample mailing pieces with list owner
  Clear mailing dates with list owners
 Invoice renters on behalf of list owners
 Collect payments and remit them to list owners, less commission/management fees
 Assume responsibility for all promotions
 Provide list owners with regular detailed activity reports— including invoicing details
 Liaise with other list brokers
 Assume responsibility for the maintenance of lists, if required, either in-house or with
outside computer service bureaus

List rental sources

 Direct mail house: many mailing houses also compile and manage mailing lists, particularly for
industrial markets. This allows them to provide one-stop marketing service
 List owners: Many list owners rent their lists directly to users. However, many list owners
prefer to leave all rental arrangements to a third party, such as a list broker, list manager or direct
mail house.
 Computer bureaus: A computer bureau that maintains a mailing list on behalf of an owner may
have the responsibility of arranging rentals to prospective users.

Placing a list order

Checklist of information

The following indicates the type of checklist of vital information that should be gathered and the
questions that should be answered prior to placing a list order.

 List description
 Quantity /Selectivity
 Coding applications
 Rental rates
 Deliverability guarantee
 List formats
 List usage
 Delivery instructions

List rental procedures

Thirteen steps to successfully renting and using a mailing list

Step One: You approach the rental contact to discuss the list and confirm your desire to rent it

Step Two: The rental contact requests a sample of your mailing package

Step Three: You provide a sample of your mailing package

Step Four: The list owner approves the sample

Step Five: The rental contact prepares and sends the list rental agreements to you, the renter
Step Six: You check, sign and return the list rental agreement to the rental contact

Step Seven: The rental contact orders your list selections

Step Eight: The ordered address diskette is sent or data emailed to the mailing house or list
manager/broker

Step Nine: You dispatch the components of your mailing package to the mailing house

Step Ten: The mailing house assembles and addresses the mailing packages and lodges them with
Australia Post or an alternative carrier

Step Eleven: The mailing house invoices you for the processing and postage

Step Twelve: The rental contact invoices you for the list rental charges Step Thirteen You return the
undeliverable — dead mail — to the rental contact

List Rental Costs, Terms, Conditions

 Rates higher are for names of proven mail order buyers

 Rates are lower for inquirers or inactive names
 Rates for high profile personalized contacts may fetch as much as 30% above normal
 Electronic media
 Sheet listings (hard copy)

Mailing List Security

 Storage
 Seeding
 Safeguards against misuse
 General

List Processing

 Merge/purge: A merge/purge program is the matching of two or more mailing lists by computer
to remove duplications so that each addressee receives only on mailing piece.
 List suppression

Mailing list maintenance

Coding mailing list data

There are many variables that can be keyed to a name and address, such as:

 Sex
 Job function title
 Division or department
 Company name
 Telephone number
 Geographic’s
 Type of product purchased
  Length of time on file
 Source
 Date of last transaction

Standard Industry Classification (SIC)

Introducing Databases

 A database is any collection of data organized for storage in a computer memory and designed for
easy access by authorized users
 The data may be in the form of text, numbers, or encoded graphics

A Customer Database

 More than a mailing list

 Evolves over time
  Best way to talk to existing customers
 Means for building relationships with customers
 Ideal for loyalty marketing
 Relevancy—information and customers
 Right messages for the right people

What is Database Marketing?

 Creating data records about customers

 Using this data to analyze customer patterns
 Then promote them benefit of brand loyalty
 Use in low cost sales methods (telemarketing etc)
 Subdivide into special segments
 Tailor offers to individuals or businesses
 Compare customers with non-customers Identify prospects most likely to become customers

Database Characteristics

 Potential & actual customers all become identified as records

 Records contain marketing information
 All information is accessible during communications
 It records responses to all initiatives
 Information is critical for marketers
 Used to ensure approach is coordinated
 It can often replace some market research
 Automatic processing & assessing

Database Design

 Optimum field size must be determined

 All data to conform to consistent rules
 Data must include postcodes
 Data should include account coding
 Data should always be verified
 Data should be updated regularly

Use of databases

 A database facilitates such direct marketing tasks as selecting market segments, increasing repeat
purchases by building customer relationships, enhancing cross- selling and gaining competitive
superiority.

Selection of market segments

 Databases make possible the implementation of sophisticated market segmentation based on such
characteristics as demographics, geographic location, previous, purchase behavior and the
likelihood of repeat business. Targeted segments are more responsive to a company’s direct
marketing efforts, which lead to increased productivity and lower costs.

Cross selling
  When a company owns several businesses that share a common database, it can use that data to
cross-sell.

Competitive superiority

 As can be seen with the RACV model, a business can establish a position of competitive
superiority by building and exploiting a database containing information about its existing and
potential customers. Databases can even become a competitive weapon when they are used in
marketing efforts directs directed at owners of a particular competitor’s product.

Database management with recency, frequency and monetary values

 Recency, frequency and monetary (RFM) values define a company’s best customers. That is,
those who are most likely to purchase again because they have bought most recently, bought most
frequently, or spent a specified amount of money.

The strengths of database marketing

 It is measurable
 It can be tested
 It is selective
 It can be personalized
 It is flexible
 Databases Weaknesses

The weaknesses of database marketing

 Expense associated with establishing and managing databases

 Difficult and time consuming to keep records up to date
 Strengths outweigh weaknesses

Forms of Segmentation

 Geographic
 Demographic
 Geo-demographic
 Psychographic
 Attitudinal
 Behavioral

Geo-demographics is a form of segmentation based on the premise that a blend of socio-economic

characteristics lead to attitudes which lead to consumer behaviors.

Census Collection District (CCD)

Objectives:

 Profiling
  Selections
 Targeting
 Site location planning
 Modelling

Advantages of geo-demographics

 It is relatively inexpensive method of accessing a segmented market

 It is a powerful data enhancement to existing customer records
 It produces high value, low cost and relatively quick market research output
 It is very actionable
 It is successful and effective

When to use them and not to use geo-demographics

 The use of geo-demographics adds most value where there is little customer information
 The use of geo-demographics also adds value where transactional and behavioral data are weak.
 The use of geo-demographics adds value where internal demographic information is poor.
 The use of geo-demographics adds value where acquisition is a key focus in marketing activity.

However, geo-demographics are unlikely to be useful where the relationship with individuals is
primarily business to business rather than business to consumer.

Summary

 Good mailing lists are essential for direct marketing programs. To stay useful they must be
regularly maintained, updated and refined.