Direct marketing Essay Example

Direct marketing Essay Direct marketing has a long history. It was emerged in the 15th century when an Italian printer was using direct marketing to sell books. McGraw Hill did a research amongst retailers to find out why people lose customers: (1) 4% of customers were lost because some customers died and others moved away to other places. (2) 5% were lost because of other company friendships. (3) 9% were lost to competition. (4) 15% were lost because of indifference, no contact, taking the customer for granted etc. The foundation of direct marketing is based on understanding this insight into why people lost customers. Because direct marketing is a way of marketing. It is oriented towards finding getting, keeping and developing customers one-to-one. Direct marketing is an attempt to approach the customers directly. It a personal approach to customers. It is much more personal than mass advertising and so it can be a key part of the development of relationships with customers. Direct marketing is the use of direct media to reach a target audience. We will write a custom essay sample on Direct marketing specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Direct marketing specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Direct marketing specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Meaning of Direct Marketing Direct marketing consists of direct communications with carefully targeted individual consumers to obtain an immediate response. It is the use of telephone and non-personal media to communicate product and organizational information to customers who then can purchase products by mail, E-mail or telephone. Direct marketing can be defined as any mode of initiating and closing sale by using one-to-one but not face-to-face communication. Dray Bird, Vice Chairman, O M Direct World wide, defines marketing as, Any activity whereby you reach your prospect they respond to you directly. In the words of Dick Shaver, Direct marketing is like opening a store in print and managing it. Most people tend to equate direct marketing with direct mail. It is as ridiculous as saying advertising is equal to a newspaper. On the contrary,, direct mail is just a part of direct marketing; only a means to the end. FORMS OF DIRECT MARKETING The major forms of direct marketing are catalogue marketing, direct response marketing, home shopping, Kiosk marketing, telemarketing and online marketing. Catalogue marketing: In this, an organization provides a catalogue from which customers make selections and place orders by mail or telephone. Catalogue marketing began in 1872, when Montgomery Ward in USA issued its first catalogue to rural families. Today were are over 7000 catalogue marketing companies in USA. The advantages of catalogue retailing include efficiency and convenience for customers. The retailers can benefit by locating in remoting, low cost areas, saving on expensive store fixtures, and reduce personal selling expenses as well as store operating expenses. However, catalogue retailing is inflexible, provides limited service and is effective only for selected set of products. Direct response marketing: This occurs when a retailer advertises a product and makes it available through mail or telephone orders. Generally a buyer uses a credit card, but other forms of payment are acceptable. Examples of direct response marketing include a television commercial offering a recording artists musical collections available through a toll-free number, a newspaper or magazine advertisement for a series of childrens books available by filling out the forms in the advertisement or calling a toll-free number etc. Direct response marketing can also be achieved by sending letters, samples, brochures or book lets to prospects on mailing list and asking that they order the advertised products by mail or telephone. Television marketing: This was developed with the advent of cable T.V. TV viewers tuning into a cable shopping channel see a show where products are demonstrated by a host. Consumers can call the host while the show is on the air to ask questions about the product or purchase it. TV home shopping offers several benefits. Products can be easily demonstrated an viewers are well informed. Moreover, the customers can shop at their convenience from the comfort of their own homes. Kiosk Marketing: These are information and ordering machine placed in stores, airports and other location. These machines provide information about products and customers can order any product or item he or she likes through it. These machines provide customers with a quick way to determine the size, color, and style of products to fit their personal preferences. And other feature of this machine is that customers can choose, a harmful and printout photos, prices, features and location on the stores lot. Car Max, the used-car superstore in USA uses a kiosk with a touch-screen computer to give customers through the vast inventory of as many as 1000 cars and trucks. Thus kiosk is different from vending machines, which dispense actual products. Telemarketing This is a non-store retailing concern. This is also known as telephone retailing. As the same suggests telemarketing means sale of goods and service by telephone. This is the performance of marketing related activities by telephone. It involves both data base management and personal selling. Advances in telephone technology are partly responsible for the development of telemarketing. With low-cost wats line and computer dialing systems, firms can economically deliver their sales message to a large from investment services to computer systems. The head of direct marketing and Sales Promotion (UK), Phil Mounsey says, Telemarketing is to achieve business objectives in sales, customer care, market growth, promotions, market research, database building and cash flow management. A well-known example where telemarketing has been the major contributor to a companys success has been Fast Direct (UK), which provides a complete, backing system without a single branch. We can see that 80% of the UK top companies today include telemarketing in their customer communication mix. Telemarketing is the fastest growing form of direct marketing in UK, increasing in value by 20% a year. In UK 90% of all press advertisements aimed at generating a response now carry a telephone number. Mail order companies in UK have found that almost 90% of their business is now carried out over the telephone, sending in orders by post or mail has declined dramatically. Customers have found that the use of the telephone benefits them by speeding up the process of receiving goods from the mail order company. Types of Telemarketing: Telemarketing can be broken down into two classes 1. Outbound Telemarketing: Outbound Telemarketing occurs when companies place cold calls to potential customers that have not requested a sales call. 2. Inbound Telemarketing: This establishes phone line for customers to call in to place orders. Outbound telemarketing can generate a lot of criticisms because it interrupts family or business activities and can even pose a threat to safety by trying up a phone line needed in an emergency. If we have been bothered during dinner or roused from a deep sleep just to answer the phone and listen to someones sales pitch. We understand the criticism. Advantages of telemarketing 1. The marketer can reach a great number of customers. 2. Some times telemarketing is used by it self; in other selling methods. 3. It saves customers time. Advantages of Direct Marketing (Importance) Direct marketing is considered to be the most useful weapon to retain customers and add new ones. It is estimated that a 2% increase in customer retention could be the equivalent of a 10% reduction in manufacturing costs. This can be achieved through direct marketing. It is one-to-one marketing that is profitable for the customer and makes business sense for the marketer. In the initial years, it was the service sector, which relied on this medium to reach the target consumer. Companies such as Citi bank, ITCs hotel and cigarette divisions found direct marketing ideal to build a consumer base. Ogilvy One Worldwide is the pioneer in the direct marketing concept in India. Several companies cut their advertising budget and increase the direct marketing budget. This is so because it offers a number of advantages. Benefits to Customers 1. Convenience:- What most attracts consumers to the direct marketing is convenience. 2. Saving in time:- Direct marketing saves time shopping at home, especially busy times as Onam, X-Mas provides undeniable attraction. 3. Choice:- It introduces customers a large selection of products. They can do comparative shopping by browsing through mail catalogues and online shopping services, then order products for themselves or others. 4. Product information:- Industrial customers can learn about available products and services without waiting for and tying up time with sales force. Benefits to Sellers 1. Reduction in operating costs: Sales person need not be hired, trained or paid. Often businesses may be located in rural areas or unattractive industrial parks. 2. Consumer relationship: Direct marketers can buy mailing lists containing names of almost any group (millionaires, new parents, college students etc). They can then personalize an customize their messages. 3. Customer relationship: The real advantage of direct marketing comes form its interactive nature; it asks for a response. This enables to build an ongoing relationship with each customer. It helps retain old customers, which is cheaper than finding new ones. It can turn the consumer into a brand advocate. 4. Privacy: Direct marketing provides privacy. The offers and strategies of direct marketers are less visible to competitors. 5. Evaluation of media and messages: Direct marketing permits easy testing of alternative media and messages. Johnson ; Johnson is one of the most dynamic users of direct marketing. Avon cosmetics, Eureka Forbes etc, also use direct marketing successfully. Cypla, the Mumbai based Pharmaceutical company uses a well sorted database of doctors to reach them directly though express packages. One of the most well known case studies of successful direct marketing is Readers Digest. This magazine depends almost completely on direct marketing to not only increase its subscription base but also retain its franchise. Automatic Vending It is the use of machine to dispense products selected by consumers when money is inserted. Automatic vending machine sell products automatically. Vending machine permits the buyer to choose the products directly by paying the money to the machine. This means that the vending machines are the coin-operated, self-service machines. Products sold through vending machines include soft drinks edible oil, tea, coffee, cigarettes, newspaper, milk, platform tickets, chocolates, T-shirts etc. When a coin is inserted in a newspaper-selling machine, the required newspaper comes out of the machine. There is a separate vending machine for each type of product. Salesmen are not required. Automatic vending is also called automatic merchandising or robot selling Automatic vending is one of the most impersonal forms of retailing Machine vending is becoming popular particularly in advanced countries of the world. In Japan a wide variety of products are sold through vending machines. In USA according to the estimates of the National Automatic Merchandising Association, sales through automatic machines rose form $4.5 billion in 1967 to $ 6 billion in 1972 and $ 16.5 billion in 1984. In USA there are some 8000-machine operators operating more than 1, million machines. There is a vending machine for about every 40 people in USA. In UK there are over a hundred operators having sale of 20 million pound per year. In India machine vending it catching up. Vending machines are placed in railway stations, in exhibitions and on other special occasions. Vending machines are widely used to sell tea, coffee, ice creams, milk etc. generally low priced goods are sold through vending machines. Now Horlicks and Boost are available from vending machines. Price is Rs. 5 per 100 M L cup. Advantages of Automatic Vending 1. It involves little running cost. So it is economical. 2. It is very convenient for customers. It is found in a variety of handy locations such as college dormitories. It is open 24 hours a day. 3. It can be located even on the top of a hill where it is not feasible to setup any store. 4. it is great use in-plant feeding. It provides access to factories or offices where for strategic or other reasons the establishment of a manned store is not permissible. It is said that automatic machines at the General Electric Companys Cafeteria in Massachusetts satisfactorily provide snacks and meals to its 13500 employees. 5. It eliminates the use of sales people. These require small space for their installation. 6. The machine doesnt get tired but provides faithful services round the clock. 7. The machine is best suited for selling small sized products, having low unit value and low margin of profit, which it is inconvenient and expensive to sell through regular stores. 8. The chances of pilferage are much less. It can be used as a supplementary outlet by locating it in busy store. Disadvantages of Automatic Vending 1. Separate vending machines are required for each product. The machines are costly. Hence huge capital investment is needed. 2. The product should be standardized. 3. The machine requires feeding from time to time. 4. They dont take back the products once sold. 5. The maintenance cost of the machine in higher. 6. Many varieties of products such as cloth materials, bulky machines, books of the choice and the like are unsuitable for automatic vending 7. There is no scope for bargaining. 8. The machine may stop running due to mechanical faults and cause nuisance to customers. 9. The customer has to procure the specific type of coin for inserting into the machine. This mant be always be convenient. Database Marketing This is a form of one-on-one marketing. It is the process of building, maintaining and using customer database for the purpose of contacting, and transacting with customers. A customer database is an organized collection of comprehensive date about individual customers or prospects, including geographic, demographic, psychographics and behavioral data. The database can be used to locate good potential customers, tailor products and services to the special needs of targeted consumers and maintain long term customer relationship. Meaning of Online Marketing Online marketing is a part of e-commerce. Online marketing is conducted through interactive online computer systems, which link consumers with sellers electronically. It makes products available between buyers and sellers through computer connections. Many retailers are setting up home page on the Internets World Wide Web to disseminate information about their companies and products. There are two types of online marketing channels commercial online services and the Internet, Commercial online service offer online information and marketing services to subscribers who pay a monthly fee. When two or more computers or other devices are connected together so as to enable them to communicate with one another, they form a network. The largest network used for computers in the world is Internet. The Internet is a worldwide collection of computer networks. The Power of Internet as the global access tool was realized with the arrival of World Wide Web. Web is a recent addition to the Internet. Meaning of Internet Marketing/Cyber Marketing (or E-Commerce) Internet marketing or electronic commerce simply refers to buying and selling goods or services through the Internet. In simple terms, e-commerce is a process of two or more parties making business transactions through computer and some type of network. It is the actual buying and selling of goods and services electronically online. Swass defines e-commerce as the sharing of business information, maintaining business relationships and conducting business transactions by means of telecommunication network. Applegate L.M, view that e-commerce is more than simply buying and selling goods electronically. It involves using network communications technology to engage range of activities up and down the value-added chain, both within and outside the organization.