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,white goods
and so on.
• Decade of selling 1960s;By the 1960s there was
an over supply 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:
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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
Product mix
Features brand benefits
packaging quality
Place mix
Marketing channels
services style warranties size
Distribution channels
Reach and accessibility
transportation
Price mix
Offered price
Discounts or incentives
Special allowance
Geographic price penalties
Credit terms
Promotion mix
Advertising
Personal selling
Sales promotion
Public relations
The Role of Direct Marketing
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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.
• Business are using the latest in technology to simplify operations
and diminish costs.
• Regulation 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, memberships at associations,
birth notices, new home owners, boats owners, credit card holder,
building society members, insurance policyholders and so on.
Types of mailing lists
• 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
The role of list manager:
• 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
Thirteen steps to successfully renting
and using a mailing list
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
Thirteen steps to successfully renting
and using a mailing list
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 undeliverables — 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 personalised contacts
may fetch as much as 30% above normal
• Electronic media
• Sheet listings (hard copy)
Mailing List Security
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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
• Geographics
• Type of product purchased
• Length of time on file
• Source
• Date of last transaction
Standard Industry Classification
(SIC)
Code
Industry
01-09
Agricultural, Forestry, Fisheries
10-14
Mining
15-17
Construction
20-39
Manufacturing
40-49
Transportation, Communication, Electric, Gas and
Sanitary
50-51
Wholesale Trade
52-59
Retail Trade
60-69
Finance, Insurance, Real Estate
70-89
Services
91-97
Public Administration
Example
Code
Industry
Quantity
7310
Advertising
2100
7311
Advertising Agencies
1520
7312
Outdoor Advertising
Services
338
7313
Radio, Television
Advertising Service
242
Introducing Databases
• A database is any collection of data
organised for storage in a computer memory
and designed for easy access by authorised
users
• The data may be in the form of text,
numbers, or encoded graphics
A Customer Database
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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?
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Creating data records about customers
Using this data to analyse 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
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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 crossselling 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 behaviour and the
likelihood of repeat business. Targeted segments
are more responsive to a company’s direct
marketing efforts, which leads 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
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It is measurable
It can be tested
It is selective
It can be personalised
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
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Geographic
Demographic
Geo-demographic
Psychographic
Attitudinal
Behavioural
Geo-demographics
• 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
behaviours
Census Collection District (CCD)
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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 effictive
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 behavioural 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 is 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.