Direct marketing is special marketing discipline, not just a medium.
The object is to increase customer value.
It focuses on individuals, not masses.
Direct marketing builds brands; it must be integrated with other disciplines.
Its principles apply to e-commerce.
Building and enhancing the database is key.
Testing and accurate measurement reduce risk and increase return on investment.
Growing with E-commerce
"Advertising Age" once revealed that one in eleven of all new jobs being created was in direct marketing. Virtually all organizations in advanced economies use it some ways.
Today’s direct marketing is essentially a fusion of traditional selling and direct mail. Yet it’s more than a sales process or medium: it’s a marketing discipline with special characteristics. It uses all media. It’s personal, like TikTok, focusing on individuals, not masses. Every message is coded, so you can gauge return on investment exactly. And it looks to long-term customer value rather than the value of individuals sales.
E-commerce, above all, has made direct marketing more relevant as the approach to directly connecting individuals; in effect e-commerce is accelerated direct marketing. Increasingly, as businesses face ever-growing competition and products and services can be copied fast, direct marketing makes great sense, as it focuses more on the customer than on what is actually being sold.
“The new system takes us a giant step beyond mass production towards increasing customization…towards niches and micro-marketing. ”
——Alvin Toffler
Directly marketing is not always a cheaper way of marketing. Nevertheless, when properly managed direct marketing directs your efforts more accurately, giving you more for your marketing money. It does this in three stages. By learning about these easy setups, you as both a business and an individual can get the most out of direct marketing.
First, you identify those customers, including organizations and the individuals within them, that your offering is more likely to appeal to. You store relevant data about them on a database (or through cloud computing), which you continually enrich with added information. Thus you can offer what they are most likely to want when they are most likely to want it with growing confidence, eliminating junk messages.
Second, by communicating with customers in an increasingly relevant way as you learn more, you strengthen and lengthen your relationship with them. This is important, as retaining customers is far more profitable than attracting them. This fact has helped fuel today’s greater focus on the customer.
Third, you reduce risk by rigorous measurement, testing on small numbers before spending big money, and comparing different approaches. Seemingly trivial changes can make big differences. Adding—or removing——an element may increase return on investment by as much as 90%. Running one TV commercial rather another, or changing the time it runs, may transform loss into profit. Altering just one word in headline can have the same effect.
No More Blunt Resistance : Where and How It Works
It’s been long established that products or services that requires detailed explanation are the toughest to move along. Typically, insurance and investment are good examples——financial services are the biggest direct marketers.
Direct marketing has its historical roots longer than most people realize. As early as the 15the century Italian printers produced catalogs to sell books directly. It’s also good for products people are shy about buying in person——slimming remedies and other health-related products, for instance, exotic lingerie.
Since the database means you can vary messages to suit individuals, direct marketing works well if you sell to business where decision makers have varying motives—value for money matters to finance directors, while managing directors may care more about efficiency.
“It’s not just running a restaurant, it’s being friends with your customers. It’s a personal connection, very personal. ”
—Mary Kelekis
Customer Life-time Value
In terms of business strategy(“Strategically Dangerous”) the most interesting aspect of direct marketing may be its emphasis on customer value. Whereas firms have traditionally measured performance by current profits, direct marketers have always thought in terms of how profitable a customer is over time.
That’s because the best early direct marketers were book clubs and catalogue firms. They attracted customers by using incentives, which obviously made the first transaction unprofitable—-their strategy was to lose money initially in order to make money eventually. Incentives are important in direct marketing, incentives to buy, or enquire, or simply give information. Thus, a car firm may want to know what car a prospect has, what car the person is thinking of buying next and when, and how much money the next car is likely to cost.
The early direct marketers measured loyalty (how long a customer stayed with them—-usually between 5 snd 7 years) and what they could afford to pay to acquire a customer. in the same way banks, credit-card companies, and insurance firms look to long-term relationships, and car firms look to keep customers buying their marque.
Customer value varies enormously. A small percentage of customers generally buys most of any product or service, and by identifying those individuals you can concentrate your efforts and reap disproportionate rewards. You can eliminate expenditure on less valuable customers and increase in on more valuable ones.
To be truly effective, one-to-one marketing involves market segmentation. This involves methods which can accurately analyze groups of current and potential customers. This promotes detailed understanding of the market, targets both current and potential customers, and enables effective marketing plans to succeed. Segmentation is a decisive factor in developing product and segmentation strategies to optimize profitability and ensuring long-term competitive advantage. Without one-to-one marketing, organization will not maximize their potential, especially if their competitors are better positioned through exploiting market segmentation. As market become increasingly global, diverse, and complex, segmentation and one to one marketing has become the most valuable in maintaining the effectiveness of marketing strategies.
How to Make it Happen:
1.Identify the customers and organizations (and individuals within) most likely to want your offering, and store the data on a continually enriched database.
2.Use direct marketing to strengthen and lengthen your relationship with profitably retained customers.
3.Reduce marketing risk by rigorous measurement, testing on small numbers before spending big money, and comparing different approaches.
4.Use direct response advertising with complement personal selling by getting leads, keeping in value-based interactions
5.Put your emphasis on customer value—how profitable a customer is over time—not on current sales or profits. Customer value is the cornerstone of long-term success.