Direct Marketing by Geoff Lancaster 1 Direct marketing explained Direct marketing is a collection of techniques that enables organisations to mar

r ket goods and services directly to customers (business-to-customers or B2C). It is a pro-active approach to marketing that takes the product and/or service to p otential customers rather than waiting for them to come to a store or other poin t of access. It is a form of non-shop shopping and is sometimes referred to as prec ision marketing or one-to-one marketing. Rather than the marketing firm sending out a general communication or sales message to a large group of potential customer s, even if these constitute a well-defined market segment, direct marketing tend s to target specific individuals or households. In a business-to-business (B2B) context this would be an individual or a specific organisation or firm. Direct m arketing is not just concerned with marketing communications. It is also concern ed with distribution. In using direct marketing, the firm is making a choice to cut out the use of marketing intermediaries and sell the product or service dire ct to customers. This has implications for both channels of distribution and log istical decisions. Direct marketing comes in a variety of forms. It is one of the fastest growing a reas of marketing and is being propelled by technical advances, particularly in the field of computer technology and the www. Academics and consultants have tak en up direct marketing with enthusiasm, and have helped to drive the subject for ward both intellectually and practically. 1.1 Direct marketing is not new Direct marketing is not new, as many companies have sold products direct to the public for years e.g. Kleeneeze and Avon who have sold products door to door for many years. Direct mail through the post and mail order catalogues have been ut ilised for a long time and all are forms of direct marketing. Direct marketing o riginated in the early 1900s and the Direct Marketing Association (DMA) was esta blished in the USA in 1917. Direct marketing became an important force in the UK in the 1950s, but at this stage of its development it was generally concerned w ith direct mail, mail order and door-to-door personal selling. Today the scope o f direct marketing has expanded dramatically largely due to the use of the telep hone and in particular the use of the Internet. Direct marketing includes all ma rketing communications elements that allow an organisation to communicate direct ly with a prospect. This includes direct mail, telephone marketing, direct respo nse advertising, door-to-door personal selling and the Internet. Party plan companies have been selling products direct to customers in peoples h omes for many years. The telephone has been used for B2B sales for a long time p articularly for the regeneration of routine orders and for making sales appointmen ts. It is now being used increasingly in domestic direct marketing programmes of ten to follow up a posted personalised mail shot. Motoring organisations, such as the RAC and AA in the UK, have used direct personal selling for years to sell me mbership of their organisations and today use direct mail extensively to keep me mbers informed about product and service benefits. However, as already mentioned , direct marketing has evolved with the advances in computer technology. The use of computers to store, retrieve and manipulate customer information has revolut ionised the way direct marketing firms operate. Direct marketing firms can make use of the Internet and computer databases which allows them to access data wareh ouses and gives them the capability to sort and aggregate or fuse data to increase its value as a marketing resource. 1.2 Not all direct marketing is IT driven There is still the opportunity for old fashioned methods that are well proven. Som e of the more traditional direct marketing methods like door-to-door selling are employed and are effective and widely used by many companies. Traditional direc t mail and telephone marketing techniques are widely employed by a range of dire ct marketing companies. Technology, especially computer technology, continues to develop at a rapid pace and ideas are changing constantly. It will be interesti

ng to see what the world of direct marketing will look like in 10 or 20 years ti me. Figure 1 illustrates its development.

Early 1900s 1950s and 1960s Present day TIME Figure 1 Development of direct marketing 2 Objectives of Direct Marketing. Much direct marketing activity is intended to result in a sale. However, in some situations a direct sale might be unlikely or inappropriate. In such cases some other form of measurable response might be used. For example, a direct mail cam paign and a telephone-marketing programme may be used in the engineering industr y to invite and encourage buyers to attend a machine tool exhibition. A leaflet drop for double-glazing might contain a free phone number for the prospect to re quest a brochure or estimate. The result may not be a sale, but some specific, m easurable action that will hopefully contribute to an ultimate sale. Although a sale may not be the immediate objective of a direct marketing campaign, some for m of direct response on behalf of the recipient of the message will be. This, in turn, will contribute to the eventual sale. Hence, direct marketing is not nece ssarily the same as direct sales. It might be used to keep customers informed of new product developments or to send them specific discount offers. 2.1 Strategic Role of Direct marketing Direct marketing should not be used as a mere tactical marketing communications tool, but should be integrated with the rest of the communications mix. All mark eting communications elements interact to some extent. Direct marketing is likel y to form a major part of communications strategy of many companies and not simp ly form a kind of tactical adjunct. Other forms of communication are likely to b e used in conjunction with direct marketing programmes even if these are only ge neral corporate advertising programmes. Many firms use direct marketing predomin antly, but not to the exclusion of other communication methods. Direct marketing is often used as part of integrated customer relationship management (CRM) prog rammes, which we discuss in the next chapter. CRM programmes are by their nature long term and strategic in nature. 2.2 Definition of direct marketing Direct marketing is broadly defined as any direct communication to a consumer or business recipient that is designed to generate a response in the form of a dir ect order, a request for further information (lead generation), or a visit to a store or other place of business for the purchase of a specific product or serv ice (traffic generation). The emphasis is on direct marketing communication. A l eading trade magazine, Direct Marketing, goes further and defines direct marketi ng as a process that is: An interactive system of marketing that uses one or more advertising media to ef fect a measurable response and/or transaction at any location, with this activit y stored on a database Dibb and Simkin (2001) define direct marketing as: a decision by a companys marketers to select a marketing channel that avoids depe

ndence on marketing channel intermediaries, and to focus marketing communication s activity on promotional mix ingredients that contact directly targeted custome rs Pickton and Broderick (2001) describe the essence of direct marketing with empha sis on its use of customer information: Direct Marketing is a marketing system based on individual customer records held on a database. These records are the basis for marketing analysis, planning, im plementation of programmes, and control of this activity Fill (2002) defines direct marketing: Direct marketing is a strategy used to create a personal and intermediary free d ialogue with customers. This should be a measurable activity and it is very ofte n media based, with a view to creating and sustaining a mutually rewarding relat ionship The goal is to provide the customer with information relative to their needs and interests. A profile on the direct and interactive marketing industry offers a useful way of looking at it as a cyclical process with six distinct phases: 1. The creative stage and design phase, where the marketing plan is constru cted and appropriate media channels are selected 2. Data compilation where both internal data, such as customer lists and ou tside data from a database company or list broker is assembled in preparation fo r the next stage in the programme 3. Database management, where information is mined, fused, aggregated or disagg regated, enhanced and standardised for use in the programme 4. Database analysis, or fine tuning the database which further focuses on an optimal target market 5. Execution and fulfilment where customer inquiries and orders are acted u pon and information on response rates are collected for final post programme ana lysis 6. Response analysis where the results of the campaign are examined for eff ectiveness before the cycle begins again 3 The Direct Marketing Association (DMA) The DMA is the oldest and largest trade association for users and suppliers in t he direct, database and interactive marketing fields. Founded in 1917, the DMA h as more than 4,700 member organisations, commercial as well as not-for-profit, f rom the USA and over 50 nations on six continents. Reflecting the revolutionary impact of the WWW and e-commerce on the industry, The DMA has acquired two e-com merce trade associations, the Association for Interactive Media (AIM) New York a nd the Internet Alliance (IA) Washington, D.C. The DMA shapes the way organisati ons apply direct/interactive-marketing methods to marketing, sales and customer service activity. Their mission is to encourage growth and profitability of thei r members and adherence to ethical standards. To achieve this the DMA: 1. Provides strong leadership in government and public affairs representati on, public relations and communications, adherence to established ethical guidel ines, self-regulation, and the identification and promotion of new and best prac tices to project and grow the business 2. Promote an environment in which users of direct/interactive marketing an d their suppliers will develop the necessary skills to prosper 3. Assist members to understand consumer and business customer needs and co ncerns regarding direct/interactive marketing and confirm that members respect an d act on those needs and concerns

4 Uses of direct marketing using different media We have examined the nature of direct marketing and its role in the communicatio ns mix, and now discuss the main areas of direct marketing. The discussion that follows is not exhaustive, but it covers the main direct marketing tools and exa mines their application in different marketing situations. We start with the use of telephone or telemarketing, which has been used particularly in industrial a nd B2B marketing. We then examine developments and the use of direct mail, which has seen enormous growth as a direct marketing tool over the past 30 years. Tel emarketing and the use of direct mail were two of the main pillars of the direct marketing industry when the Direct Marketing Association (DMA) was established in the USA. Direct mail examines some of the revolutionary developments in the u se of the Internet in direct marketing. Topics here include database marketing a nd techniques of data mining and data fusion, which are central to the direct ma rketing revolution when using this medium. Direct personal selling is well estab lished as a direct marketing tool and formed the bedrock of the direct marketing i ndustry at the time of the establishment of the DMA in 1917. We finally examine direct response, concentrating mainly on television direct response advertising, but also covering newspapers and radio applications. 4.1 Telephone marketing Telephone marketing has been used as a direct marketing tool for many years, alt hough mainly in B2B situations. Much routine reordering can be handled over the telephone without the need for an expensive personal visit. The telephone is use d to keep in touch with customers between visits. It can be used to make cold cal l appointments and re-appointments with established clients. It is extremely vers atile and can be used in many ways as a marketing tool. In consumer markets it i s now used extensively and has grown in importance as a marketing tool. Services like banking are offered over the telephone and customers can give instructions to pay bills and receive a balance on their account using special access codes. Many companies use the telephone as part of a direct marketing programme. They may start first with a direct response press advertisement, which gives a free n umber to call. This starts the direct marketing process going. The telephone derives its power as a marketing medium from its transactional nat ure (i.e. one human being in a controlled conversation with another). What origi nally began as ordering by telephone evolved into telemarketing, a concept defined as: Any measurable activity that creates and exploits a direct relationship between supplier and customer by the interactive use of the telephone (Roncoroni 1986) The American Telephone and Telegraph Company (AT&T) define it as: The marketing of telecommunications technology and direct marketing techniques ( Nash 1984). Telephone marketing is divided into incoming and outgoing call telemarketing. Wi th incoming call telemarketing the prospect makes the call to the marketing firm , usually in response to a direct mail advertisement or direct response televisi on advertisement giving a free phone or toll free telephone number. Hence, telem arketing is often used with other direct marketing tools as a part of an integra ted programme. The caller may wish to sign up to a service such as insurance, ap ply for a loan over the telephone, order a product seen on the television or in a direct response advertisement or ask for further details. The call is logged a nd often recorded. The caller is then followed up with an outgoing telephone cal l sometime later, or sent information through the post. A personal visit might b e arranged e.g. from a kitchen surveyor. Outgoing telephone marketing may simply be the return of an incoming call. Often existing customers are telephoned to a sk if they want to take advantage of a special offer. For example, if a loan has been taken out with a finance company by a good customer, the firm may ring tha t customer to offer another loan at a special discount rate. A bank may ring a c ustomer to ask if they would like to make an appointment at the branch to have t

heir mortgage reviewed or discuss house insurance. Companies can exploit the telephone as a marketing tool in a number of ways: Cost savings. Telephone selling provides a customised means of communications. Greater sophist ication in telemarketing equipment and services, new marketing approaches and de velopments in applications have turned the use of the telephone into telemarketin g. The telephone may not have the quality of a personal sales call, but it is sig nificantly cheaper. Sometimes in the initial stages of a direct marketing progra mme a personal visit is not necessary or appropriate anyway. Supplement to a personal visit. Professional salespeople use a system of differential call frequency to plan the ir visits to customers. Salespeople may have to prioritise their calls on a key account basis. Although they may not be able to visit less important customers w ith the same frequency as more important customers, they can make a telephone ca ll on a regular basis to keep customers informed and build and maintain relation ships. Gaining marketing intelligence. Marketing firms can speak to customers on a regular basis, not only to maintain relationships, but also to ask questions about their needs and wants and purchas ing intentions. This information can be recorded and fed into the firms marketin g information system (MkIS) for future use. Buying intentions can be used to pro duce sales forecasts for future planning. On establishing customer needs, teleph one marketers can introduce new products to clients and use the call to sell fur ther products. Supplement to direct mail and other advertising. Many direct mail and other forms of direct response advertising, on television, press or radio for example, will carry a free phone message. This enables the pr ospect to make telephone contact at no cost. Prospects can make an immediate com mitment to purchase whilst the advertising message is still fresh in their minds . If they do not ring to make a purchase, they may telephone for further informa tion, which in turn produces a qualified lead for further marketing action. The above list is not exhaustive, but it serves to demonstrate how versatile the telephone can be as a direct marketing tool. The use of the telephone is still growing as a marketing tool and further advances in technology and the linking o f the telephone to television and the Internet will bring further developments i n the future making it an even more important marketing medium. 4.2 Direct mail 4.2.1 Direct mail explained Direct mail is considered by some to be an advertising medium, but by others to be a separate element of the marketing communications mix. Direct mailing is the use of the postal service to distribute informative literature or other promoti onal material to selected prospects. A direct mail shot may consist of anything from a letter to weighty catalogues o f product offerings. Regular users of direct mail techniques in the UK are the R eaders Digest and the Automobile Association. Direct mail is a method of communicating a message directly to a particular pers on, household or firm. As such it falls under the more general heading of direct marketing, which includes many other forms of direct communication. We now dist inguish direct mail from related activities with which it is commonly confused: Direct mail is not: Direct advertising This is one of the oldest methods of reaching consumers. It consists of printed matter that is sent by the advertiser direct to the prospect. This material is o ften sent by mail, but it may also be distributed house-to-house by personal del ivery, handed out to passers-by, or put under the windscreen wipers of parked ca

rs. The portion of direct advertising that is sent through the mail is called di rect mail advertising. Mail order If the object of a direct mail shot is to persuade recipients to order the produ ct or service by return post, the correct term is mail order or mail order adver tising. Deliveries are made through mail or parcel services or by carrier direct from a warehouse or factory or sometimes through a local agent. Mail order is a special form of direct mail. It seeks to complete the sale entirely by mail, wh ilst direct mail is generally supplementary to other forms of advertising and se lling. Direct mail is part of a companys general marketing plan, whereas mail ord er advertising is a complete plan in itself, and companies exist solely to condu ct business in this manner. Mail order is a type of direct mail, but not all dir ect mail is mail order. Direct response advertising Neither direct mail nor mail order should be confused with direct response adver tising. This is the strategy of using specially designed advertisements, usually in newspapers and magazines, to invoke a direct response rather than a delayed one. The most familiar type of direct response advertising is the coupon-respons e press advertisement, in which a coupon is provided which the reader may use to order the advertised product or service or request further information or a sal es call. Other variants involve incentives to visit the retail outlet immediatel y, such as preview invitations and money-off coupons. Direct mail can also be us ed for direct response advertising. 4.2.2 Growth of direct mail in UK marketing Post Office/Royal Mail statistics show a continuing rise in the annual volume of direct mail and in the number of organisations using it for business and consum er communication. A number of factors account for this increased use and accepta nce of direct mail as a communications medium. Of the most significant is the in creased fragmentation of media: There are now three UK terrestrial commercial television channels as well as a w ide choice of satellite and cable television available to subscribers;

In the print media, there has been the rapid growth of freesheets alongside tradi ional local press, as well as a proliferation of special interest magazines. This fragmentation has meant that media buyers and advertisers either have to sp end more money to ensure they reach as wide an audience as previously, or spread the same amount of money more thinly over a range of media. Developments within the direct mail industry have removed many difficulties that have previously de terred large advertisers particularly in respect of the inferior quality of larg e mail shots and hence such material being dubbed junk mail. IT advances have made it possible to personalise mail shots, targeted to individuals by name. Quality h as been improved by increased investment that has been channelled into direct ma il. There have been tremendous technical strides in all areas of direct mail, in cluding computer aided design of direct mail material and use of mail merge soft ware that produces results that look like letters. Materials can be produced and addressed exclusively for individuals. Data storage and customer profiling, tar geting of direct mail shots to individuals and organisations are possible. In or der to effectively segment and target markets and gain best value for money, org anisations are increasingly opting for the benefits of direct mail flexibility, selectivity and personal contact. 4.2.3 Uses of direct mail The range of products or services that can be sold by direct mail is wide, as ar e its uses. To define it more fully, it is appropriate to deal with direct mail to consumers and businesses separately.

Consumer direct mail The uses of consumer-targeted direct mail are only limited by the scope of imagi nation. Some of the more common uses are: 1. Selling direct Direct mail is a good medium for selling to customers without the need for middl emen. Product offerings can be described fully and orders can be sent straight b ack to the advertising company. 2. Sales lead generation If a product requires a meeting between the customer and a specialised salespers on (e.g. fitted kitchens, central heating and insurance) direct mail is a useful method of acquiring good, qualified leads for the companys salespeople. Sales ca lls are expensive, so anything that improves call success rate is welcome. A wel l-planned mail shot can act as a preliminary sieve, pinpointing the best prospec ts and ranking others in terms of sales potential. The warmer the lead, the more e ffective will be the sales discussion with fewer wasted calls. Responses, indicating potential interest can be followed up by direct mail, a te lephone call or a personal visit by a salesperson. Potential customers can be pl aced in a personal selling situation by issuing an invitation to view the produc t in a retail outlet, showroom or exhibition. This is useful for products that s alespeople cannot take to prospects for demonstration because of its size or fun ction. Direct mail creates a receptive atmosphere for the companys salespeople through co rdial contact mailings that build on the reputation of the company and through th e impression created. Well-executed mailing places the company in a favourable l ight to prospects, setting up goodwill or creating a latent desire that might be triggered into action by a later mailing. 3. Sales promotion Direct mail can send promotional messages money off vouchers, special offers, et c. to selected targets. This is a useful way of encouraging people to visit a sh op or exhibition. 4. Clubs Book clubs are the best-known example of the use of direct mail as a convenient medium of communication and transaction between a club and its members. Other it ems can be marketed by the club system particularly collectibles e.g. record colle ctions, porcelain and miniatures. 5. Mail order Mail order companies use direct mail to recruit new customers and local agents, as well as direct selling. 6. Fundraising An advantage of direct mail is ability to communicate personally with an individ ual. This makes it a powerful method of raising money. It can carry the long copy often needed to convince recipients of the worthiness of the charity, and make i t more likely that the reader might respond with a donation. 7. Dealer mailings If a product is sold through dealers or agents, they can use direct mail to reac h prospective customers in their particular catchment area just as a producer mi ght. 8. Follow-up mailings The companys name can be promoted to customers by following any kind of sales act ivity with a mailing e.g. checking that the customer is satisfied with their pur

chase or informing them that perhaps a car they bought last year is coming up fo r its annual service. Customers can be kept informed of new developments, latest products and improved services. Exclusive offers can be made and invitations issu ed. Using direct mail in this way helps maintain contact quickly, personally and effectively and can increase repeat sales. Business direct mail Business markets are made up of closely defined, discrete groups of individuals. These groups may not be best reached by mass advertising media. Direct mail can be used to accurately identify different market sectors and provide messages ap propriate to each sector. Some of the more common uses are: 1. Product launch Often the launch of a new industrial product or business service entails getting the message across to a small, but significant, number of people who will influ ence buying decisions (e.g. catering managers and car fleet managers). 2. Sales lead generation As in consumer markets, direct mail can effectively reach qualified sales leads for a companys sales force. 3. Dealer support Direct mail makes it easy to keep dealers, retail outlets, franchise holders, et c. more fully informed of tactical marketing promotions and plans. 4. Conferences and exhibitions Business and trade conferences and exhibitions are well-established means of com municating with potential customers and business colleagues. Direct mail can be used to invite delegates, who may be attracted if the event relates to a specifi c theme of direct interest to them. 5. Follow-up mailing using the customer base Much business takes the form of repeat sales to existing customers. Since these are existing clients it can be worthwhile mailing them regularly, as long as the content of the mail-out relates to something that is new or of specific interes t rather than simply junk mail. 6. Marketing research/product testing Direct mail can be used for marketing research, especially amongst existing cust omers. Questionnaires can be used as part of a regular communication programme, with levels of response being increased by some kind of incentive. Small-scale t est mailings can be made to sample a target market. The results can give a quick and accurate picture of market reaction, with minimum risk. A marketing approac h that is successful in a test mailing can later be mailed to the full list. 4.2.4 Direct mail as part of the promotional mix In both consumer and business markets, direct mail must fit in with an organisat ions other promotion efforts e.g. a television or press campaign can reach a broa der audience and raise levels of awareness of a company. If such a campaign is a dded to a direct mail campaign aimed specifically at groups of people or compani es most likely to buy, or to people particularly wanted as customers the effecti veness of the overall campaign can be significantly raised. Lists of respondents to direct response techniques in other media e.g. coupon resp onse press advertisements or television or radio commercials that give a phone-in number or contact address can be used as mailing lists for direct mail approache s. 4.3 Use of the Internet as a Direct Marketing Tool Customers now have more products and services to choose from and more informatio n available to them to help them make purchasing decisions. Conventional communi

cations, principally media advertising, is not as effective as it used to be. Th is is partly because there is more for consumers to digest, and partly because p eople have learned to ignore it. The rise of the Internet means that companies c an go further than conventional communications would allow them to in the past. There is a new group of products and services that relies on customers registeri ng their interest in them with the company. Amazon.com for example, encourages c ustomers to review books and publishes their comments on the website so both the firm and other users can read and make use of them. A US airline invites custom ers to register their preferences for last minute offers via its web site, and t hen emails potential customers with details of weekend breaks at their preferred resorts. These are examples of the precision that can be achieved with direct m arketing. The Internet has the potential to be the most powerful direct marketing tool eve r. In ten years owning a computer workstation that is wired to the Internet will be as common as owning a TV is today. Children being taught at school using new technology today and playing computer games at home will take the use of the In ternet as a shopping medium for granted. The Internet is not a fad; it is a majo r technological development that will continually evolve. We are at the beginnin g of the next business revolution that will affect the way we live, work and pla y. The technology involved in setting up the Internet has demonstrated that it w ill significantly change the way people interact with each other, particularly i n the sphere of direct marketing. The Internet crosses boundaries of geography, politics, race, sex, religion, time zones and culture. Some areas of marketing a re almost totally underpinned by technology and its application e.g. the use of e-marketing based on Internet technology and variations that have been developed from original Internet concepts such as the Intranet and Extranet, which connec ts and links employees, customers, suppliers and partners. The Internet has redu ced the planet to a global village, accelerated the pace of technology, opened u p tremendous possibilities for direct marketers and altered the way they think a bout doing business. It has started the new revolution in direct marketing; some say the most important revolution since the invention of commercial advertising , the e-commerce revolution. It is the revolution people can no longer ignore anym ore. It is contended that the e-commerce revolution will rebuild the existing economy and change the way marketing and business is conducted. Doubters say the likely effect of this new technology is over-blown and many people will stop using it once the novelty has worn off. 4.3.1 Database Marketing Improvements in database software and related computer technology have revolutio nised the direct marketing industry. Nothing has driven the direct marketing ind ustry forward more than IT developments, especially in the development of databa se software and applications. Database marketing is a marketing and sales system that continually gathers, refines and utilises information and data that drives relevant marketing and sales communications programmes. It is used extensively, but not exclusively, in direct marketing. Examples are sales calls, direct mail and advertising to selected companies to acquire new customers, retain customer s, generate more business from existing customers and create long-term loyalty. The Internet, e-commerce, rising costs of direct marketing and more emphasis on customer retention over customer acquisition are only a few salient factors affe cting the way firms carry out business today. Firms have to move quickly and kee p up with latest developments and trends, and invest in relevant software and sy stems to stay ahead of the competition. Database marketing is more than a data retrieval system. Whilst direct marketing describes a collection of marketing communication tactics like direct mail, tel emarketing and direct response advertising, database marketing describes a way o

f organising a companys total marketing and sales processes. It is broad and can impact market research and product development through to customer service. Accu rate information about customers that is readily available to everyone in the ma rketing company can transform the companys marketing ability. 4.3.2 Strategic and tactical implications Database marketing aims to focus and target and take guessing out of marketing p rogrammes. Perfect accuracy is never possible, but it allows for significant imp rovements in accuracy and efficiency if used properly. Some companies engage in hit-or-miss marketing. This means management often makes decisions based on intui tion or instinct rather than on hard facts based on scientific evidence, so inst ead for predicting target audiences on hard facts they make best guesses about w hom their target audience is and what they want. This can be expensive in terms of wasted direct mail shots and other forms of communication. It allows you to take information you already have in your customer databases, a nalyse it to find any patterns like purchasing associations and relationships, a nd use information that has been gained to produce and instigate better marketin g and sales programmes. This means targeting specific groups with specific messa ges about products that are important to them, rather than giving irrelevant inf ormation. This means that more resources can be spent on prospects that are most likely to buy, increasing the return on marketing and sales investment. Proper use of databases gives marketing better tools to operate more professiona lly and improves the effectiveness of marketing campaigns, allowing for the more effective allocation and utilisation of marketing resources. Database marketing is sometimes referred to as precision marketing. Directing a marketing programm e from a well constructed and managed database is analogous to shooting a rifle at a target using a precision telescopic sight rather than a conventional sight. Developments in database marketing over the past 20 years, has probably done mo re to drive the direct marketing industry forward than any other single developm ent. 4.3.3 Principles of database marketing Some illustrations are provided of applications and basic principles of database marketing. This is not an exhaustive or definitive list, but it serves to illus trate the main principles: Consider characteristics your best customers have in common so you can target yo ur next programmes to prospects with similar characteristics. Evaluate which mar ket segments buy from your firm. You might think you know this, but analysis cou ld uncover market segments you have sold a significant amount of product to, but did not realise it. This process enables the firm to improve its segmentation b y refocusing and redefining existing segments or it may highlight unexpected new segments. Ascertain whether different market segments buy different products from you. Thi s will allow you to spend marketing and sales resources more effectively by mark eting each of your products to the best potential industries, firms or prospects . Study which market segments bring most revenue and which ones bring highest av erage revenue. This is the application of differentiated marketing, which divide s the total market into segments, and then has a slightly different marketing st rategy for each segment. Find out what types of industries, firms or individuals respond to which types o f marketing communication, so you can decide where to spend advertising and mark eting resources next time. Ascertain that they not only respond to your programm es, but also actually buy, and which buy from you repeatedly. These might have b een different demographic profiles or different in some other way, which might b e commercially exploitable, and you may then decide to modify your targeting tac

tics and only market to segments that buy more frequently. Calculate the average lifetime value of customers. This can be done using discou nted cash flow procedures (discussed in Chapter 10). This information can be use d to find out which customers are not achieving their potential. Marketing and s ales programmes can then be devised to encourage more purchases. Reward the most frequent buyers and buyers that bring the highest revenue. The concept of lifet ime value is central to the idea of customer retention and long-term relationshi p marketing. 4.4 Direct personal selling. Marketing communications can be classified into personal and impersonal methods. Conventional advertising is classified as impersonal and of course selling is p ersonal and involves some form of interaction with a prospect, referred to as a dyadic relationship. This interaction can be at a distance, over the telephone f or example. However, most personal selling is carried out on a face-to-face basi s and this dimension is a key strength of personal selling. Selling was the focu s of the previous chapter, and it was discussed that it is more expensive on a c ost per contact basis, but sometimes there is no substitute for a personal appro ach. Consumers benefit from direct selling because of the convenience and servic e it provides, including personal communication, demonstration and explanation o f products to a higher standard than in conventional stores or through printed m edia. Home delivery by the salesperson who took the order provides even further satisfaction. This is different from conventional shopping, and cuts out the nee d for marketing intermediaries, thereby saving customers money. The task of selling differs according to products or services being marketed. In some situations the task of selling is more a matter of keeping customers satis fied and the task then calls for more skills of personality and caring. In other situations, contractual negotiations might be the main emphasis of selling wher e skills of prospecting, negotiating, demonstrating and closing a sale will be g reater criteria of success. In organisational marketing, reliance is placed on p ersonal communication. For FMCGs, emphasis is placed on above- and below-the-lin e communication. In organisational selling the proportion of selling within the total market budget usually outweighs all other marketing expenditure. Direct se lling is a specific form of selling. Not only is it personal, but it is direct a nd constitutes an expanding channel of distribution. Moreover, direct selling pr ovides a channel of distribution for companies with innovative or distinctive pr oducts not readily available in traditional retail outlets. It may be that produ cts on offer are produced by a relatively small firm that cannot afford to compe te through advertising and promotion, because of the costs associated with gaini ng space on retail shelves of major outlets. Hence, customers gain by being able to purchase products that would have been unavailable had the marketing company to operate through conventional retail outlets. Direct selling enhances the ret ail distribution infrastructure. It can serve customers with a convenient source of products that may not be available elsewhere. Direct selling is described as marketing products and services directly to consu mers face-to-face generally in their homes, at their workplace and other places away from permanent retail locations. It typically occurs through explanation or personal demonstration by a direct salesperson, or direct seller. Products and services sold by direct sellers are varied as are people involved i n the direct selling industry, particularly insurance, financial services, cosme tics, skin care products, personal care items, home appliances, household cleani ng products, nutritional products, toys, books, clothing, jewellery, fashion acc essories, etc. Sometimes, such products are sold in the context of group present ations (party plan). Tupperware produce a range of products, especially kitchenw are and food and drink storage boxes. The company is an example of a party plan selling strategy used successfully. In this approach, the direct salesperson dem onstrates products to a group of guests, invited by a host in whose home or othe r location the direct selling demonstration takes place. By contrast, other type

s of direct selling often explain and demonstrate the products being offered to customers in the comfort of their homes at a time that is convenient for them on a personal one to one basis rather than in a group. Avon Cosmetics uses freelan ce agents to visit people in their own homes and demonstrate and explain the use of a range of beauty products. Direct selling provides benefits to individuals who desire an opportunity to ear n income and build their own business. It also offers an alternative to consumer s who want something different from traditional shopping. 4.4.1 Multi-level Marketing Multi-level Marketing (MLM), like many innovative business systems, was develope d in the USA and exported to other parts of the world. Some suspicion surrounds MLM as there is confusion with pyramid selling. This was an unethical business p ractice that is banned in the UK. An important component of the direct selling i ndustry is multi-level marketing. It is also referred to as network marketing, s tructure marketing or multi-level direct selling, and has proved to be a success ful and effective method of compensating direct sellers for marketing and distri buting products and services direct to consumers. Unlike pyramid selling MLM is an ethical business practice that uses the principle of team building in terms of st imulating salespeople to aspire to better levels of performance to sell products . Direct salespersons are usually self-employed people working on a freelance ba sis for commission on sales. Figure 2 explains how it is structured.

Figure 2 Principle of multi-level marketing (MLM) showing team originator receiv ing downstream commissions from those lower in the network Salespersons normally start by selling goods and services to the public, often i n the first instance, to people they know such as friends and work colleagues. T hey then move up the hierarchy to not only sell products themselves, but to recr uit other direct sellers to sell as part of their own team. They not only receiv e commission on the goods they sell themselves, but also earn downstream commissio n on products the people they have recruited have sold. Eventually they may move from selling direct themselves, and concentrate on managing others in their tea m. As the team grows so does the downstream commission that accrues to the origina l team organiser. Eventually the end the team leader may have a network of many direct selling staff at different level in the hierarchy. Some will be content t o sell some product direct on a part time basis. Some may want to recruit a smal l team. Some may want to be senior team leaders and put in effort to lead a whol e networking team of direct personal selling staff and reap the rewards of commi

ssions based on the selling effort of their team combined with their own motivat ional, leadership and managerial skills. 4.4.2 World Federation of Direct Selling Associations Founded in 1978, the WFDSA is a non-governmental, voluntary organisation represe nting the direct selling industry globally as a federation of national Direct Se lling Associations. The United States Direct Selling Association serves as the S ecretariat for the Federation and is based in Washington DC. The mission of the WFDSA is to support direct selling associations in the areas of governance, educ ation, communications, consumer protection and ethics in the marketplace and to promote personal interaction among direct selling executives regarding issues of importance to the industry. There are over 50 national DSAs represented in its m embership, and in 2001 it was estimated that worldwide retail sales by its membe rs accounted for more than $US95 billion through the activities of more than 25 million independent salespersons. The World Federation and its national DSAs und erstand the necessity for ethical conduct in the marketplace and as such the WFD SA has developed a World Code of Conduct for Direct Selling that all national DS As have approved and implemented in their national codes. All direct selling com panies agree to be bound by these codes as a condition of membership in a nation al DSA. The WFDSA regularly publishes a newsletter, World Federation News, with an international focus on direct selling for distribution to member direct selli ng associations and companies. 4.5 Direct response advertising This area has witnessed an enormous growth over recent years particularly direct response television advertising. Direct response advertising is a major part of those communication activities classified as direct marketing. Direct response advertising uses carefully crafted marketing communications to generate a respon se directly from advertising itself. This could be a telephone call to you askin g for an appointment to provide further information or an order in the post or r equest for a brochure. A coupon presented for a discount or free sample can also be used. Credit cards as convenient charging platforms over the telephone have helped to expand this type of business. Many product are advertised on televisio n that cannot be purchased elsewhere, and the only way to obtain the product is to telephone a free phone or toll free number given in the advertisement. There is sometimes a related free gift such as an extra product if you place the order w ithin a short period of time. Since the firm is generating and monitoring responses, management can measure th e contacts and income produced by each individual advertisement or mailing. Conv entional advertising is difficult to evaluate in terms of sales response, where it is more appropriate to evaluate the communications effect rather than the sal es effects following advertising. Management can test different forms of adverti sing in consecutive issues of the same publication, and see which is most effect ive or schedule the same advertisement in different publications and learn which publication is most effective in producing the desired response. Direct respons e is the only type of advertising that allows evaluation of the effectiveness of operations in relation to specific, measurable objectives. It is difficult for a firm to evaluate specific sales response from conventional advertising because of multiple causation. An advertisement is only one of a numb er of communications being used by firms simultaneously. It is difficult to sepa rate out the effects, particularly the sales effects, in respect of each of thes e forms of promotion. As they do not have any response generator or tracking mec hanism in place for quantifying sales results, it is difficult to ascertain whic h medium is working and which is not. Lord Lever of household detergent fame onc e said: I know that half my advertising is wasted, but I dont know which half. Direct Response Advertising relies on compelling and persuasive material to brin g about a specified response. Its objective is not merely to inform, but to brin

g about a desired specific response, that can be objectively measured. With Dire ct Response Advertising, creative writers use artwork copy, page layout, plus ca refully crafted text, to explain salient reasons to purchase a product or servic e. 5 Summary Direct marketing is a branch of marketing that has gone through rapid growth and technological change over the past 30 years. It is an important marketing proce ss and some organisations base their entire marketing strategy on direct marketi ng methods. Worldwide, the direct marketing industry is huge. As firms seek ways of obtaining more value from marketing budgets, direct marketing is likely to b ecome even stronger in the future. Direct marketing refers to a collection of me thods that allows companies to communicate with, and obtain a direct response, f rom prospects. It allows firms to target customers more precisely than conventio nal non-direct marketing techniques and is referred to as precision marketing. Direct marketing techniques are constantly being improved, and developed and new innovative media are likely to be developed in the future. At present, the main methods employed within the direct marketing industry are the use of the teleph one, direct mail, the internet, direct face to face personal selling and direct re sponse advertising using television, radio and newspapers, trade journals and ma gazines. The industry is being driven by a desire for greater accuracy and econo my in marketing operations and by developments in IT that can be applied to dire ct marketing. Database marketing in particular has revolutionised the way organi sations use direct marketing and has increased efficiency in areas like direct m ail and telephone marketing. Direct marketing is not solely driven by IT. Some t raditional methods that were used in 1917 when the Direct Marketing Association was founded in the USA, are still being used successfully, particularly face-toface direct personal selling. However, these techniques have benefited from the information revolution in terms of retrieval of customer information and improve d targeting. Direct marketing is a major force within marketing and is likely to increase in future. References Dibb, S. and Simpkin, L. (2001) Marketing Briefs: A Revision and Study Guide Butte rworth-Heinemann, Oxford Fill, C. (2002) Marketing Communications: Contexts, Strategies and Applications Ch apter 28 Direct Marketing, Financial Times Prentice-Hall Nash, E.L. (1982) Direct marketing McGraw-Hill Pickton, D. and Broderick, A. (2001) Integrated marketing Communications Financial Times Prentice-Hall, Chapter 28 Direct Marketing Communications Roncoroni, S. (1986) Direct Marketing, Financial Times, 15th April Further Reading Bird, D (1999) Common Sense Direct Marketing Kogan-Page, London Blattenberg, RC, Glazer, R. and Little, JDC, eds. (1994) The Marketing Informatio n Revolution Harvard Press, Boston, USA December, J. and Randall, N. (1996) The World Wide Web Unleashed Sams Publishing, New York Godin, S. (1999) Permission Marketing, Simon & Schuster Hafner, K. and Lyon, M. (1996) When Wizards Stay Up Late: The Origins of the Inte rnet, Simon & Schuster Hardaker, G and Graham, G. (2001) Wired Marketing: Energising Business for e-Comm erce, John Wiley and Sons Kotler P and Armstrong G. (2000) Marketing an Introduction (5th Edition) Chapter 1 4, Direct and On-Line Marketing, Prentice Hall, Inc. OMally, L., Paterson, M. and Evans, M. (1999) Exploring Direct Marketing Thomson, L

ondon Plamer, A. (2000) Principles of Marketing Chapter 20, Direct Marketing, Oxford Uni versity Press Rapp, S and Collins, T. (1999) Maximarketing McGraw Hill, New York Roberts, M.L. and Berger, P.D. (1989) Direct Marketing Management Prentice-Hall, E nglewood Cliffs, New Jersey, USA Schwartz, E.I. (1997) Webonomics: Nine Essential Principles for Growing Your Busi ness on the World Wide Web Broadway Books, New York