Direct Marketing

Table of contents

Illustrations

List of abbreviations

1 Introduction
1.1 Definition
1.2 The history of direct marketing
1.3 Delimitation of the classical marketing
1.4 Objectives of direct marketing

2 Importance of direct marketing
2.1 For the companies
2.2 For the customers

3 Instruments of direct marketing
3.1 Classical media with elements for response
3.2 Not addressed advertising mail
3.3 Addressed advertising mail
3.3.1 Mailing
3.3.2 Other media
3.4 Telephone marketing
3.4.1 Active telephone marketing (Outbound)
3.4.2 Passive telephone marketing (Inbound)
3.5 New media
3.5.1 Couponing
3.5.2 E-Mail marketing (Permission-marketing)
3.5.3 Homepage and banner advertising

4 Database-Marketing as an success factor for direct marketing
4.1 Database-Marketing in general
4.2 Meaning of the target group selection

5 Examples from the practice
5.1 Direct marketing at Festo AG & Co. KG
5.2 Direct marketing at Home Shopping Europe (HSE24)

6 The future of direct marketing

7 Conclusion

Vocabulary

Literature

Illustrations

Illustration 1 Flow of information: classical marketing – direct marketing

Illustration 2 Number of companies using direct marketing in different branches and company sizes

Illustration 3 Use of several direct marketing instruments in 2003

Illustration 4 Expenditures for the media of direct marketing

Illustration 5 Ladder of loyalty from Kreutzer

List of abbreviations

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1 Introduction

No matter whether in the newspaper while having breakfast, in the radio on the way to work, in the afternoon when looking through the post or in the evening while relaxing by watching TV… everywhere we are overwhelmed with advertising. In the course of this we encounter media of classical marketing and of direct marketing.

In this seminar paper the area of responsibility of direct marketing should be shown. The readership shall get a perspective over the instruments, areas and possibilities of use, as well as realize the difference to the classical marketing.

1.1 Definition

There are lots of various definitions for direct marketing in the literature. This is also explaining the different spellings in the German language (Direktmarketing, Direkt-Marketing, Direct Marketing). As in this seminar paper the several views can not be discussed, only the definition from the "German Direct Marketing Association" (called DDV) is consulted.

"The concept of Direct Marketing includes all marketing activities that use media and communication tools with the purpose to establish an interactive relation to the target person, in order to induce them to an individual, measurable reaction."^[1]

The most important headwords of this definition surely are "individual" and "measurable". Because with direct marketing campaigns it could be determined how the individual customers have reacted to the advertising. The possibility to measure the success is the most important feature of direct marketing for the companies.

The direct marketing campaigns can either address already existing customers or can be used for the canvassing of new customers. According to this the media can be designed differently. But in both cases the interactive relation, which means a direct contact, to the customer is established or strove for.

1.2 The history of direct marketing

The direct marketing can look back at a long history, which has its beginning in the year 3,000 before Christ. In this time economic series were written down and sent on panels of clay, cloth or on so-called "Papyrus". On this occasion small wooden boxes served as an envelope. The first advertising letters came a little bit later. These were the epistles from the apostles, for example Paulus and Petrus.

The first catalogues were developed just after the invention of the letterpress. On the first of October 1498 the first catalogue including books was brought out from Aldo Romano Manuzio in Venice. The first advertising letter, in which the copy of the imperial document was advertised, was proved in Basel in 1471. Lots of people denote the construction of the first letter box in Germany on October the first 1823 as the date of birth of the modern direct marketing.

From here on the direct marketing records a fast evolution. In 1935 Ad-con in Frankfurt published the first definition of direct marketing, whose content is really similar to the modern definitions. The contemporary DDV was set up in 1948 called "Association of addresses publisher" (ADV) and got its present name in 1985.

After the Second World War more and more books about direct marketing came out. In the fifties the direct marketing was not particularly accepted in the society, until Alfred Gerardi woke up the economy with his book "Customers in every house" in 1959.

The first computers and chain printers were also becoming a marketing instrument in the sixties. The direct marketing also became, slowly but steady, academic. The first seminars about direct marketing at universities were held by Heinz Fischer.

In the years from 1970 to 1979 the first compulsory lecture about direct marketing for the eighth semester in business management at the University of Pforzheim took place. The computer technologies caught on more and more, until the chain printers were replaced by laser printers and so the drawing up of advertising letters got faster. In this decade also the companies in the business-to-business sector developed the use of direct marketing for themselves. The media telephone, TV, internet and email have been used stronger and stronger since the nineties. Out of this the "Multi Channel Marketing" was developed.

Nowadays, in the 21rst Century, the direct marketing enjoys a big popularity and represents an important factor for all kinds of companies, as well as for all households.

1.3 Delimitation to the classical marketing

The classical marketing is concentrating on the advertised product with the main target of sales increase of this product. To reach that, it uses the instruments of mass advertising, like commercials, posters, advertisements, and so on. "Having the (potential) customer directly in one's sight" instead is the motto of direct marketing. All marketing campaigns are focused on the customer. Examples are mailings, telephone marketing and newsletters. These instruments will later be explained in detail.

On closer examination of the flow of information the distinction is getting cleaner. The direct marketing in contrast to the classical marketing has mutual flow of information, therefore a kind of dialog. This means that the customer has the possibility to get in contact with the company every time.

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Illustration 1: Flow of information: classical marketing – direct marketing^[2]

The direct marketing starts basically there, where the problems of the classical marketing appear. With the classical marketing the target market or the target group can not be determined exactly, the preferences of the customer, as well the customer himself, are unknown. Additionally the advertising success is hardly measurable and the reactions follow with a big lost of time. A concrete example for the indefinite target group is a commercial on RTL while "Who is becoming a millionaire" is shown. Young and old, poor and rich, everyone is sitting in front of TV. No matter which product is promoted, there is always a big group of watchers, who do not count to the target group of this product. The reactions caused by a commercial are difficult to determine, because they can just be suspected by the sales numbers. There is also no direct contact to the customer, which could give information about what the customer likes. Companies in the business-to-business sector would not have much use of commercials, posters or something like that, because they would have to accept too much scattering losses.

To avoid these problems the direct marketing offers the right solution trial. It addresses directly a before selected target group and stands in an interaction with the customer. To increase and fasten the reactions there are used methods like lotteries, premiums and so on. Decisions about continuing, widening or reducing the marketing campaigns can be found quickly, because the success is easy to measure though the dialog with the customer. Furthermore direct marketing campaigns can be tested by spot checks, which are, in opposite to commercials, more economical.

1.4 Objectives of direct marketing

Every progress of decision in the marketing has the formulation of a clear and long term orientated target system as a fundamental component. These objectives can be deduced from the object of a company and the head targets of the company. Primary targets of the direct marketing are attractions of customers, the customer retention, customer win-back and increasing sales. As, however, a direct marketing campaign rarely activate the customer to buy immediately, there are mostly needed some steps between. For example a campaign can first invite the customer to obtain further information, to visit the stand on a trade fair or maybe to arrange an appointment with a sales representative. That way a relation to the customer can be built little by little, which can result in a sale some time. From this a permanent relation to the customer may be developed with the aid of right measures.

There are additional partial targets besides these main targets, like the increase of the rate of return, the increase of following buys of the first buyers as well the reduction of the postage expenses (for mailings).

The direct marketing uses in summary not only the usual marketing concept, but wants to bind the customer to the company for long-term due to the direct and individual attention to the customers and the service orientation. Therefore the maximum of economy can be achieved, in accordance with the famous "Cash Cows" in the Portfolio.

2 Importance of direct marketing

Direct marketing has a considerable influence on both the suppliers and the customers. It offers considerable advantages for both sides but it also goes along with some disadvantages.

2.1 For the companies

From the results of the latest study from the German Post (Deutsche Post AG) "direct marketing monitor study 16" you can clearly see that the number of companies using direct marketing has increased in all branches and company sizes from 2002 to 2003.

Abbildung in dieser Leseprobe nicht enthaltenIllustration 2: Number of companies using direct marketing in different branches and company sizes.^[3]

Out of that it can be deduced that the direct marketing is getting more and more important for the companies to survive in times of market saturation, increasing market transparency and dropped consumption.

An important advantage of direct marketing surely is the possibility to keep campaigns in secret to the competitors. So the company can build a projection to the competitors, which has to be made up first. Additionally through an exact fixing of the target markets the scattering losses and with these also the costs per contact can be reduced. Further costs are thereby saved that it can be done, partly or even completely, without intermediary. The chance of spontaneous buys is higher, because of the direct contact to the customers and therefore the fast response.

The above mentioned costs, however, are used for the care of the customer database and the high postage expenses (e. g. for mailings).

[...]

^[1] Definition from the DDV, quoted after Holland, Heinrich (1992): Direktmarketing, 1. edition, Munich 1993, p4

^[2] Source: Holland, Heinrich (1992): Direktmarketing, 1. edition, Munich 1993, p5

^[3] Source: Deutsche Post AG (2004), Direct Marketing Monitor study 16, p18