Direct & Electronic Marketing

James E. Coleman, CPA, CFP, Ph.D.

http://ssbea.mercer.edu/coleman

Why We Hate Telemarketers!

• They are not selective.• They are aggressive.• They don’t understand ‘NO’.• They are inconsiderate.• Does this sound like a winning

customer relations strategy?• www.donotcall.gov or 1-888-382-1222• Now that you know what NOT to do……

MarketingEvolution

• Mass Marketing Make something and try to sell it to everyone.

• Target Marketing Segment into large groups based on demo-graphics &

what they say they want.

• Direct Marketing Segment into relatively large groups based

on actual recent behavior.

• Customer Relationship Marketing Individualized & customized communications

Mass

Target Direct

Mass Marketing vs. CRM

Traditional Mass Marketing

Relationship Marketing

Hunting

Farming

Customer Acquisition

Customer Retention

Integrated Marketing

• Outbound Communications Integration similarity of image & message in all media

• Organizational Integration rapid, accurate info flow among operations,

marketing and customers

• Process Integration two-way communication, promotion

plus data gathering

Conceptual IntegrationA plus B

Brand

Psychology

The only thing about your product that absolutely cannot

be duplicated

Database

Technology

Knowledge of customers is the most important

asset

Traditional Direct Marketing

• Relies Heavily on RFM Analysis Recency, frequency & monetary value

• Strengths Past best indicator of future (purchases) Measurable results

• Weaknesses May de-emphasize search for new customers May drop customers as purchases decline

Relationship Marketing:

• Use Intimate Customer Knowledge to: Stimulate profitable behavior Build barriers against competition Improve profitability of under-performing

groups ID & triage hopelessly unprofitable customers Recapture lost customers intelligently Find new customers intelligently

Key Retention Formulas

• Churn Rate number of customers lost during the year

divided by the number of customers gained (number of defections)

Churn = ---------------------------------- (number of new customers)

example: if 350,000 customers leave in a year while you attract 500,000 new customers, the churn rate is 70%

Key Retention Formulas

• Defection Rate the percentage of your customer base

that leaves you in one year

(number of lost customers)defection = --------------------------------------

(average customer base)

example: if 8 out of 21 accounts leave, your defection rate is 38%.

Key Retention Formulas

• Customer Average Life average length of time a customer regularly

purchases from your company

1customer life = -----------------------------------

(percentage defection rate)

example: if the defection rate is 38%, then your average customer life is 2.6 years

Key Retention Formulas

• Customer Life Time Value (LTV) also known as the long-term value, LTV is the

total amount of profit from a customer during their average life

LTV = (average annual profit) x (customer life)

Normally calculated using the NPV approach.

Data-Based Relationship Marketing

If you track responses as you continuously modify your messages, offers and products, you will be guided by the marketplace to the “best” or “most preferred” status

Electronic Interactive Communications

• FOD (fax on demand)• CD-ROM & Diskettes (AOL)• Kiosks (airlines, Dell, Wal-mart)• www. whatever-you-want.com

In 2001, mail order sales began to decline while online sales continued to grow rapidly

(see ‘Remote Shopping Research’ article) Online now exceeds traditional mail order

Key Success Factors

• Uses an existing customer base• Improves effectiveness of existing market• Diminishes impact of physical separation• Easily accessible, wide distribution• Decision support info/value added service• Ability to close the sale direct• Sufficient funding

Biggest problem for most of the dot.com’s

Who are the online leaders?

Online Sales Revenues for Top 300 US Retailers(2003, Billions Dollars)

Type of company• Retail chain $16.38 40.9%• Web-only company $ 9.72 24.2%• Consumer brand manufacturer $ 8.14 20.3%• Catalog/call center $ 5.85 14.6%

Total $40.09 100.0%

Source: Internet Retailer via eMarketer (2004)‘Remote Shopping Research’ article

Website Guidelines

• Provide valuable info• Good copy & graphics• Quick download & easy navigation• Frequent updates• Survey & capture visitor info• Track hits path and click-thru rate• Link to other similar sites (maybe)• Offer a reasonable value & good service

Just like with any business!

Email: The Next Logical Step(compared to direct postal mail)

• Higher response rate DM: 1-3%, Banners: .05-4%, EM: 5-20% (dated)

• Much lower cost Pennies rather than dollars per recipient

• Much Faster 3-5 days vs. 4-20 weeks

• But, “When the feed is scarce, the chickens will scratch at anything.”Or, “Timing is everything.”

• Now just another tool in the kit.

The Current ‘Magic Bullets’

• Multi-Channel Marketing (see ‘Tinkering with the Media Mix’ article)

"spending more on public relations, significantly more on online and more in 'viral' or 'buzz' marketing" - as well as "less on traditional broadcast TV." CMO Wachovia

• Long Tail Marketing (see ‘Long Tail Marketing’ article)

The shift from mass markets to niche markets, as electronic commerce aggregates and makes profitable what were previously unprofitable transactions.

• Business Blogging (see ‘Blogs & Marketing’ article) “search engines are paying attention to them--even if few

others take the time to read them. A blog is the most cost-efficient way you can improve your search engine rankings. It's nothing short of amazing," said Debbie Weil, (http://blogwrite.blogs.com)

QUESTIONS?