Marketing management Chapter 19 pps

We begin by evaluating direct marketing; then w e consider personal selling and the sales force.. More and more business marketers have turned to direct mail and telemarketing in respon

1 How can companies use

integrated direct marketing for

CHAPTER 19 MANAGING PERSONAL

inter-Companies must ask not only " H o w can w e reach our customers?"

but also, "How can our customers reach us?" Thanks to ical breakthroughs, people can now communicate through tradi- tional media (newspapers, magazines, radio, telephone, television, billboards), as well as through computers, fax machines, cellular phones, pagers, and wireless appliances By decreasing communi- cations costs, the new technologies have encouraged more compa- nies t o move from mass communication t o more targeted commu- nications and one-to-one dialogue But companies are also using their sales force to provide a human touch to their marketing

technolog-A Newell Rubbermaid trainee filling a product dispenser as part of his

participation in the company's Phoenix program

603

ewe// Rubbermaid's Phoenix program takes college graduates and

assigns them to Wal-Mart, The Home Depot, Lowe's, and other

retailers where they do everything from stocking shelves to

demonstrating new staresistant plastic food containers to organizing

in-store scavenger hunts The 500+ college graduates selected for the program

are chosen based on their accomplishments outside the classroom

Personable jocks or sorority presidents are favored on the basis of evidence

of ambition, leadership, and teamwork They then receive intensive training

on effective retail marketing strategies to increase consumer demand in the seven

to eight stores to which they are assigned With their logo-emblazoned Chevy Trailblazers, the highly motivated and energetic sales force has generated, on average, double-digit, year-to-year sales increases.' 1

Personalizing communications—and saying and doing the right thing to the

right person at the right time—is critical In this chapter, we consider how

com-panies personalize their marketing communications to have more of an impact

We begin by evaluating direct marketing; then w e consider personal selling and

the sales force

: : : Direct Marketing

Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods

and services to customers without using marketing middlemen These channels include direct mail, catalogs, telemarketing, interactive TV, kiosks, Web sites, and mobile devices Direct marketers seek a measurable response, typically a customer order This is some-

times called direct-order marketing Today, many direct marketers use direct marketing to

build a long-term relationship with the customer.2 They send birthday cards, information materials, or small premiums to certain customers Airlines, hotels, and other businesses build strong customer relationships through frequency award programs and club programs Direct marketing is one of the fastest-growing avenues for serving customers More and more business marketers have turned to direct mail and telemarketing in response to the high and increasing costs of reaching business markets through a sales force In total, sales from direct marketing generate almost 9 percent of the U.S economy.3

In addition to trying to increase sales force productivity, companies are seeking to substitute mail- and phone-based selling units to reduce field sales expenses Sales produced through tra-ditional direct-marketing channels (catalogs, direct mail, and telemarketing) have been grow-ing rapidly Whereas U.S retail sales grow around 3 percent annually, catalog and direct-mail sales grow at about double that rate Direct sales include sales to the consumer market (53 per-cent), B2B (27 percent), and fund-raising by charitable institutions (20 percent) Total media expenditures for direct marketing in 2000 (including direct mail, telephone, broadcast, Internet, newspaper, magazine, etc.) has been estimated at $236.3 billion.4 Figure 19.1 provides a break-down of the various types of direct marketing

The Benefits of Direct M a r k e t i n g

The extraordinary growth of direct marketing is the result of many factors Market fication has resulted in an ever-increasing number of market niches Higher costs of driving,

demassi-traffic congestion, parking headaches, lack of time, a shortage of retail sales help, and lines

at checkout counters all encourage at-home shopping Consumers appreciate toll-free phone numbers and Web sites available 24 hours a day, 7 days a week, and direct marketers' commitment to customer service The growth of next-day delivery via FedEx, Airborne, and UPS has made ordering fast and easy In addition, many chain stores have dropped slower-moving specialty items, creating an opportunity for direct marketers to promote these items

to interested buyers The growth of the Internet, e-mail, mobile phones, and fax machines has made product selection and ordering much simpler

Direct marketing benefits customers in many ways Home shopping can be fun, convenient, and hassle-free It saves time and introduces consumers to a larger selection of merchandise They can do comparative shopping by browsing through mail catalogs and online shopping

Broadcast ME: S73,020B

Internet ME: S3.2B

Newspaper ME: $49,246B

Magazine ME:S17,083B

Outbound ME: S58,850B

Television ME: $53,435B

Local ME: S42.062B

Consumer ME:$12,348B

Radio ME:S19,585B

National ME:S7,184B

Farm ME: 0,340B

Inbound ME: S58.850B

Business Papers ME: S4.395B

Direct Response Expenditures 2000 S236.26B

Channels of Distribution

Measurable Response and/or Transaction

Vending Machines Sales S41.350B

Mail Order-Mail/Phone Sales $289.01 B

Personal Visit to Seller (Retail) Sales S5,223,000B

I

Personal Visit or Call to Buyer Sales S12.037.0B

Customer/Prospect Databases

Response/Transaction Fulfillment

Misc Media ME: S66.943B

Yellow Pages ME:12,367B

Outdoor

ME: $1,540B Trade shows

ME:12.6B Other

services They can order goods for themselves or others Business customers also benefit by learning about available products and services without tying up time in meeting salespeople Sellers benefit as well Direct marketers can buy a mailing list containing the names of almost any group: left-handed people, overweight people, millionaires They can customize and personalize messages Direct marketers can build a continuous relationship with each customer The parents of a newborn baby will receive periodic mailings describing new clothes, toys, and other goods as the child grows

Direct marketing can be timed to reach prospects at the right moment and receive higher readership because it is sent to more interested prospects Direct marketing permits the testing of alternative media and messages in search of the most cost-effective approach Direct marketing also makes the direct marketer's offer and strategy less visible to competi-tors Finally, direct marketers can measure responses to their campaigns to decide which have been the most profitable (However, see "Marketing Memo: Public and Ethical Issues in Direct Marketing.")

Direct marketers can use a number of channels to reach individual prospects and tomers: direct mail, catalog marketing, telemarketing, TV and other direct-response media, kiosk marketing, and e-marketing

cus-L A N D S ' E N D

A direct merchant of traditionally styled, upscale clothing for the family, soft luggage, and products for the home, Lands' End sells its offerings through catalogs, on the Internet, and in stores, after being acquired by Sears for S1.86 billion in 2002 The catalogs came out four times a year starting in 1964 and included detailed write-ups of prod- ucts Lands' End was an early adopter of the Internet, launching its Web site in 1995 The U.S site offers every Lands' End product and is the world's largest apparel Web site in sales volume A leader in developing new ways to enhance shopping experiences, customers can create a 3-D Virtual Model of themselves by providing critical measurements

or a "personal wardrobe consultant" by answering questions about their clothing preferences Weekly e-mails with quirky tales and discounts also drive sales A story of how a customer wore his Lands' End mesh shirt to a preserve for orphaned chimpanzees in the Republic of Ghana led to an increase of 40 percent in sales of the shirt that week 5

Direct Mail

Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a person Using highly selective mailing lists, direct marketers send out millions of mail pieces each year—letters, flyers, foldouts, and other "salespeople with wings." Some direct mar-keters mail audiotapes, videotapes, CDs, and computer diskettes to prospects and customers

MARKETING MEMO THE PUBLIC A N D ETHICAL ISSUES I N DIRECT MARKETING

Direct marketers and their customers usually enjoy mutually

rewarding relationships Occasionally, however, a darker side

emerges:

Irritation: Many people do not like the increasing number of

hard-sell, direct-marketing solicitations Especially bothersome

are dinnertime or late-night phone calls, poorly trained callers,

and computerized calls placed by auto-dial recorded-message

players

Unfairness: Some direct marketers take advantage of impulsive

or less sophisticated buyers TV shopping shows and infomercials

may be the worst culprits with their smooth-talking hosts and

claims of drastic price reductions

Deception and fraud: Some direct marketers design mailers

and write copy intended to mislead buyers They may

exag-gerate product size, performance claims, or the "retail price."

The Federal Trade Commission receives thousands of

com-plaints each year about fraudulent investment scams or phony charities

i Invasion of privacy: It seems that almost every time consumers

order products by mail or telephone, enter a sweepstakes, apply for a credit card, or take out a magazine subscription, their names, addresses, and purchasing behavior may be added to several company databases Critics worry that marketers may know too much about consumers' lives, and that they may use this knowledge to take unfair advantage

People in the direct-marketing industry are attempting to address these issues They know that, left unattended, such problems will lead to increasingly negative consumer attitudes, lower response rates, and calls for greater state and federal regulation In the final analysis, most direct marketers want the same thing that con- sumers want: honest and well-designed marketing offers targeted only to those consumers who appreciate hearing about the offer

MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 607

Direct mail is a popular medium because it permits target market selectivity, can be

per-sonalized, is flexible, and allows early testing and response measurement Although the cost

per thousand people reached is higher than with mass media, the people reached are much

better prospects Direct mail may be paper-based and handled by the U.S Postal Service,

telegraphic services, or for-profit mail carriers such as FedEx, DHL, or Airborne Express

Alternatively, marketers may employ fax mail, e-mail, or voice mail to sell direct

Direct-mail marketing has passed through a number of stages:

E "Carpet bombing." Direct mailers gather or buy as many names as possible and send out

a mass mailing Usually the response rate is very low

• Database marketing Direct marketers mine the database to identify prospects who

would have the most interest in an offer

a Interactive marketing Direct marketers include a telephone number and Web address,

and offer to print coupons from the Web site Recipients can contact the company with

questions The company uses the interaction as an opportunity to up-sell, cross-sell, and

deepen the relationship

B Real-time personalized marketing Direct marketers know enough about each customer

to customize and personalize the offer and message

• Lifetime value marketing Direct marketers develop a plan for lifetime marketing to each

valuable customer, based on knowledge of life events and transitions

One company long recognized for its strong, beneficial focus on customers is Maine's

L.L Bean, Inc., which sells outdoor/casual clothing and equipment through mail order,

online catalogs, and retail stores and factory outlets To maximize customer satisfaction, the

company has an unequivocal, 100 percent guarantee for all purchases Founder L.L Bean

placed a notice on the wall of the Freeport store in 1916, which proclaimed, "I do not

con-sider a sale complete until goods are worn out and customer still satisfied." Bean even once

refunded the money on a pair of two-year-old shoes because the customer said the pair did

not wear as well as expected!6

In constructing an effective direct-mail campaign, direct marketers must decide on their

objectives, target markets, and prospects; offer elements, means of testing the campaign,

and measures of campaign success

• A N Z B A N K

Australia's ANZ Bank's "Change Your Home to Suit Your Life" campaign was chosen winner of the 2003 Direct

Marketing Association award as top international direct and interactive marketing campaign Direct-response

agency M&C Saatchi used sophisticated data analysis to identify and tailor a campaign to raise interest in home

loans Database profiling was used to select customers from 16 distinct groups of targets Direct mail then offered

information specific to each target audience, reflecting the recipient's situation and specific needs As a result of the

campaign, ANZ received a record number of calls to its home buyers' line—an 83 percent year-on-year increase—

a 3 percent rise in home loan applications, and a 47 percent increase in campaign recognition The direct-mail

campaign specifically resulted in 4,922 new accounts or mortgages with a conversion rate of 6 percent 7

)BJECTIVES Most direct marketers aim to receive an order from prospects A campaign's

success is judged by the response rate An order-response rate of 2 percent is normally

con-sidered good, although this number varies with product category and price Direct mail can

achieve other communication objectives as well, such as producing prospect leads,

strengthening customer relationships, informing and educating customers, reminding

cus-tomers of offers, and reinforcing recent customer purchase decisions

TARGET MARKETS AND PROSPECTS Direct marketers need to identify the characteristics

of prospects and customers who are most able, willing, and ready to buy Most direct

mar-keters apply the R-F-M formula [recency, frequency, monetary amount) for rating and

select-ing customers For any proposed offerselect-ing, the company selects customers accordselect-ing to how

much time has passed since their last purchase, how many times they have purchased, and

how much they have spent since becoming a customer Suppose the company is offering a

leather jacket It might make this offer to customers who made their last purchase between

30 and 60 days ago, who make three to six purchases a year, and who have spent at least $100

MARKETING MEMO W H E N YOUR CUSTOMER IS A COMMITTEE

One of the many advantages of database marketing and direct mail

is that they allow you to tailor format, offer, and sell messages to

the target audience(s) Business marketers can create a series of

interrelated and reinforced mailings to decision makers and

deci-sion influencers Here are some tips for increasing success in

sell-ing to a customer-by-committee:

• When creating lead generation and follow-up mailings,

remem-ber that most business mailings are screened once, twice, or

even more before reaching your targeted audience

n Plan and budget for a series of mailings to each of your

customer-by-committee members Timing and multiple exposures are critical in

reaching these audiences

• Whenever possible, mail to individuals by name and title Using

the title helps the in-office mail screener reroute your mailing if

the individual addressed has moved on to another job

• Do not necessarily use the same format and size for reaching all

your targeted audiences A more expensive-looking envelope may

reach the president or CEO, but it may be equally effective to use

a less expensive, less personal format to reach other decision

influencers

Tell your customer-by-committee that you are communicating

with others in the organization

Make your decision influencers feel important They can be your biggest advocates

When communicating with different audiences, make sure you anticipate — and address—their individual buying objectives and objections

When your database or mailing lists cannot help you reach all the key people, ask the individual you are addressing to pass along your information

When doing a lead-generation mailing, make sure to ask for the names and titles of those who might be interested and involved in the buying decision Enter this information into your database

Even though it may seem like a lot of work (and expense) to write different versions of the same letter and create different offers, there is a big payoff The final decision maker may be interested

in having a payback calculated, but others may be interested in day-to-day benefits such as safety, convenience, and time sav- ings Tailor your offer to your targets

Source: Adapted from Pat Friesen, "When Your Customer Is a Committee," Target Marketing (August 1998): 40

since becoming customers Points are established for varying R-F-M levels, and each tomer is scored The higher the score, the more attractive the customer The mailing is sent only to the most attractive customers.8

cus-Prospects can also be identified on the basis of such variables as age, sex, income, tion, and previous mail-order purchases Occasions provide a good departure point for seg-mentation New parents will be in the market for baby clothes and baby toys; college freshmen will buy computers and small television sets; newlyweds will be looking for housing, furniture, appliances, and bank loans Another useful segmentation variable is consumer lifestyle or

educa-"passion" groups, such as computer buffs, cooking buffs, and outdoor buffs For business kets, Dun & Bradstreet operates an information service that provides a wealth of data

mar-In B2B direct marketing, the prospect is often not an individual but a group of people or

a committee that includes both decision makers and multiple decision influencers See

"Marketing Memo: When Your Customer Is a Committee" for tips on crafting a direct-mail campaign aimed at business buyers

Once the target market is defined, the direct marketer needs to obtain specific names The company's best prospects are customers who have bought its products in the past Additional names can be obtained by advertising some free offer The direct marketer can also buy lists of names from list brokers, but these lists often have problems, including name duplication, incomplete data, and obsolete addresses The better lists include overlays of demographic and psychographic information Direct marketers typically buy and test a sample before buying more names from the same list

OFFER ELEMENTS Nash sees the offer strategy as consisting of five elements—the product, the offer, the medium, the distribution method, and the creative strategy.9 Fortunately, all of

these elements can be tested

In addition to these elements, the direct-mail marketer has to decide on five components

of the mailing itself: the outside envelope, sales letter, circular, reply form, and reply lope Here are some findings:

enve-1 The outside envelope will be more effective if it contains an illustration, preferably in color, or a catchy reason to open the envelope, such as the announcement of a contest,

MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING

premium, or benefit Envelopes are more effective when they contain a colorful

com-memorative stamp, when the address is hand-typed or handwritten, and when the

enve-lope differs in size or shape from standard enveenve-lopes.10

2 The sales letter should use a personal salutation and start with a headline in bold type

The letter should be printed on good-quality paper and be brief A computer-typed

let-ter usually outperforms a printed letlet-ter, and the presence of a pithy P.S increases the

response rate, as does the signature of someone whose title is important

3 In most cases, a colorful circular accompanying the letter will increase the response rate

by more than its cost

4 Direct mailers should feature a toll-free number and also send recipients to their Web

site Coupons should be printed out at the Web site

5 The inclusion of a postage-free reply envelope will dramatically increase the response rate

Direct mail should be followed up by an e-mail, which is less expensive and less intrusive

than a telemarketing call

TESTING ELEMENTS One of the great advantages of direct marketing is the ability to test,

under real marketplace conditions, different elements of an offer strategy, such as products,

product features, copy platform, mailer type, envelope, prices, or mailing lists

Direct marketers must remember that response rates typically understate a campaign's

long-term impact Suppose only 2 percent of the recipients who receive a direct-mail piece

advertising Samsonite luggage place an older A much larger percentage became aware of

the product (direct mail has high readership), and some percentage may have formed an

intention to buy at a later date (either by mail or at a retail outlet) Furthermore, some of

them may mention Samsonite luggage to others as a result of the direct-mail piece To derive

a more comprehensive estimate of the promotion's impact, some companies are measuring

the impact of direct marketing on awareness, intention to buy, and word of mouth

MEASURING CAMPAIGN SUCCESS: LIFETIME VALUE By adding up the planned

cam-paign costs, the direct marketer can figure out in advance the needed break-even response

rate This rate must be net of returned merchandise and bad debts Returned merchandise

can kill an otherwise effective campaign The direct marketer needs to analyze the main

causes of returned merchandise (late shipment, defective merchandise, damage in transit,

not as advertised, incorrect order fulfillment)

By carefully analyzing past campaigns, direct marketers can steadily improve performance

Even when a specific campaign fails to break even in the short run, it can still be profitable in

the long run if customer lifetime is factored in (see Chapter 5) A customer's ultimate value is

not revealed by a purchase response to a particular mailing Rather, it is the expected profit

made on all future purchases net of customer acquisition and maintenance costs For an

aver-age customer, one would calculate the averaver-age customer longevity, averaver-age customer annual

expenditure, and average gross margin, minus the average cost of customer acquisition and

maintenance (properly discounted for the opportunity cost of money).11

Catalog M a r k e t i n g

In catalog marketing, companies may send full-line merchandise catalogs, specialty consumer

catalogs, and business catalogs, usually in print form but also sometimes as CDs, videos, or

online JCPenney and Spiegel send general merchandise catalogs Victoria's Secret and Saks

Fifth Avenue send specialty clothing catalogs to the upper-middle-class market Through their

catalogs, Avon sells cosmetics, W R Grace sells cheese, and IKEA sells furniture Many of these

direct marketers have found that combining catalogs and Web sites can be an effective way to

sell Thousands of small businesses also issue specialty catalogs Large businesses such as

Grainger, Merck, and others send catalogs to business prospects and customers

Catalogs are a huge business—about 71 percent of Americans shop from home using

cat-alogs by phone, mail, and Internet They spent an average of $149 per catalog order in 2002.12

The success of a catalog business depends on the company's ability to manage its customer

lists carefully so that there is little duplication or bad debts, to control its inventory carefully,

to offer quality merchandise so that returns are low, and to project a distinctive image Some

companies distinguish their catalogs by adding literary or information features, sending

swatches of materials, operating a special hot line to answer questions, sending gifts to their

best customers, and donating a percentage of the profits to good causes

P A T A G O N I A

"Stunning," "soaring," and "wonderful" were a few of the adjectives that Catalog Age judges used in awarding

Patagonia's fall 2002 edition their Catalog of the Year prize The judges cited the spectacular cover shot of South American mountains, the excellent selection of merchandise, and the superb presentation Copy was lauded as being highly detailed without being technical, high-quality photographs were seen as providing strong visual images, and environmental essays and field reports were deemed to add relevant editorial substance The judges also cited the catalog's strong customer service policies and ease of ordering 13

The cover of the award-winning

Patagonia catalog, Fall 2002 edition

Global consumers in Asia and Europe are catching on to the catalog craze In the 1990s, U.S catalog companies such as L.L Bean, Lands' End, Eddie Bauer, and Patagonia began setting up operations in Japan—and with great success In just a few years foreign catalogs— mostly from the United States and a few from Europe—have won 5 percent of the $20 billion Japanese mail-order catalog market A full 90 percent of L.L Bean's international sales come from Japan Consumer catalog companies such as Tiffany & Co., Patagonia, Eddie Bauer, and Lands' End are also entering Europe

Business marketers are making inroads as well Sales to foreign (mainly European) kets have driven earnings increases at Viking Office Products and computer and network equipment cataloger Black Box Corporation Viking has had success in Europe because, unlike the United States, Europe has fewer superstores and is very receptive to mail order Black Box owes much of its international growth to its customer service policies, which are unmatched in Europe.1,1 By putting their entire catalogs online, catalog companies have bet-ter access to global consumers than ever before, and save considerable printing and mailing costs in the process

mar-MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 611

Telemarketing

Telemarketing is the use of the telephone and call centers to attract prospects, sell to

exist-ing customers, and provide service by takexist-ing orders and answerexist-ing questions Telemarketexist-ing

helps companies increase revenue, reduce selling costs, and improve customer satisfaction

Companies use call centers for inbound telemarketing (receiving calls from customers) and

outbound telemarketing (initiating calls to prospects and customers) In fact, companies

carry out four types of telemarketing:

a Telesales Taking orders from catalogs or ads and also doing outbound calling They can

cross-sell the company's other products, upgrade orders, introduce new products, open new

accounts, and reactivate former accounts

s Telecoverage Calling customers to maintain and nurture key account relationships and

give more attention to neglected accounts

a Teleprospecting Generating and qualifying new leads for closure by another sales channel

E Customer service and technical support Answering service and technical questions

Although telemarketing has become a major direct-marketing tool, its sometimes intrusive

nature led to the establishment by the Federal Trade Commission of a National Do Not Call

Registry in October 2003 so that consumers could indicate if they did not want telemarketers

to call them at home Only political organizations, charities, telephone surveyors, or

compa-nies with existing relationships with consumers were exempt.15

Telemarketing is increasingly used in business as well as consumer marketing Raleigh

Bicycles uses telemarketing to reduce the amount of personal selling needed for contacting

its dealers In the first year, sales force travel costs were reduced by 50 percent and sales in a

single quarter went up 34 percent Telemarketing, as it improves with the use of

video-phones, will increasingly replace, though never eliminate, more expensive field sales calls

An increasing number of salespeople have made five- and six-figure sales without ever

meet-ing the customer face-to-face Effective telemarketmeet-ing depends on choosmeet-ing the right

tele-marketers, training them well, and providing performance incentives Here is an example of

successful telemarketing

i - U S A A

USAA, located in San Antonio, Texas, proves that a company can successfully conduct its entire insurance

busi-ness over the phone without ever meeting customers face-to-face From its beginnings, USAA focused on

sell-ing auto insurance, and later other insurance products, to those with military service It increased its share of

each customer's business by launching a consumer bank, issuing credit cards, opening a discount brokerage,

and offering a selection of no-load mutual funds In spite of transactions taking place on the phone, USAA boasts

one of the highest customer satisfaction ratings of any company in the United States It received the Chairman's

• Award from J D Power & Associates in 2002 16

O t h e r M e d i a for Direct-Response M a r k e t i n g

Direct marketers use all the major media to make offers to potential buyers Newspapers

and magazines carry abundant print ads offering books, articles of clothing, appliances,

vacations, and other goods and services that individuals can order by dialing a toll-free

number Radio ads present offers to listeners 24 hours a day

1 Direct-response advertising -Some companies prepare 30- and 60-minute infomercials

that attempt to combine the sell of commercials with the draw of educational

informa-tion and entertainment Infomercials can be seen as a cross between a sales call and a

television ad and cost roughly $250,000 to $500,000 to make A number of people have

become famous with late-night channel switchers (e.g., Tony Robbins, Victoria Principal,

and Kathy Smith) Increasingly, companies selling products that are complicated,

tech-nologically advanced, or simply require a great deal of explanation are turning to

infomercials (Callaway Golf, Carnival Cruises, Mercedes, Microsoft, Philips Electronics,

Universal Studios, and even the online job search site, Monster.com).17 They share the

product's story and benefits with millions of additional prospects at a cost-per-lead or cost-per-order that usually matches or beats direct mail or print ads.10

2 At-home shopping channels - Some television channels are dedicated to selling goods

and services On Home Shopping Network (HSN), which broadcasts 24 hours a day, the program's hosts offer bargain prices on such products as clothing, jewelry, lamps, col-lectible dolls, and power tools Viewers call in orders on a toll-free number and receive delivery within 48 hours Millions of adults watch home shopping programs, and close to half of them buy merchandise

3 Videotext and interactive TV- The consumer's TV set is linked with a seller's catalog by

cable or telephone lines Consumers can place orders via a special keyboard device nected to the system Much research is now going on to combine TV, telephones, and computers into interactive TV

con-KIOSK MARKETING A kiosk is a small building or structure that might house a selling or information unit The name describes newsstands, refreshment stands, and free-standing carts whose vendors sell watches, costume jewelry, and other items The carts appear in bus and rail stations and along aisles in a mall The term also covers computer-linked vending machines and "customer-order-placing machines" in stores, airports, and other locations All of these are direct-selling tools Some marketers have adapted the self-service feature of kiosks to their businesses Continental Airlines found that 66 percent of its U.S passengers checked themselves in via kiosks with a mean check-in time of only 66 seconds with bags and 30 seconds without bags McDonald's found that customers who used its kiosks to order spent 30 percent more per order.19

: : : Interactive Marketing

The newest channels for direct marketing are electronic.20 The Internet provides marketers

and consumers with opportunities for much greater interaction and individualization

Companies in the past would send standard media—magazines, newsletters, ads—to one Today these companies can send individualized content and consumers themselves can further individualize the content Today companies can interact and dialogue with much larger groups than ever in the past

every-The exchange process in the age of information, however, has become increasingly customer-initiated and customer-controlled Marketers and their representatives must wait until customers agree to participate in the exchange Even after marketers enter the exchange process, customers define the rules of engagement, and insulate themselves with the help of agents and intermediaries if they so choose Customers define what information they need, what offerings they are interested in, and what prices they are willing to pay.21

Electronic marketing is showing explosive growth: $2.2 billion was spent in online tising during the fourth quarter of 2003; 43 percent of PC users, or 51 million U.S house-holds, could connect to the Internet via the broadband connection necessary for swift down-loading of dense video and music digital files.22 These new capabilities will spur the growth

adver-of rich media ads that combine animation, video, and sound with interactive features

r— A X E D E O D O R A N T

Winner of Business 2.ffs 2003 Sweet Spot Award for Most Innovative Campaign, Unilever's Axe Deodorant body

spray was launched in 2002 targeting the 18- to 24-year-old male audience interested in improving their appeal

to the opposite sex The centerpiece of the effort, designed by ad agency Bartle Bogle Hegarty, was a set of mercials purporting to be home videos and playing only on Axe's Web site (www.theaxeeffect.com) In each, a pretty young woman is instantly attracted by a whiff of Axe deodorant In one 25-second clip, a high school cheerleader sprints onto a football field to tackle an Axe-saturated ball carrier The agency's assumption was that this demographic group—95 percent of whom spent at least four hours online—preferred to discover brands, not to be sold them The campaign bypassed conventional TV ads in favor of banner ads on Web sites of men's

com-magazines Maxim and FHM as well as on AtomFilms, a repository of quirky short movies The banners clicked

through to a flashy Web site where surfers could view the video clips The campaign R0I exceeded all tions The site received seven times as many hits as expected Four months into the campaign, 1.7 million peo- ple had visited the site and a third of them reported that they had been sent there by friends By year end, Axe

expecta-• had captured almost 4 percent of the 82 billion U.S male deodorant market.

MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 613

The Benefits of Interactive M a r k e t i n g

Interactive marketing offers many unique benefits.24 It is highly accountable and its effects

can be easily traced Eddie Bauer cut its marketing cost per sale by 74 percent by

concen-trating on higher-performing ads.25 The Web offers the advantage of "contextual

place-ments." Marketers can buy ads from sites that are related to their offerings, as well as place

advertising based on contextual keywords from online search outfits like Google In that

way, the Web can reach people when they have actually started the buying process Light

consumers of other media, especially television, can be reached The Web is especially

effec-tive at reaching people during the day Young, high-income, high-education customers' total

online media consumption exceeds that of TV.26

Designing an A t t r a c t i v e W e b Site

Clearly, all companies need to consider and evaluate e-marketing and e-purchasing

oppor-tunities A key challenge is designing a site that is attractive on first viewing and interesting

enough to encourage repeat visits

Rayport and Jaworski have proposed that effective Web sites feature seven design

ele-ments that they call the 7Cs:27

a Context Layout and design

• Content Text, pictures, sound, and video the site contains

B Community How the site enables user-to-user communication

B Customization Site's ability to tailor itself to different users or to allow users to

personal-ize the site

E Communication How the site enables site-to-user, user-to-site, or two-way communication

n Connection Degree that the site is linked to other sites

B Commerce Site's capabilities to enable commercial transactions

To encourage repeat visits, companies need to pay special attention to context and content

factors and also embrace another "C"—constant change.28

Visitors will judge a site's performance on its ease of use and its physical attractiveness

Ease-of-use breaks down into three attributes: (1) The Web site downloads quickly, (2) the

first page is easy to understand, and (3) the visitor finds it easy to navigate to other pages

that open quickly Physical attractiveness is determined by the following factors: (1) The

individual pages are clean looking and not overly crammed with content, (2) the typefaces

and font sizes are very readable, and (3) the site makes good use of color (and sound)

The Neiman Marcus Web site is both attractive and functional: It is easy to navigate and easy to shop from If you want to buy these leather gloves, you can see a full description plus color choices, and follow instructions to order in a few clicks of the mouse

JUST YOUR TYPE

Marketers have analyzed customers and markets in terms of gender,

age, ethnicity, and other characteristics for decades But

demograph-ics aren't the only tools for slicing up an online market San Diego

market research firm Miller-Williams Inc splits online buyers into five

categories:

Sensibles, at 37%, are the most numerous of all online

shop-pers, the easiest to satisfy, and probably the best customers

Agonizers, representing 10%, do lots of comparison

shop-ping, but aren't as price-oriented as Hagglers, who make up

34 percent

Loaners, representing 15 percent, emphasize ease of use in

their shopping experience About 5 percent of online

shop-pers are Web-sawy but fickle Techies

The takeaway of this segmentation is that you need to know who your customers are and make sure you aren't offering something they don't want or need "If you know your buyers are hagglers," rea- sons Amy Ferraro, director of research for Miller-Williams Inc., "you know you need to target them with coupons."

Source: Adapted from Mark Henricks, "Net Meeting," Entrepreneur, February 2003, p 55

Context factors facilitate repeat visits, but they do not ensure that this happens Returning to a site depends on content The content must be interesting, useful, and con-tinuously changing Certain types of content function well to attract first-time visitors and

to bring them back again: (1) deep information with links to related sites, (2) changing news of interest, (3) changing free offers to visitors, (4) contests and sweepstakes, (5) humor and jokes, and (6) games

Companies are also paying attention to how people buy once they are shopping online See "Marketing Memo: Just Your Type" for a look at five categories of online buyers

A company has to decide which forms of Internet advertising will be most cost-effective in achieving advertising objectives Banner ads are small, rectangular boxes containing text and perhaps a picture Companies pay to place banner ads on relevant Web sites The larger the audience reached, the more the placement will cost Some banners on Web sites are not paid for, but instead are accepted on a barter basis In the early days of the Internet, viewers clicked on roughly 2 to 3 percent of the banner ads they saw, but that percentage quickly plummeted and advertisers began to explore other forms of communication

Many companies get their name on the Internet by sponsoring special content on Web sites that carry news, financial information, and so on Sponsorships are best placed in well-targeted sites where they can offer relevant information or service The sponsor pays for showing the content and in turn receives acknowledgment as the sponsor of that particular service on the Web site

A microsite is a limited area on the Web managed and paid for by an external advertiser/ company Microsites are particularly relevant for companies selling low-interest products such

as insurance People rarely visit an insurance company's Web site However, the insurance pany can create a microsite on used-car sites that offers advice for buyers of used cars and at the same time a good insurance deal

com-Interstitials are advertisements, often with video or animation, that pop up between changes on a Web site Ads for Johnson & Johnson's Tylenol headache reliever pop up on bro-kers' Web sites whenever the stock market falls by 100 points or more Because consumers found pop-up ads intrusive and distracting, many computer users such as AOL installed software to block these ads.29

The hottest growth area has been search-related ads.30 Thirty-five percent of all searches are reportedly for products or services Search terms are used as a proxy for the consumer's consumption interests and relevant links to product or service offerings are listed along side the search results from Google, MSN, and Yahoo! Advertisers pay only if people click on the links The cost per click depends on how high the link is ranked and the popularity of the keyword searched Average click-through is about 2 percent, much more than comparable online ads.31 At an average of 35 cents, paid search is a lot cheaper than the $l-per-lead for Yellow Pages listings One Samsung executive estimated that it was 50 times cheaper to reach

MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 615

1,000 people online than on TV The company now spends 10 percent of its advertising

bud-get online.32 A newer trend, content-target advertising, links ads not to keywords but to the

content ofWeb pages

Companies can set up alliances and affiliate programs When one Internet company works

with another one, they end up advertising each other AOL has created many successful

alliances with other companies Amazon has almost 1 million affiliates that post Amazon

ban-ners on their Web sites Companies can also undertake guerrilla marketing actions to publicize

the site and generate word of mouth When Yahoo! started its Denmark site, it distributed

apples at the busiest train station in Denmark with the message that in the next hours a trip to

New York could be won on the Yahoo! site; it also managed to get this mentioned in Danish

newspapers Companies can offer to push content and ads to targeted audiences who agree to

receive them and are presumably more interested in the product or product category

Web advertising is showing double-digit growth Costs are reasonable compared with

those of other advertising media For example, ESPN.com (www.espn.com), the number-one

Internet sports site, attracts more than 5 million Web surfers a week Based on current

adver-tising rates, running adveradver-tising on the site for an entire year may range from $500,000 to

$1,000,000 (depending on impression levels).33 Yahoo! employs 100 salespeople who

demon-strate how online ads can reach people with certain interests or who live in specific zip codes

E-Marketing Guidelines

If a company does an e-mail campaign right, it can not only build customer relationships,

but also reap additional profits E-mail involves only a fraction of the cost of a "d-mail," or

direct-mail, campaign For example, Microsoft spent approximately $70 million a year on

paper-driven campaigns Now, it sends out 20 million pieces of e-mail every month at a

sig-nificant savings over the cost of paper-based campaigns Also, compared to other forms of

online marketing, e-mail is a hands-down winner Click-through rates for ad banners have

dropped to less than 1 percent, whereas click-through rates for well-crafted e-mail are

run-ning around 80 percent

Here are some important guidelines followed by pioneering e-mail marketers:34

m Give the customer a reason to respond Companies should offer surfers powerful

incen-tives for reading e-mail pitches and online ads, like e-mail trivia games, scavenger hunts,

and instant-win sweepstakes

a Personalize the content of your e-mails IBM's iSource is distributed directly to

cus-tomers' office e-mail each week, delivering only "the news they choose" in terms of

Announcements and Weekly Updates Customers who agree to receive the newsletter select

from topics listed on an interest profile

n Offer something the customer could not get via direct mail Because e-mail campaigns

can be carried out quickly, they can offer time-sensitive information Travelocity sends

fre-quent e-mails pitching last-minute cheap airfares Club Med uses e-mail to pitch unsold,

discounted vacation packages to prospects in its database

m Make it easy for customers to "unsubscribe." It is important that online customers have a

positive exit experience According to a Burston-Marsteller and Roper Strach Worldwide

study, the top 10 percent of Web users who communicate much more often online typically

share their views by e-mail with 11 friends when satisfied, but contact 17 friends when they

are dissatisfied.35

Online merchants face many challenges in expanding the public's use of e-commerce

Customers will have to feel that the information they supply is confidential and not to be

sold to others Customers will need to trust that online transactions are secure Companies

must encourage communication by inviting prospects and customers to send in questions,

suggestions, and even complaints via e-mail Some sites include a call-me button—the

cus-tomer clicks on it and his or her phone rings with a cuscus-tomer representative ready to answer

a question Customer service representatives can in principle respond quickly to these

mes-sages Smart online marketers will answer quickly, by sending out newsletters, special

prod-uct or promotion offers based on purchase histories, reminders of service requirements or

warranty renewals, or announcements of special events

Direct marketing must be integrated with other communications and channel

activities.36 Citigroup, AT&T, IBM, Ford, and American Airlines have used integrated direct

marketing to build profitable relationships with customers over the years Retailers such as

Designing the

Sales Force

FIG 19.2 I

Designing a Sales Force

Nordstrom, Nieman Marcus, Saks Fifth Avenue, and Bloomingdale's regularly send catalogs

to supplement in-store sales Direct-marketing companies such as L.L Bean, Eddie Bauer, Franklin Mint, and The Sharper Image made fortunes in the direct-marketing mail-order and phone-order business, then opened retail stores after establishing strong brand names

as direct marketers They cross-promote their stores, catalogs, and Web sites, for example, by putting their Web addresses on their shopping bags

V I R G I N M O B I L E

In a campaign that received the top prize at the 2004 Cannes Lion awards, Virgin Mobile created a wireless phone service campaign in Australia to sell 5-cent text messaging that combined TV and outdoor ads and a Web page, all based on Warren, a fictitious, love-hungry character Outdoor ads with Warren's text address and photo read "Be my text kitten" and "Tell me your favorite text position." During the 10-week campaign, Warren got 600,000 text responses, and the Web site got 3 million hits Sales increased by over 35 percent month-on-month with existing users making 15 percent more calls and sending 20 percent more text messages 37

Ill Designing the Sales Force

The original and oldest form of direct marketing is the field sales call Today most industrial companies rely heavily on a professional sales force to locate prospects, develop them into customers, and grow the business; or they hire manufacturers' representatives and agents to carry out the direct-selling task In addition, many consumer companies use a direct-selling force: insurance agents, stockbrokers, and distributors work for direct-sales organizations such as Avon, Amway, Mary Kay, and Tupperware

U.S firms spend over a trillion dollars annually on sales forces and sales force materials— more than they spend on any other promotional method Nearly 12 percent of the total workforce work full-time in sales occupations Sales forces are found in nonprofit as well as for-profit organizations Hospitals and museums, for example, use fund-raisers to contact donors and solicit donations

No one debates the importance of the sales force in marketing programs However, panies are sensitive to the high and rising costs (salaries, commissions, bonuses, travel expenses, and benefits) of maintaining a sales force Because the average cost of a personal sales call ranges from $200 to $300, and closing a sale typically requires four calls, the total cost can range from $800 to $l,200.3i! Not surprisingly, companies are trying to increase the pro-ductivity of the sales force through better selection, training, supervision, motivation, and compensation

com-The term sales representative covers a broad range of positions Six can be distinguished,

ranging from the least to the most creative types of selling:39

1 Deliverer-A salesperson whose major task is the delivery of a product (water, fuel, oil)

2 Order taker-A salesperson who acts predominantly as an inside order taker (the

sales-person standing behind the counter) or outside order taker (the soap salessales-person calling

on the supermarket manager)

3 Missionary-A salesperson who is not expected or permitted to take an order but whose

major task is to build goodwill or to educate the actual or potential user (the medical

"detailer" representing an ethical pharmaceutical house)

4 Technician - A salesperson with a high level of technical knowledge (the engineering

salesperson who is primarily a consultant to the client companies)

5 Demand creator-A salesperson who relies on creative methods for selling tangible

products (vacuum cleaners, cleaning brushes, household products) or intangibles (insurance, advertising services, or education)

6 Solution vendor - A salesperson whose expertise is in the solving of a customer's

prob-lem, often with a system of the company's products and services (for example, computer and communications systems)

Sales personnel serve as the company's personal link to the customers The sales sentative is the company to many of its customers It is the sales rep who brings back much-needed information about the customer Therefore, the company needs to carefully con-sider issues in sales force design—namely, the development of sales force objectives, strategy, structure, size, and compensation (See Figure 19.2.)