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Now, what is Direct Marketing ?

Direct Marketing is an interactive system of


marketing which uses one or more advertising
media to effect a measurable response and/or
transaction at any location
1980s definition of Direct Marketing

The new direct marketing is an


information-driven marketing process,
managed by database technology, that
enables marketers to develop, test,
implement, measure, and appropriately
modify customised marketing programs and
strategies
New definition of direct marketing

Goals of Direct Marketing


Finding new prospects
Acquiring Customers
Creating Customer Loyalty

19 Wundermentals
from
Being Direct Making Advertising Pay

#1 Direct Marketing is a Strategy, Not a


Tactic
Its not an ad with a coupon; its not a
commercial with a toll free number; its not
mailing, a phone call, a promotion, a database,
or a website.
Its a commitment to getting and keeping
valuable customers

#2 The Consumer, Not the Product, Must


be the Hero
The product must create value for each of its
customers. It must satisfy consumers unique
differences, not their commonalities.

# 3 Communicate with Each Customer or


prospect as an Audience of One
Advertising must be relevant to each
consumer as the product or service is. General
advertising and more targetted direct
marketing must both be part of a holistic
communication strategy

# 4 Answer the Question Why Should I ?


The most dangerous question a prospect or
customer asks is Why Should I?
And he may ask it more than once but never
of you.
The product and its communication stream
must continue to provide him with both
rational and emotional answers

# 5 Advertising Must Change Behavior


Favourable consumer attitudes go only part of
the way to creating sales.
Its also the consumers accountable actions
such as enquiries, product trials, purchases,
and repurchases that create profits

# 6 The Next Step : Profitable Advertising


The results of advertising are increasingly
measurable ; they must now be accountable.
Advertising cant be just a contribution to
goodwill it must become an investment in
profits

# 7 Build the Brand Experience


Customers have to know and feel the brand as
an experience that serves to individual needs.
It has to be a total and on-going immersion in
satisfaction that includes everything from
packaging to point of purchase, repurchase,
and after-sales service and communications

# 8 Create Relationships
Relationships continue to grow encounters
do not. The better the buyer seller
relationship, the greater the profit

# 9 Know and Invest in Each Customers


Lifetime Value
One automobile dealer calculated that a
lifetime value of cars sold to one customer
would be worth $332,000.
How much should a marketer spend to create
such a loyal lifetime customer for a given
product or service ?

# 10 Suspects are not Prospects


Prospects are consumers who are able,
ready, and willing to buy ; suspects are
merely eligible to do so.
Communicating with prospects reduces the
cost of sales ; communicating with suspects
raises the cost of advertising

# 11 Media is a Contact Strategy


Measurable results from media, not the
number of exposures, are what counts.
Measurements such as reach and frequency
are out of date.
Only contacts can begin relationships.

# 12 Be accessible to your customers


Be there for your customers be their
database and source of information and
service through as many channels of
communication as possible.
They cant tell you what they need unless they
can reach you.

# 13 Encourage Interactive Dialogues


Listen to customers rather than talk to them.
Let them advertise their individual needs.
Theyll be grateful for your responsiveness.
Convert one-way advertising to two-way
information sharing

# 14 Learn the Missing When?


The answer Not Now is as dangerous to
advertising as Not This. Only consumers
know when they are ready to buy, and they
will tell you if you ask them in the right way

# 15 Create an advertising curriculum That


Teaches as it Sells
A Curriculum is a learning systme that
teaches one bit of information at a time.
Each advertising message can build on the
learning of the previous one. It can teach
consumers why your product is superior and
why they should buy it

# 16 Acquire Customers with the Intention


to Loyalise them
Promotions sell product trials but not
ongoing brand loyalty. They may attract
wrong customers, who may never become
loyal. The right customers must be acquired
and persuaded to want what the product does
and not what the promotion offers. The right
customers may infact be your competitors
best customers

# 17 Loyalty is a Continuity Program


Totally satisfied customers are least likely to fall
away. Those who are merely satisfied may fall away
without warning.
To build ongoing relationships, rewards for good
customers should be tenure-based (on previous
purchases, usage behavior and length of relationship).
Rewarding tenure can prevent competitors from
conquesting your best customers

# 18 Your Share of Loyal Customers, Not


Your Share of Market, Creates Profits
Spend more on the good customers you have.
Ninety percent of most companies profits
come from repeat customers. It costs 6 to 10
times to get a new customer as to keep an old
one.

# 19 You are What You Know


Data is an expense knowledge is a bargain.
Collect only data that can become
information, which , in turn, can become
knowledge. Only knowledge can build on
success and minimise failure. A company is
know better than what it knows.

Beyond all this, DM is a Process ..

The 60 30 10 Rule in DM
60% of the success of your direct response
marketing program will be selecting the right
audience and reaching them with your message.
30% of the success of your direct response
program will be making the best possible offer to
this highly selected audience.
10% of the success of your direct response
program will be the creative, and excellent
presentation.

Why the database is so


important
You cant save souls in an empty church
- David Ogilvy

No product or service, however brilliant,


will sell to the wrong people. And no
creative idea, however stunning, will work
if it isn't seen by the best prospects.

A poor product or message sent to the right


prospect is better than the other way
round.

The origin of the database


The idea is not new; the technology is.
The average person in 1995 had more
computing power in their wrist watch
than did an IBM 360 main frame in
1961.
Thats the machine used on space
launches - the one credited with
inaugurating the computer age.

The backbone of direct


marketing
By continually testing and monitoring
you can:
Evaluate the initial response.
Monitor customer behaviour - response
to various offers - over time.
Assess the potential of a given prospect.
Spend your money where it will do best.

Typical Mailing Results


Factor

Differences between best & worst

List x 6.0 (12 lists)


Offerx 3.0 (3 prices, 2 ways to pay)
Timing

x 2.0 (2 different times a year)

Creative x 1.35 (2 envelope colours, a


personalised plastic card)
Ways to Reply x 1.2 (sticker, either phone
or mail response, or choice)

Read results carefully


If you combine all the results on the last
example, in theory the best combination is
58 times better than the worst.
This is very misleading because in reality,
uplifts cannibalise each other.
Two tests giving a 20% uplift each will not,
combined, produce 40%. It may be 30% - or
less.

Surprising results simple


tests can achieve
We tried a mailing with a letter, no
brochure vs. one with brochure. ROI
went up 92%.
We tested a letter twice as long
making the same proposition.
Response was almost double.
We tested the effect of a human face
in an ad: much the same occurred.

Dont ignore the most


important - and easiest - test
Most people think of comparative testing.
But the most important test is the easiest:
trying a message out on small numbers
before you spend all your money:
Why mail 1 million and hope, when you can
mail 10,000 and be sure?

Never spend money you cant afford to


lose without testing first.

Vary your messages to fit


the individual
Different Strokes for Different Folks

Chairman:
Is it right for our firm?
Managing Director:
Will it help the business
run better?
Finance Head :
Is it good value?
Marketing Head
:
Will it help the sales
force?
Operations Manager:
Is it reliable?
User:
Is it easy to use?
Secretary:
Does my boss need it?

To summarise

If you cant measure it, you


cant manage it
Try to establish the value of each name
- customer, lapsed customer and
potential.
This should reflect past and potential
value. Then you know what you can
afford to get and keep them.
Discover which are more likely to be
loyal - and spend more on them.

Top 10 Uses of Direct Mail

Generating leads
Generating store trafc
Responding to competitive activity
Generating customer loyalty
Generating new customers/referrals
Improving sales force effciency
Improving customer service
Increasing customers average purchase amounts generating
higher sales
Announcing store hours/sales/new locations
Augmenting media advertising to top prospects and select
customers
If you want to do something, chances are, Direct Mail can help you
accomplish it. Effectively and efficiently.

If you cant measure it, you


cant manage it
Try to establish the value of each name
- customer, lapsed customer and
potential.
This should reflect past and potential
value. Then you know what you can
afford to get and keep them.
Discover which are more likely to be
loyal - and spend more on them.

Dont assume a scheme will


be the right answer.
Loyalty is what is left when the
bribes are removed
Victor Ross,
Former Chairman, Readers Digest,
Europe

Its what you do with the knowledge


gained that may ensure success
Most do very little because they dont
know how

Enlightened companies
remember information for
customers,
not about them."

20 225 Rule
In a HBR article, Cooper and Kaplan discovered that
the famous Pareto Principle of 20 80 Rule had to be
revised
A 20 225 Rule was actually operating : 20 % of
your customers were generating 225 % of profits.
The middle 70 % of your customers were hovering
around the break-even point, and 10 % of customers
were losing 125 % of profits !

To Build Processes to Differentially Treat Customers Based on Their Potential


Value and Promote Continuous Learning
Brand Positioning
and Promise
Building the Brand Image

Building the Brand Through


the Customer Experience

Customer Needs & Wants

(Customer Relationship Management)

Direct
TV
ITM/OTM

TV

Print

Delivery Requirements
Radio

Outdoor
Media

Internet
Face to Face
Tailored Value Propositions

Print

Direct Mail

Continuous Learning

CRM Processes
Referral
Segmentation
Lead generation
Customer investment Lead conversion Win back
Cross-sell / optimize
management

Brand Management and CRM are both big issues within the Marketing Dept, and within the company as a whole - but rarely in the same room, or with the same
people. But is this starting to change?

THEY DONT LOOK VERY MUCH ALIKE


CUSTOMER RELATIONSHIP
MANAGEMENT

BRAND MANAGEMENT
Reflects to the customer what the
company and / or product stands for

Focuses upon managing the


customer relationship, in order to
achieve sales (although many CRM
programmes in fact focus on product
sales alone)

Should be coherent across all


activities undertaken by the
company
Brand values are built up over
time, but they should be the result of
conscious design by the company
Much effort goes into defining
brand footprints - ie values of the
company or product, and alignment
with the profile of the customers
Tone, style, manner of the product
or service at all points of contact
with the customer should be defined
by the brand - not the other way
around

Are these two


approaches to
Marketing in
conflict, or they
dependent upon
each other?

the customer life cycle of


recruitment, customer development
and retention are common themes in
CRM programmes
CRM is a data driven. Customer
data is used extensively the
understand behaviour and direct the
appropriate communication to the
customer
CRM impacts all parts of the
company. Business processes
should run from the centre through
to the distribution channels where
the customer touches the company

BUT THEY CANT LIVE WITHOUT EACH OTHER


Brand Management is softer

CRM is harder

Brand Management has to do with

CRM has to do with

Values
Attitudes
Imagery
Words
Creative

Brand Management matches the psychology and needs of


the customer to the features of the product or service

Brand Management shapes the customer proposition

Data and Analysis


Organisation and culture
Business processes
Technology
Service standards across multiple channels

CRM deals with the mechanics of building and


maintaining customer relationships

CRM takes the customer proposition and delivers it to the


customer

BRANDING AND CRM COME TOGETHER


Delivers:
Values of product or
service being offered
BRAND
MANAGEMENT

coherence of product
features
tone and style of customer
contact - written or spoken
visual appearance

Delivers:
relationship strategy
who to contact

CRM

how and when to contact


service standards
processes and technology to
relationship manage
customers

consistent product or
service proposition
delivered to the customer
over lifetime of relationship

Brand Management and CRM coming together clothes buying model


Different segments on Needmap, leads to different value proposition
being available to the customer

These lead to potentially different CRM strategies being developed


for each segment

Segment

Discerning Connoisseurs

Value Seeking Price Conscious

Tone and Style

Emphasis on quality and prestige


Exclusive

Emphasis on value for money, and


durability
Practical every day , straight talking

Nature of communication

Co-ordinated fashion items

Offers, (3 for 2)

Relationship building strategy

Distribution channels

Special fashion shows


Special effort to capture
personal requirements (eg size,
colour style)and tailor future
communications accordingly
Own tailor / dress maker
concept

Niche stores
Fashion club

Discount loyalty card


Invitation to pre sales store
openings
Regular offers based on value
and potential

Direct
Mail order
Superstores

THE TOOLS OF CRM


CUSTOMER DEVELOPMENT STRATEGY - BIG PICTURE
CUSTOMER ACQUISITION

CUSTOMER DEVELOPMENT

Via targeted recruitment products.

Next best action for customer.

Event driven, relationship development


programme
Recruitment product,
eg for financial services

Driven by customer segment, event


triggers, product propensity matrix, and
contact rules
Propensity matrix

Current account Path

Savings Path

Relationship
stage
Events

Re mortgage Path
Contact rules

TARGET: 3 relevant product sales,


activation, and loyalty generation

RETENTION

Outbound prioritisation based on ranking of


customer by product

Prioritised
Segments

Nurture priority customers

Continuous campaign testing..champion / challenger.test cells design.campaign profitabilityfeedback...

A SHIFT TO RELATIONSHIP MARKETING

Adopting a CRM strategy requires the customer to be put at the centre of the organisation.
This will require changes to infrastructure, systems and processes, organisation and culture.
Such changes must be allowed to evolved over time - they cannot be implemented on a single big bang

From traditional
campaign driven

To CRM driven

ANALYSIS

HYPOTHESIS

Infra structure
CREATE
GENERIC VALUE
PROPOSITION

DELIVER

COMMUNICATE

TARGETED
VALUE
PROPOSITION

RESULTS
INFRA STRUCTURE
CAPABILITY
Business processes
Organisation
Systems
Skills

ACTION

BETTER DIRECT MARKETING DRESSED UP AS CRM

Many so called CRM programmes are still focused around product campaigns. These will provide business benefit in terms of
improved efficiency, but might more correctly be described as better direct marketing

ANNUAL CAMPAIGNS - product focused


Increasing volumes of data are
available to Marketers. These data
combine to deliver:
AN
NU
AL

customer segmentation
customer propensity to purchase
products
key event data in customer
relationship

SA
LE
SC
AM
AP
AI

GN
S

But still most campaigns are centred


around products rather than customers
JAN

APR

JUL

OCT

JAN

What Is CRM trying to do?

TURN THROUGH 90 DEGREES - move from product


to customer focus
To: Finding products that are right for each customer

Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer .
FROM: Finding customers that are right for each product

Products: 1

To achieve this we need to align around:


Organisation and culture
Business processes and skills
Measurement and incentives
Information management
Technology

Processes and systems infra structure broken down into three major stages

STAGES OF CUSTOMER MANAGEMENT

PLANNING AND STRATEGY

understand customer
segments, their value, and
decide ambitions are for
each

MARKETING FACTORY

automate the marketing


communications activities

decide customer contact


strategy for each segment
to achieve ambitions

create stand alone


communications elements,
which can be built up into
tailor made individual
communication plans

develop rules set to place


customers on particular
communication programme

focus on continuous
performance assessment to
optimise communications

CHANNEL
CUSTOMER
CONTACT
MANAGEMENT
create seamless customer
handling capability across
all channels
information driven sales
prompts to direct customer
dialogue
channels to co-ordinate
activities as required

FEED BACK LOOP IN ALL STAGES

A BROAD RANGE OF DISCIPLINES NEED TO WORK TOGETHER

KEY ASPECTS OF SUCCESSFUL CRM DEPLOYMENT

CRM Strategy

Organisation

Business
Processes

Marketing/
Sales skills

Information
Technology

KEY ASPECTS OF SUCCESSFUL BRAND AND CRM DEPLOYMENT

Brand Management

CRM
Strategy

Organisation

Business
Processes

Marketing/
Sales skills

Information
Technology

Concentrate on customers
more than prospects
Why retailers lose customers
1.
2.
3.
4.
5.

Moved away or died 4%


Other company friendships
5%
Competition
9%
Product dissatisfaction
14%
No contact/indifference/attitude
of sales force 68%
Retail research by McGraw-Hill