Chapter 14 Direct and Online Marketing Building Direct Customer Relationships Direct and Online...

Chapter 14

Direct and Online Direct and Online Marketing Marketing

Building Direct Customer Building Direct Customer RelationshipsRelationships

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 14 - 2

1. Define direct marketing and discuss its benefits to customers and companies.

2. Identify and discuss the major forms of direct marketing.

3. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies.

4. Discuss how companies go about conducting online marketing to profitably deliver more value to customers.

5. Overview the public policy and ethical issues presented by direct marketing.

Rest Stop:Rest Stop: Previewing the ConceptsPreviewing the Concepts


Background• Success: Since its inception

in 1995, Amazon.com has grown to sales of more than $19 billion today, and profits have increased 18-fold, with 50% of sales coming from overseas.

• Merchandise: Amazon has expanded its merchandise beyond books to include music, videos, electronics, tools, housewares, shoes, groceries, and more. Amazon boasts, “We have the Earth’s biggest selection!”

Amazon.com – The Wal-Mart of the InternetFirst Stop

How Did They Do It?

• Customer-driven: Amazon offers a better store, easier shopping, greater variety, more information, and low prices. Small retailers can sell via Amazon. Innovative services include Amazon Prime, Kindle, music downloading, and shopping applications for iPhone.

• Customization: Amazon’s site greets customers by name and offers personalized, relevant recommendations. Users can share opinions and reviews, chat online, and more.


Direct Marketing

• Direct marketing:Connecting directly with carefully

targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.


• The new direct-marketing model:Direct marketing has undergone a dramatic

transformation.Most firms use direct marketing as a

supplemental channel or medium.For many companies, direct marketing

constitutes a new and complete model for doing business.

Some firms employ the direct model as their only approach (e.g., Geico, Amazon, eBay).

The New Direct-Marketing Model


Growth of Direct Marketing

• Direct marketing:Fastest growing form of marketing.10% of U.S. economy ($2.1 trillion) is

generated by direct marketing sales.Direct marketing sales are expected to

grow at 5.3% annually through 2013.Direct marketing continues to become

more Web-oriented and Internet marketing is the fastest-growing form of direct sales.


Benefits of Direct Marketing

• Benefits to buyers:Convenient.Easy to use.Private.Ready access to products.Ready access to wealth of comparative

information.Immediate and interactive.


Benefits of Direct Marketing

• Benefits to sellers:Powerful tool for building customer

relationships.Offers a low-cost, speedy way to reach

markets, including business markets.Offers lower costs, improved efficiencies, and

speedier handling of channel and logistics functions.

Offers greater flexibility.Gives access to buyers that could not be

reached through other channels.


Customer Databases and Direct Marketing

• Customer database:An organized collection of

comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data.


Forms of Direct Marketing

• Major forms of direct marketing:Face-to-face selling.Direct-mail marketing.Catalog marketing.Telemarketing.Direct-response TV marketing.Kiosk marketing.New digital technologies.Online marketing.



• Direct-mail marketing:Involves sending an offer, announcement,

reminder, or other item to a person at a particular physical or virtual address.

Largest direct marketing medium.Well-suited to one-to-one communication.Use of traditional forms may decline as

marketers switch to newer digital forms.Can be used effectively in combination with

other media, such as Web sites.Often perceived as “junk mail.”



• Catalog marketing:Direct marketing through print, video, or digital

catalogs that are mailed to select customers, made available in stores, or presented online.

• Catalog marketing trends:More and more catalogs are going digital:

• Minimizes costs, and web space is unlimited.• Allows real-time merchandising.

Print catalogs are still the primary medium.• Drives web traffic and can create an emotional

connection to the consumer.Expected catalog sales in 2013 = $182 billion.



• Telephone marketing:Accounts for 17% of all direct-marketing

driven sales.Used in both consumer and B2B markets.Marketers use outbound and inbound calls.

• Outbound: Sell directly to consumer.• Inbound: Toll-free ordering or order faxing.

Do-not-call legislation has impacted the telemarketing industry.

• Many telemarketers have shifted to other forms of direct marketing.


• Direct-response TV marketing:Direct-response television advertising (DRTV):

• TV spots that are 60 or 120 seconds long. Infomercials:

• A 30-minute or longer advertising program for a single product.

• Home shopping channels:Entire cable channels dedicated to selling

multiple brands, items, and services.




• Kiosk marketing:Information and ordering machines

generally found in stores, airports, and other locations.

E.g., in-store Kodak kiosks allow customers to transfer pictures from digital storage devices, edit them, and produce high-quality color prints.



• New digital direct marketing technologies:Mobile phone marketing:

• Mobile ad spending is expected to grow.

Podcasts and vodcasts. Interactive TV (ITV):

• Viewer engagement is much higher than with regular TV ads.

• Online marketing is the final form of direct marketing.


Online Marketing

• Online marketing:Company efforts to market products and

services and build customer relationships over the Internet.

• Marketing and the Internet:Usage continues to grow with Internet

household penetration equaling 72.5%.33% of American consumers chose the

Internet as the second-most-essential medium in their lives.

Online marketing efforts are expanding.


Online Marketing

• Click-only companies: So-called dot-coms, which operate only online

without any brick-and-mortar presence.

• Types of click-only firms:E-tailers (Amazon).Search engines and portals (Google).Transaction sites (eBay).Content sites (ESPN).


Online Marketing

• Click-and-mortar companies:Traditional brick-and-mortar companies that

have added online marketing to their operations.

• Trends:Almost all traditional companies have set up

their own online sales and communication presence.

Many click-and-mortar firms are having more online success than their click-only competitors.


Online Marketing

• Online marketing domains:Business-to-consumer (B2C).Business-to-business (B2B).Consumer-to-consumer (C2C).Consumer-to-business (C2B).


Online Marketing

• Business-to-consumer (B2C) online marketing:Businesses selling goods and services online

to final consumers.

• Trends:Online buying continues to grow.The Internet influences 35% of total retail

sales; 50% of U.S. households shop online.B2C consumers differ from off-line consumers

because customers initiate and control the Internet exchange process.


Online Marketing

• Business-to-business (B2B) online marketing:Businesses using B2B Web sites, e-mail,

online catalogs, online trading networks, and other online resources to reach new business customers, serve current customers more effectively, and obtain buying efficiencies and better prices.

Most major B2B marketers offer online product information, purchasing, and support.

Many firms use the Internet to build stronger customer relationships.


• Consumer-to-consumer (C2C) online marketing:Online exchanges of goods and information

between final consumers.Auction sites such as eBay offer

marketplaces to buy or exchange goods.Blogs and forums facilitate information

interchanges.• Marketers are tapping into blogs as a medium for

reaching carefully targeted consumers.• Firms should monitor blogs for what is being said.

Online Marketing


Online Marketing

• Consumer-to-business (C2B) online marketing:Online exchanges in which consumers search

out sellers, learn about their offers, and initiate purchases, sometimes even driving transaction terms.

E.g., GetSatisfaction.com allows users to post questions, voice complaints, or deliver compliments to companies.


Online Marketing

• Conducting online marketing:Creating a Web site.Placing ads and promotions online.Creating or participating in online social

networks.Using e-mail.


Online Marketing

• Corporate Web sites:Designed to build

customer goodwill, collect customer feedback, and supplement other sales channels, rather than to sell the company’s products directly.

• Marketing Web sites:A Web site that

engages consumers in interactions that move them closer to a direct purchase or other marketing outcome.


Online Marketing

• Online marketers should pay careful attention to the seven Cs of effective Web site design: Context. Content. Community. Customization. Communication. Connection. Commerce.

• Constant change helps encourage repeat visits.


Online Marketing

• Placing ads and promotions online:Online advertising has become a major

medium.Forms of online advertising:

• Banner ads.• Interstitials.• Pop-up or pop-under ads.• Rich media ads.• Search-related ads (contextual advertising).


Online Marketing

• Placing ads and promotions online:Other forms of online promotion:

• Content sponsorships (sponsoring special content).

• Alliances and affiliate programs (work with firms to promote each other).

• Viral marketing (Internet version of word-of-mouth).


Online Marketing

• Creating or participating in online social networks:Also called web communities.

• E.g., MySpace, Facebook, YouTube.Marketers can participate in existing

online communities or set-up their own.More focused niche social networks are

emerging which can be used to target special interest groups.


Online Marketing

• Using e-mail:79% of all direct marketing campaigns employ

e-mail.Enriched e-mail messages can grab attention.Spam accounts for 90% of all e-mail sent.Permission-based e-mail marketing is key.E-mail can produce an ROI 40-50% higher

than other forms of direct marketing.


Public Policy and Ethical Issues in Direct Marketing

• Irritation, unfairness, deception, and fraud:Direct marketing excesses may offend

consumers.Direct marketing has been accused of taking

unfair advantage of impulsive or less sophisticated buyers.

Internet fraud and phishing are growing concerns.

Internet shoppers have online security concerns.

Marketers often find it difficult to restrict access by vulnerable or unauthorized groups.


Public Policy and Ethical Issues in Direct Marketing

• Invasion of privacy:Database marketing allows customers to

receive offers closely matched to their interests.

Critics worry whether marketers know TOO much about consumers.

Online privacy (particularly for children) is of particular concern.

If marketers don’t prevent privacy abuse, legislators may step in.


1. Define direct marketing and discuss its benefits to customers and companies.

2. Identify and discuss the major forms of direct marketing.

3. Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies.

4. Discuss how companies go about conducting online marketing to profitably deliver more value to customers.

5. Overview the public policy and ethical issues presented by direct marketing.

Rest Stop: Reviewing the Concepts


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

Chapter 14 Direct and Online Marketing Building Direct Customer Relationships Direct and Online...

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