Clearing the confusion about this highly effective sales tool and defining its scope
Direct marketing is a highly effective sales tool that all businesses will want to deploy as part of their everyday marketing activity. Notably, it is one of the most cost-efficient ways smaller businesses can acquire new customers, retain existing customers and/or increase the revenue potential of an existing base
For all its relevance to business, direct marketing is one of those terms that has the potential to confuse. It is so, because most marketers feel that any marketing activity, promotion or communication will invoke a direct response from the customer. In fact, nothing could be further from the truth.
Direct marketing is all about the marketing communications of a ‘for profit’ company, where direct contact is made, initiated or invited between a seller of products, propositions and services, and its current and potential customers. It can involve direct mail, direct response advertising (including infomercials and teleshopping), personal selling and telemarketing.
Whatever the type, importantly the results of any direct marketing activity should be able to be directly measured, to assess the intended or the actual financial return on that investment. In other words, a marketer should be able to exploit the relationship that exists between a business and its prospects or customers as individuals. One way to better understand the fundamentals of direct marketing is to explore the key differences in mass advertising versus direct marketing:
Before getting into the details of direct marketing tactics, it is important we fully understand the advantages and disadvantages of direct marketing.
Direct marketing is all about the marketing communications of a ‘for profit’ company where direct contact is made… between a seller of products, propositions and services and its current and potential customers.”john lincoln, author
Done well, direct marketing offers the capability for businesses to give customers a better experience than mass marketing.
Deeper customer relationships
It offers the capability for businesses to build deep relationships and segregate their customers as individuals. Direct marketing also has the potential to build a continuing relationship with an existing customer, especially where the business is able to maintain and manage a customer database that captures all relevant information on a customer (for comparison, try to imagine the information or rather the lack of it on ‘walk-in’ customers in a traditional retail environment).
Test marketing capability
Direct marketing enables the marketer to test markets and take measures as to what works and what does not work.
Flexibility and predictability
Direct marketing enables marketers a good degree of flexibility to manage and control their costs and comes with an ability to predict and measure the outcomes of a campaign.
Higher customer motivation to respond
Direct marketing has a higher preponderance for customers to be motivated to respond.
Enables customer segmentation
Direct marketing enables the marketer to better segment or clusters their customers.
If you don’t get noticed, you don’t have anything. You just have to be noticed, but the art is in getting noticed naturally, without screaming or without tricks.”Leo Burnett, advertising pioneer
Wrongly or poorly executed direct marketing strategies can have tremendous negative consequences for a business.
Junk mail, annoying telemarketers and intrusive direct sales folks have given direct marketing tactics a bad image.
Opportunity costs, through inaccurate targeting
Inaccurate and out-dated mailing lists can not only become a costly disaster but can increase the annoyance factor of potential customers.
Lack of emotional stimuli
By its very nature, direct marketing is too direct for many customer prospects and does not have the potential to create the stimuli to invoke an emotional response from
a potential buyer.
When do you use direct marketing
Direct marketing is most effectively used when:
- There is a narrowly defined target.
- There is a need to explain the proposition in detail.
- There is a need to elicit a direct response from a potential or existing customer.
It is most effective when two critical success factors are fully considered before embarking or executing the campaign:
Target selection: professional marketers fully understand that it is paramount that when they select a target, it has to be based on the potential interest or preexisting levels of interest of a selected target.
Proposition strength: a strong campaign needs to market a strong proposition that will provoke or elicit a strong response.
It is important here also to recognize some of the received wisdom of the direct marketer:
- The more we need potential customers to react, the less willing they appear to be.
- The more the level of resistance from the potential and existing customer base, the more expensive it will be to buy the cost of sales time (i.e. the direct marketing costs).
- There is an inverse proportionality to the cost of persuasion and a pre-existing interest within a pool of potential targets. What this means is that it will cost a lot of money to persuade a customer to bite the bait if they are unaware of a proposition or lack any interest in it, or if the direct marketing list is not targeted correctly.
- The life-time value of the customer matters greatly. There is a direct relationship to the life-time value of the customer and the acquisition costs: the life-time value of a customer decreases, the more it costs to acquire that customer.
Managing the customer life-time value
In view of the impact that the life-time value of a customer can have on the return-on-investment of direct marketing campaigns, we need to consider how best we can build a life-time relationship with our customers.
Customer Relationship Management (CRM) has been a buzzword that has been around for a good while. It has mostly been described in the context of IT systems, business processes, opportunity management and so forth. However, marketers will prefer to consider CRM from a direct marketing perspective, and there are three phases that need be outlined, all of which will shape the nature and execution of a direct marketing campaign.
Are you in the customer relationship formation stage?
This phase is used to reinforce a potential customers’ decision to purchase. As a marketer, we need to be certain that we have an offer which has benefits that interest the customer. Reinforcement of a customers’ decision could include the fulfilment and/or delivery aspects of the proposition that the business is trying to sell.
Are you in the customer relationship cultivation stage?
We should ask if we are able to personalize the relationship in some way that better meets the customers’ unique needs. The marketer should also consider if the business is attempting to build trust and/or if it able to better qualify the customer.
Are you in the customer relationship management stage?
At this stage, we need to consider if the business is able to provide a value proposition to meet the customers’ unique needs. If so, it has a greater potential to cross-sell and up-sell the existing propositions.
JohnLincoln.one –The business growth hacker