How direct

marketing works
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And here you can add your subtitle.

 What is direct marketing?
Direct marketing is a discipline, a subset of marketing, which permits
us to carry out certain marketing tasks more efficiently. It does this by
gathering, analyzing and using information about individual customers
and prospects.

This information enables us to identify which of the people on our

customer and prospect files are likely to be interested in a particular
product, service or offer.
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 What is direct marketing?
We can then select only those who will find our message
appropriate and communicate with them alone, eliminating
much of the wastage inherent in other forms of advertising.
This is a major reason why direct marketing is so cost-
effective. We can also use our customer information to develop
‘profiles’ and use these to identify the best sources of new
customers.
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 Where does direct marketing fit into marketing?
Let’s begin by defining marketing. Marketing is the process of identifying
customer needs and satisfying them in a way which is acceptable to both
parties – customers feel that their needs have been recognized and fulfilled at
a fair price; the supplier makes a fair profit.

According to Peter Drucker, the aim of marketing is ‘to make selling

superfluous; to know and understand the customer so well that the product or
service fits . . . and sells itself’.

Collecting and applying customer and prospect data enables us to:

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• identify customer needs and wants more precisely

• communicate our proposed solutions more cost-efficiently.
 Where does direct marketing fit into marketing?
In other words, direct marketing can support all aspects of the
marketing process. It is not an alternative to marketing, but an integral
part of it. If there is a difference between the two, it is that marketing
tends to focus at the broader market level whilst direct marketing is
more tightly focused at the individual level. It achieves this by using
sophisticated information management techniques.
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 Where does direct marketing fit into marketing?
These techniques, in turn, require the use of computer systems
and software, and modern direct marketers allocate a high
priority to the task of developing their marketing databases.
Fortunately, the constant reduction in the cost of PCs and the
more user-friendly modern software make it possible to run highly
sophisticated databases and information systems on low-cost
hardware and software.
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 Why is direct marketing growing?
In the past, many people were content to buy new,
untried products and services, based only on the advice
of a salesperson. Knowledgeable buyers were few and
far between. Today’s buyers are much better informed
and much more selective. There are number of reasons
for this.

1. Choice – in almost every field there are more options

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available and more competitive prices offered to

customers.
 Why is direct marketing growing?
2. More information available – this started with Which?
magazine but now there are many magazines in both
consumer and business markets, carrying articles and features
comparing the strengths and weaknesses of products
available. Few people today would choose a new PC without
first buying a couple of magazines that carry product test
reports and offer skilled advice.
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 Why is direct marketing growing?
3. Greater pressure on consumer budgets – although most
households tend to have more disposable income than they
did 20 years ago, there is a greater range of goods that are
now considered ‘essentials’ – few people would consider a
television set and video recorder a luxury today. Business-to-
business marketers are also finding their customers are
experiencing greater pressure on costs than ever before,
causing buyers of all types to be more selective
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 Information – the driving force behind direct marketing

Marketers have always used market research and published

information sources with the intention of gaining a greater
understanding of customer needs, wants and motivations.

What is different about direct marketing is the ability to take

this difference down to the level of the individual. This
ability enables us to become customer-focused in a much
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truer sense.
 Information – the driving force behind direct marketing

It also enables us to ‘de-select’ prospects for whom an offer

would not be appropriate. This is an aspect of direct marketing
that is rarely publicized by the data protection lobby, yet it is a
key objective of any sensible direct marketer. The only things
that prevent us from being much more targeted and selective
are the shortage of data available to us or, in some cases, the
rules preventing us from using such data.
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 Information – the driving force behind direct marketing

if we are going to use individual data to plan and execute

campaigns, we have a great responsibility. We must make sure that
our information is as accurate and up-to-date as possible.

We have all heard horror stories of people receiving mailings

addressed to their deceased spouses, and whilst this is sometimes
unavoidable, we need to be ever vigilant, checking our data
frequently and verifying it against other sources where these are
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available.
 Where does our information come from?
It is important to recognize the value of research in helping us to
understand our markets and our customers. Market research can be
useful in many ways. It can help us to:

• understand how, when and why people decide to buy a specific

product – this helps reduce wasted costs and avoids approaching
people at inappropriate times

• highlight misunderstandings about our products and our messages

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– this means we can make our messages more relevant

 Where does our information come from?
• discover why people did not respond to a communication
– they may simply not have liked the offer, but on a
surprising number of occasions the reason is that they did
not understand the message
• find out what customers really think of us – if we ask in
the right way, they will tell us all we want to know,
including perhaps some things we would rather not hear
• develop our database – customer questionnaires can
generate very high responses (more than 40% response
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is quite normal)
 Where does our information come from?
• assess how effective our messages are in changing
people’s opinions about us – see the following example.
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 The customer database
A customer database is the collection of information that is
gathered from each person. The database may include
contact information, like the person's name, address, phone
number, and e-mail address. The database may also include
past purchases and future needs.

There were two barriers to entry to computer sytem – costs

and lack of knowledge
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 The customer database
Having the customer records on a PC database with some basic
analytical features enables us to manage, integrate and analyze
several types of data:

• customer and prospect addresses, fax, e-mail and telephone details

• customer and prospect values
• product needs/usage
• identities of decision-makers and budget-holders
• contact history – what did we send them and when?
• results of promotions – how did they react?
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• attitudes towards our company and products

• attitudes towards and usage of competitive products.
 The customer database
Data is gathered from various sources:

• questionnaire responses
• advertising and mailing response forms and Internet
registration
• telemarketing and sales force reports
• external databases operated by companies such as
Claritas and Dun & Bradstreet.
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General market information can be combined with individual

customer data to create powerful marketing information.
 Information and measurement
The database is at the center of marketing communications
planning. Marketing communications have four main
purposes:

• to initiate a relationship (prospecting)

• to develop the relationship into a sales transaction
(conversion)
• to maintain the relationship (loyalty building)
• to resurrect a lapsed relationship (re-activation).
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 Information and measurement
The marketing database is essential for efficient management of these
tasks. It enables us to identify the right names for a particular
communication, according to their potential value and their propensity
to be interested in this offer. It tells us the right time to send it; even
the right form of words to use based on our knowledge of the interests
of the individual.

The database helps us record and analyze our responses by segment

and gives us the information we need to prioritize and target future
communications.
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 Information and measurement

We use the data to make management decisions. So, if the data

is bad:

• it simply helps us make bad decisions more quickly

• it reduces the accuracy of our targeting
• it clouds our judgment when analyzing the outcome of our
actions
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 Making marketing cost-efficient

To make marketing work cost-efficiently, we have to say the right

things to the right people at the right time. What do we mean by
this?

Saying the right things

People react well to information that is interesting and relevant to

their current needs. We need to provide relevant information, but
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we must also deliver it in a suitable way.

 Making marketing cost-efficient
Reaching the right people

We are not in the business of ‘junk mail’ or junk anything – our aim is to
send only relevant messages. This means we need to know which of the
people on our list will find this message relevant right now. This calls for
information about our customers and prospects and expertise in analyzing
the information to enable us to select the right people for this specific
message.

Selecting the right time

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Timing is much underrated as a marketing tool. The following example is

from the insurance business.
 The value of individual data
Having individual information, enables us to be selective about:

• whom we communicate with

• when we speak to them
• what we say to them – tone, offer, style and so on
• how we ask them to respond/react

In other words, we can segment our customers and prospects into

clusters with similar needs, problems and characteristics, and
develop messages that address individual issues, with relevant
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information at the time when it will be most useful.

 Customer profiling and segmentation
Customer profiling is the practice of organizing customers into
specific groups possessing similar goals or characteristics.

A customer profile can be based on a number of identifiers including 

demographics, location, hobbies, preferred social media channels,
likes/dislikes, buying patterns, psychographics and credit
background. Assigning every customer a profile allows organizations
to target products, services and communications in a consistent
manner that resonates to a group of customers.
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 Customer profiling and segmentation
The key to customer profiling is to narrow down the list of potential
groupings to those that are relevant to the targeted customer base
and the organization's product offerings. Ideally, customer profiles
will describe a group of consumers rather than individual buyers or
end users. Customer profiles can then be used to identify the best
products or services to pursue, create relevant messaging or
marketing campaigns and attract a target market.
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 Customer profiling and segmentation
Customer profiling is important because it forces an organization to
focus on the specific consumers they want to pursue and create
products and services that are more attractive to that audience while
also realizing economies of scale. The practice of customer profiling
is similar to the practice of customer segmentation.
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 Benefits of customer profiling
• The ability to tailor marketing efforts to relevant audiences.
• Personalization of customer experiences to increase brand
loyalty.
• Can provide a more holistic view of market potential.
• Improved customer satisfaction
• Increased response, click or open rates.
• More potential customers, prospects and customer types are
identified.
• Increased sales and revenue.
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 The marketing communications plan
This is the basis for achieving forecasts, by maximizing business
from the most profitable customer groups and, thus, optimizing
resources. The main driver of the plan is the budget. The budget:

• identifies costs and expected profits associated with each activity

• lets us compare forecast with actual performance
• helps us decide between alternative strategies by predicting the
business each will create.
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