Direct Marketing7th Dec 2013

Welingkar Institute

Direct Marketing

Topics covered

•Customer targeting•Criteria for database management•Loyalty Marketing•Campaign testing & dashboard concepts•Relationship management•Mass customisation•Onlinemarketing

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Customer Targeting

Customer Targeting

The Suzuki motorbike (new model) introduction in US

Suzuki chose DM as a way to increase awareness and sale of its new motorcycle in US.

What did they do?

Customer Targeting

The TA for chosen mailing were motorcycle owners. [1.2 million] ?

Option 1 – Mail to all and hope for a small % response

Option 2 – Refine the list to probable buyers and get better response.

Customer Targeting

Decided to for go for option 2.

* Refine the list to probable buyers and get better response.

Customer Targeting

To sharpen the focus, geographic segmentation was done.

All potential customers who did not live within a certain radius of the Suzuki dealer were eliminated. (reasons?) [0.8 million]

Customer Targeting

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Further demographic profiling was done. All those who did not fit the consumer profile were eliminated. [0.6 million]

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Then, further selection was done on the basis of RTB.

All who had bought a bike 2 to 5 years ago and had not changed/traded their bikes were short listed. [0.4 million] (Why?)

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Again psychographic profiling was done (?)

Certain brand owners like Harley, BSA were dropped (reasons?)

The balance were screened for creditworthiness.

The finalists were sent the offer. [256000]

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Few businesses do this kind of sorting.

The belief is ‘more the merrier’ (we could get more responses).

Cast a wide net, we could get a bigger catch.

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Open Session

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Criteria for Developing,

Maintaining and Refining data bases.

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The 9 criteria for developing, maintaining and refining data bases.

For a direct marketer, her data base is the holy grail.

The more developed, maintained and refined the DB - the better will be the ROIs

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1. Affinity - This criterion gives classification of merchandise that the data base represents. Eg. investors in MFs, Insurance

Affinity market can be expanded to include people investing in FDs, insurance, etc.

This is also useful for marketers of variety of products.

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2. Demographics – Data base that is broken down by age, gender, income, education etc.

(If you are selling organic vegetables ? What will be demographic segmentation?)

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3. Psychographics – Habits, attitudes, perceptions and behaviour patterns. (Eg?)

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4. Source – The source of data base should be authentic and preferably classified into buyer, inquirer or potential.

This will save time and other resources and will also reduce outdated information.

Further it is imp to know the age of data (recency). (Eg. ?)

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5. Selections – When renting/outsourcing data bases, its is advisable to be selective Eg. If Citibank database is being used select the right consumer profile.

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The 3 most important of the 9 criteria.

The RFM criteria

Recency, Frequency and Monetary criteria

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These 3 criteria are based on the idea that customers tend to repeat themselves.

6. Recency – This is the most imp and crucial factor of an updated/current database.

People who have bought something are more likely to buy again. (provided your product at least meets customer expectations)

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7. Frequency – This gives you how often the person is buying from you.

A frequent buyer needs to be pampered. (Frequent flyer scheme!)

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8. Monetary (average amount per purchase) – The goose that lays the golden egg!

Obviously, a high average buyer is the marketers’ darling.

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9. Universe – It is important to know how big is the total database with in your segment.

It also helps in product testing

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The purpose of DM is to

- Sell more to existing customers

- Find more profitable customers.

For this that data base needs to be constantly updated and upgraded.

The RFMs principle needs to be constantly applied.

The best way is to develop your own data base

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Some of the ways to develop your own data base:

- With technology available, one can have all the software that will sort, filter, age, cross index and maintain your database in operational readiness mode.

An upgraded and effective software for DB management is a must.

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Some of the ways to develop your own data base: contd.

- Record buyer information and their buying histories. Your software will then mix and match creating matching profiles (another database!)

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Some of the ways to develop your own data base: contd

- Follow the 9 criteria process. This will improve your ROI. Also it will help you add more products for all sub DBs

Direct MarketingSome of the ways to develop your own data base: contd

- Sort and segment the DB to save money. The software gives you selected sublists. This will save money in mailing and increase ROI.

- Keep adding to database and keep it current.

- Repeat the above process periodically

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Data analytics is the fastest growing career choice.

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Loyalty marketing.

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Loyalty marketing is a strategic marketing process in which a marketer focuses on growing and retaining existing customers through incentives.

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The new focus in marketing is to create long term relationships with customers

Loyalty marketing focuses on long-term relationships with a lot of customers (mass customization)

Marketing yesterday ...•Objective: to make a sale.•Sale is the end of a customer relationship.

•Buyer and seller are independent.•Focus on products (mass production).

•Anonymous customer.•Customer buys values.•Costs + profit = price.•One way communication.•Products and resources determine the activities.

Marketing tomorrow...•Objective: To create a Customer.•Sale is the beginning of a customer relationship.

•Buyer and seller are dependent from each other.

•Focus on overall value creation and customer service (mass customization).

•Known customer.•Customer creates values.•Price - Profit = Costs (Target Pricing)•Two way communication.•Relationships determine the activities.

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In US, Betty Crocker issued coupons since 1929 for redemption on future purchases.

This scheme ran for about 77 years and was one of the firsts to have initiated a plan for customer retention.

Customer loyalty programmes have evolved into ‘Customer Advocacy marketing’

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Customer retention is becoming a challenge

- Increasing competition - Better technology - continued product innovations

How to retain your existing customers and grow more

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Changing view of the customer

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Information-Driven Marketing- The Complete Model

5 Degrees of Customer Bonding*Awareness *Identity *Relationship *Community *AdvocacyMarketing Strategy

Marketing Tactics

Data Processingand Storage

Applications of Data

Publicity RelationshipPrograms

General Advertising

Sales promotion

Point-of-purchase

New ProductIncubator

Life-time-ValueEnhancer

Crystal BallPredictor

New CustomerAttractor

PartnershipStimulator

Information Accumulator

The Information Core-Datamotion-

Information Exchange

InformationExchange

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Customer Loyalty/Relationship Marketing Is Not equal ToFrequency Marketing

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Frequency marketingWhen customers give a greater share of their transactions than they might have, without the program, usually in exchange for accumulating miles, points, or other surrogate discounts.

They are not loyal to the brand but to the accumulation of benefits

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Drawbacks of Frequency marketing

•Exclusive focus on behavior ignores the emotional and psychological factors that build real commitment.

•Without that commitment the customer focuses on “the deal,” not the brand or product relevance.

•A behavior focus makes bribing the customer irresistible.

•Erodes the brand and diminishes product differentiation.

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Loyalty marketing

•When the customer feels so strongly that you can best meet her relevant needs, your competition is virtually excluded from the considered set, and the customer buys almost exclusively from you — referring to you as “their restaurant” or “their hotel.”

• Loyalty is focusing on emotion

•Winning maximum share of heart, mind and wallet.

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Benefits of Loyalty marketing

- Loyal customers tend to maintain their positive expectations relatively longer than low-loyalty consumers. They are not likely to adjust expectations based on episodic factors- Loyal customers tend to show:•A special preference, attachment, commitment, •Positive WOM, •Low switching to competitive brands, •Willingness to pay premium price

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Benefits of Loyalty marketing contd..

•The customer focuses on your brand, offers and messages to the exclusion of the competition.•Price is no longer the dominant consideration, but is one component in the larger value proposition.•Loyalty provides critical inoculation.•Competitive offers face a higher hurdle.•The customer becomes more forgiving — goodwill equity.•Loyalty begets loyalty.

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How to create loyalty?

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How to create loyalty?

PhysicalProduct

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How to create loyalty?

PhysicalProduct

ServiceProduct

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How to create loyalty?

PhysicalProduct

ServiceProductService

Delivery

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How to create loyalty?

PhysicalProduct

ServiceProduct

ServiceDelivery

Service Environment

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Customer Retention

Acquiring new customers costs 5x more

than retaining current customers

The average company loses10%

Of its customers yearly

Reducing customer defections by 5% can increase profits from

25% to 85%

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As mentioned earlier, CLP is now moving on to Customer Advocacy Marketing.

There exists a strong co-relation between customer loyalty and customer advocacy.

As the name suggests, existing customers advocate the product or services to other prospects and may be rewarded for the same. This is also referred to customer referral.

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- Organisations recruit through referral and reward programmes

- Publishers reward existing customers for new ones

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Campaign testing and dashboard concepts

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Testing pays off.

If all variables are carefully controlled and sample sizes are representative, testing can predict the results.

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Testing can be done by selecting a small sample size from the data base that is representative of the segment and marketing the product/service to this sample.

The results would be predictive.

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A second best approach is a mixture of limited tests and careful tracking.

By meticulously recording results, you can track which marketing mix is working best.

The applicability of the testing method will vary with:

• Size of you database, • The number of potential customers • The budget.

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You can manage only what you measure

Conversely, if you don’t measure, you cannot mange

For running a successful DM operations you need to track and measure the business

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What to track?

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In DM measuring the revenues and expenses is just one part.

We need to track the details like who bought the product and how was the payment made.

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The way to do it.To measure the 6 Ws and 2 H.

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Who: Names of the existing and prospective customers

Where: The co-ordinates of the customers

What: The types/categories of merchandise bought

When: Dates/ period when bought (around festivals/beginning of the month/quarterly)

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Why: Was it during promotions/incentives? Types of promotions and incentives.

Which: Which kind of product/merchandise was bought

How: Method of response. Direct mail, coupon, telemarketing

How much: What was the value of order placed

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How to keep track of these variables on a regular basis?

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We need to create a dashboard

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A dashboard is a collection of indicators that provide real time reports on vital aspects.

In a car it give information on Speed, distance, fuel, temperature.

The RVM and SVM gives information on surrounding.

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The DashboardA simple way for executives to monitor key performance

metricsfrom across the business

• Visual representation of key business areas- Warning lights to signal the current status of key business

areas being monitored – green, yellow, red status

• Targeted to CEOs, managers, and anyone else inthe company

- Contextual usefulness (interpretation) of data/performance

results (role-based dashboards)

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Why a Dashboard?• A well-proven performance management practice – provides an organization wide perspective of business performanceacross multiple dimensions.

• Business objectives/goals and management expectationsare clearly articulated

• Standardize data sharing and performance measurementpractices – brings all performance data from various sourcesand locations before the decision makers.

• Serves as a performance diagnostic tool – facilitates decision on fact rather than judgmental inference.

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Why a Dashboard? contd…• Establishes a platform for business andoperational excellence –uses performance metrics to drive productivity

• Directs process improvement efforts – Converts business data into action-oriented information; Helps coordinate actions amongst diverse stakeholders and align execution with strategic goals

• Establishes the foundation for benchmarkingorganizational processes – through goal alignment across the organization

Align People, Implement Strategies, and Measure Performance

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What can a dashboard accomplish?

• Provide a complete business picture • Communicate complex information quickly• Help monitor time-sensitive processes• Promote more informed and timely decision making • Provide actionable business information

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Requirements of a Dashboard

• Identification of Key Performance Indicators (KPIs)

Reflect the Management PhilosophyTargets all levels of the organizationSummarization at various levels – Organization /Department /Division /Business Area Drill down through the connecting levels and links of the keybusiness area

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Requirements of a Dashboard contd.

• Categorize information / identify data sourcesCRM systemsProjectsFinance & Accounts

• Target setting

• Review mechanisms and cycle

• Proactive correction through recommendations based oncurrent performance and trends

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What is a KPI?

Key Performance Indicator (KPI) is a metric that drives decision

making and improvement

• Key–Most important or most relevant • Performance–Related to measuring or managing

performance• Indicator–Indicate a result or required action

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Typical Performance Indicators

Financial•Sales Performance – Target vs Achievement•Sales Productivity – Prospect Conversion Ratio, Cycle Time•Business from New Customers/Total Revenue•Revenue from Acquired•Strategic Partnership

•Customer•Customer Satisfaction Index•Customer Retention Index•RFM

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Pre-requisites

• Clearly articulated organization objectives

• Organizational Measurement Program

• Quantitative management insight – statistical analysis and interpretation

• Basic technology infrastructure- Fixed data sources, access and consolidation

mechanisms- Performance results publishing

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Dashboard Implementation

• Simplistic- Easily usable, adaptable and accessible

• Defining the rules for access/update

• Live data feeds / real-time data

• Ownership for data

• Data analysis (also includes trends)

• Organization performance baselines

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Open session

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Relationship marketing

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Relationship marketing emphasizes customer retention and satisfaction, rather than a dominant focus on sale transactions.

• It is the process of attracting, maintaining and enhancing relationships with key individuals over time.

• Uses one-on-one communication to earn the loyalty of your target audience.

• High-touch, person-to-person communication• The most powerful and the most time-consuming.

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It differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages.

• A key to relationship marketing is to make it clear that your program is going to last for a long time.

• Diverse communities are accustomed to the short attention span of programs that come in, make promises, then lose their funding and leave.

• Explain how Extension is different, and that you are committed for the long term.

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Provide long-term and mutually beneficial arrangement where both the buyer and seller have an interest in providing a more satisfying exchange.

The approach is to make more meaningful and richer contact by providing a more holistic, personalized purchase, and uses the experience to create stronger ties.

• Customer Retention Marketing (CRM) is the foundation of relationship marketing.

• The goal is to convert the target audience into loyalists, loyalists into enthusiasts, advocates and donors

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It is cross-functional marketing. It is organized around processes that involve all aspects of the organization.

Step 1:Identify the audience with whom you wish to build a

relationship.

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Step 2:• If they know about Extension and feel positively about it,

maintain a good relationship by keeping in contact through impersonal marketing techniques, such as mailings, brochures, etc.

• If they know about Extension and feel negatively or indifferently about it, use the Six “P’s” from the Personal Marketing program. The Six P's represent people, partnership, product, place, promotion, and price.

• Emphasize Promotion and Price

• If the audience does not know much about Extension, inform them. Again, apply the Six “P’s” technique.

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Relationship marketing is a process, not a one-time event.

Customer must understand that you are committed for a long time and that they can depend on you to provide your program.

These connections will help Extension build strong network.

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Open Session

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Mass Customisation

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Mass CustomisationThe term is dichotomous!

What does it mean?

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Mass Customisation is

Drawing on a large collection of modules to build unique products and services that exactly match the needs and desires of individual customers who have already ordered what does not yet exist.

Accepting payment for finished products and services before paying for the components of which they are made.

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Mass production evolution.

Middle Ages – Craft Production Master Craftsmen and Apprentices One off products, high labour content, expensive

18th Century – Industrial Revolution Movement of people off land to towns and cities Sub-division of work Loss of traditional skills

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Mass production evolution.

Mass Production – example: Ford Division of work Low variety of output – ‘any colour as long as it’s black’ Constantly rising volume sales, and lower input costs =

lower prices (economies of scale) OK in permanently expanding economy with favourable

demographics

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MASS PRODUCTIONInventory is freeTime is freeEither standardization at low cost or flexibility at high costOne size fits allMarket share focusSelling goods and services

MASS CUSTOMIZATION Inventory is NOT free Time is everything Low cost and high flexibility Customers are particular Market fragment and

variety focus Selling service and

experiences

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Producing goods and services to meet individual customer's needs with near mass production efficiency

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At its core is a tremendous increase in variety and customization without a corresponding increase in costs.

At its limit, it is the mass production of individually customized goods and services.

At its best, it provides strategic advantage and economic value.

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4 Types of mass customisation

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1. Collaborative Customization:

Consumer and producer engage in a dialogue to determine

customer requirements

Computers, clothing and footwear, furniture, some services

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2. Adaptive Customization:

Product is designed so that users can alter it themselves to fit unique requirements on different occasions

High-end office chairs, R7 golf club, certain electronic devices

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3. Cosmetic Customization: Product is unique in appearance only

Customer’s chosen text or image on T-shirts, mouse mats,

baseball caps, mugs etc.

Also called ‘Personalization’

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Producer provides customized product without consumer

being necessarily being aware that it has been customized.

Can be used when consumer’s needs are predictable or can

be easily deduced, and when customers do not want their

requirements repeated.

Example- repeat orders for customized clothing, chemicals,

perfumes

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True Mass Customization requires:

• System for customer to specify requirements easily e.g. online ordering, call center

• Advanced manufacturing systems • Enable economies of scope (keep cost and price low)• Build-to-order approach • Product is not made until order is received• Minimum order quantity of one

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Advantages of Mass Customization:

• Customer has control over product• Does not have to pay for features he/she does not want

(computers etc.)• ‘Not in your size’ becomes a thing of the past• Company does not have finished product inventory • Better use of working capital• Easier for company to differentiate product• Levels out economic fluctuations• When slowdown occurs, less backlog of inventory• Prices do not have to be cut as much• Less likelihood of recession

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Mass Customization is NOT:

Massive Product Variety – Customer has Choice but not Control;

E.g. ‘Personalize your cell phone with any of our 2000 jackets’

Advanced ordering system linked to craft production;

Example: Tailoring – customer can specify exact requirements online but suits are hand-made

Personalization or mass customization of Marketing:

Use of knowledge about customer to personalize marketing of standard products. Data gathered from loyalty schemes, etc.

Customized products with minimum quantities‘Your design on a T-shirt, minimum order 100’

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Future of Mass Customization:

•MC to be Mainstream•Growth of ‘Online Factories’: EMachineShop.com – download software, design product; send completed design which will be manufactured within a few days

•Personalized location-based services

•Development of Digital Fabrication: Digital Fabrication ‘3D printing’ from data files

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Web based marketing

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Online Marketing Domains

• Business to consumer (B2C)• Business to business (B2B)• Consumer to consumer (C2C)• Consumer to business (C2B)

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• Business to consumer (B2C) involves selling goods and services online to final consumers

• Business to business (B2B) involves selling goods and services, providing information online to businesses, and building customer relationships

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Consumer to consumer (C2C) occurs on the Web betweeninterested parties over a wide range of products and

subjects

Blogs• Offer a fresh, original, and inexpensive way to reach

fragmented audiences• Difficult to control

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Consumer to business (C2B) involves consumers communicating

with companies to send suggestions and questions via company

Web sites

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Types of Online Marketers

• Click-only marketers

• Click-and-mortar marketers

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Click-only marketers operate only online without any brick and

mortar presence

• E-tailers• Search engines and portals• Shopping or price comparison sites • Internet service providers (ISP)• Transaction sites • Content sites

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E-tailers are dot coms that sell products and services directly to

final buyers via the Internet• Amazon• Flipkart

Search engines and portals are ports of entry to the Internet

• Yahoo!• Google

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Internet service providers (ISP) provide Internet connections for a

fee• Airtel• BSNL

Shopping or price comparison sites provide product and price

comparison information• Yahoo! shopping

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Transaction sites take commissions for transactions on their sites

• eBay

Content sites provide financial, news, research, and otherInformation• Times of India.com• MSN.com• Wikepedia

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Click-and-mortar companies are brick-and-mortar companies with

an online presence

Advantages of click and mortar companies include:• Known and trusted brand names• Strong financial resources• Large customer bases• Industry knowledge• Reputation• Strong supplier relationships• More options for customers

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Setting Up an Online Presence

Creating a Web site requires designing an attractive site and

developing ways to get consumers to; Visit the site, Remain on the site, and Return to the site

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Setting Up an Online Presence

Types of sites• Corporate Web site• Marketing Web site

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Corporate Web site is designed to build customer goodwill and to

supplement other channels, rather than to sell the company’s

products directly to:• Provide information• Create excitement• Build relationships

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Marketing Web site is designed to engage consumers in interaction

that will move them closer to a direct purchase or other marketing

outcome

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Designing Effective Web Sites

To attract visitors, companies must:• Promote in offline promotion and online links• Create value and excitement• Constantly update the site• Make the site useful

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Designing Effective Web Sites

The seven Cs of effective Web site design1. Context2. Content3. Community4. Customization5. Communication6. Connection7. Commerce

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Designing Effective Web Sites

Context - is the site’s layoutContent - is the site’s pictures, sound, and videoCommunity - is the site’s means to enable user-to-user Customization - is the site’s ability to tailor itself to different

usersor to allow users to personalize the siteCommunication - is the way the site enables user-to-user,

user-to-site, or two-way communicationConnection - is the degree that the site is lined to other

sitesCommerce - is the site’s capabilities to enable commercial transactions

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Designing Effective Web Sites

The eighth C

To keep customers coming back, the site needs to constantly

change

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Placing Ads and Promotions Online

Forms of online advertising• Display ads• Search-related ads• Online classifieds

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Placing Ads and Promotions Online

Display ads • Banners are banner-shaped ads found on a Web site• Interstitials are ads that appear between screen

changes• Pop-ups are ads that suddenly appear in a new window

in front of the window being viewed• Rich media ads incorporate animation, video, sound,

and interactivity

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Placing Ads and Promotions Online

Search-related ads are ads in which text-based ads and links appear alongside search engine results on sites such as Google and Yahoo! and are effective in linking consumers to other forms of online promotion

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Placing Ads and Promotions Online

Other forms of online promotion include:• Content sponsorships• Alliances• Affiliate programs• Viral advertising

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Placing Ads and Promotions Online

Content sponsorships provide companies with name exposure through the sponsorship of special content such as news or financial information

Alliances and affiliate programs are relationships where online companies promote each other

Viral marketing is the Internet version of word-of-mouth marketing and involves the creation of a Web site, an e-mail message, or another marketing event that customers pass along to friends

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