Future Prospects of Direct Marketing Media

TABLE OF CONTENT

1. INTRODUCTION

2. THE FUNDAMENTALS OF DIRECT MARKETING
2.1 The meaning of Marketing today
2.1.1 Shift from traditional Marketing towards Direct Marketing
2.1.2 Fundamentals and core values of Direct Marketing
2.1.3 Database Marketing
2.1.4 Similarities & Differences between traditional Marketing and Direct Marketing
2.2 Trends supporting the shift towards direct marketing in particular
2.2.1 Individualisation
2.2.2 Product & Media fragmentation
2.2.3 Time spending
2.2.4 Information technology

3. COMPARISON OF THE MAIN DIRECT MARKETING MEDIA
3.1 Main direct marketing media in context
3.1.1 Dimensions of direct marketing and its media
3.1.2 Direct mail
3.1.3 Telemarketing
3.1.4 Online direct Marketing
3.2 Advantages & disadvantages regarding communication
3.2.1 Direct mail
3.2.2 Telemarketing
3.2.3 Online direct marketing
3.3 Advantages & disadvantages regarding privacy
3.3.1 Direct mail
3.3.2 Telemarketing
3.3.3 Online direct marketing
3.4 Advantages & disadvantages regarding design
3.4.1 Direct mail
3.4.2 Telemarketing
3.4.3 Online direct marketing
3.5 Media specific advantages & disadvantages
3.5.1 Direct mail
3.5.2 Telemarketing
3.5.3 Online direct marketing
3.6 Summary

4. FUTURE PROSPECTS OF DIRECT MARKETING
4.1 Direct mail’s future
4.2 Telemarketing’s future
4.3 Online marketing’s future
4.4 The integrated future

5. CASE STUDY: ROBA
5.1 The implementation of online direct marketing
5.2 The implementation of direct marketing media in the process of creating a new distribution channel

6. CONCLUSION

B. ) ABBREVIATIONS

C. ) EXHIBITS IN THE TEXT

D. ) APPENDIX

E. ) BIBLIOGRAPHY - Literature

BIBLIOGRAPHY - Internet

BIBLIOGRAPHY - Interviews

1. Introduction

“All the armies of the world are not as powerful as an idea whose time has come.“^[1]

This liberal translation of the famous Victor Hugo quote applies to direct marketing as it exists today. Only 20 years ago, direct marketing was considered a speciality employed by book publishers, record clubs or magazine publishers seeking subscriptions. Meanwhile direct marketing has become a marketing tool utilised by more than half the U.S. Fortune 500 companies.^[2] Realising the growing importance of direct marketing in addition to traditional advertising, major advertising agencies such as Young & Rubican (Y&R) and Doyle Dane Bernbach (DDB) purchased the most famous specialised agencies in this field and worked with them to bring both general and direct marketing clients the combined expertise of both disciplines.^[3] Due to direct marketing’s success it is now the basis for various subdisciplines. Database marketing, relationship marketing, one-to-one marketing, integrated marketing, and others all offer interesting extensions and variations of direct marketing’s basic techniques.^[4] More and more companies, in Europe and the United States, are using direct marketing as one part of their overall marketing mix. But even with enormous advances in analytical and computer capabilities, many direct marketing attempts fail to achieve their potential or, worse, fail to work at all due to a misunderstanding of their advantages and disadvantages.^[5] Therefore the aim of this thesis will be to examine the characteristics of direct mail, outbound telemarketing and online direct marketing, and to explore their specific advantages & disadvantages in order to enable their effective utilisation in todays' business world.^[6]

At the beginning of this thesis direct marketing’s evolution and development over time will be analysed. The thesis continues with a description of these three direct marketing media and an evaluation of their respective advantages and disadvantages under the headings of communication, privacy, ^[7] design and media. These four categories have been chosen, because they are the most important elements for the future of successful direct marketing. After analysing the current situation the future prospects of the three direct marketing media will be demonstrated by examining how their various characteristics fit into the future. Finally a case study was conducted to determine to which degree the analysed arguments were applicable. This is examined in the case of Roba Baumann GmbH, a wholesaler which produces children’s accessories.

2. The Fundamentals of Direct Marketing

In this chapter the history and definition of “Marketing“ & “Direct Marketing“ as well as its evolution and development over time will be researched.

2.1 The Meaning of Marketing today

Marketing can be defined as “the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational objectives “. The stated definition from 1985 is, until today, the official American Marketing Association’s (AMA) definition of the term Marketing. But before as well as after 1985 there have been different forms of interpretation of the discipline marketing in literature. According to different theories at different times, the definition of marketing has evolved over the last five decades. In exhibit A-1 in the appendix, the most important definitions from well known theorists in this field are demonstrated. In addition the main focus of their philosophy is shown.

2.1.1 Shift from traditional Marketing towards Direct Marketing

The origin of the term marketing as it is known today, can be followed back in history until the turn of the 20th century. Due to the existence of problems in the marketing process of mainly agricultural products, the search for new methods of distribution began.^[8] The emphasis of Marketing in the 60’s changed. In the 50’s the medium marketing was primarily used for distributing and selling of products, whereas in the 60’s marketing has been used to influence buying decisions - the begin of mass-marketing. The reason for that was the increasing choice of products in the 60’s due to a flourishing and expanding economy as well as an increased competition on the manufacturer side.^[9] In the early 1960’s Jerome McCarthy made a significant contribution towards the development of marketing as he proposed a marketing mix which consisted of four Ps: product, price, place, and promotion which was very much focused on management for that time. The four-P framework calls upon marketers to decide on the product and its characteristics, set the price, decide how to distribute their product, and choose methods for promoting their product. However, some critics argue that the four Ps omit or underemphasize certain important activities, such as services, packing and personal selling. But just as economists use two principal concepts for their framework of analysis, namely demand and supply, the marketer sees the four-Ps as a filling cabinet of tools that could guide their marketing planning. Many activities that might appear to be left out of the four-P marketing mix are subsumed under one of the four. For that reason exhibit A-2 in the appendix is included to show the four-P framework in more detail. The promotion-P includes basically five areas: Advertising, Sales promotion, Public relations, Sales force, and Direct Marketing.^[10] These five areas take advantage of various promotional tools, which are demonstrated in exhibit A-3 in the appendix.

Mass-marketing worked from the middle of the 20th century until the 1970s and 1980s. At that time all mass-marketing broke down, due to changes in various external & internal influences of a company. Due to the fact that a general distinction between external & internal influences of a company exists, exhibit A-4 & A-5 are included in the appendix. Exhibit A-4 shows the “PESTE analysis“, which gives an overview over the external influences of a company and the subsumed issues. Exhibit A-5 shows “Porter’s Value Chain“, which gives an overview over the internal influences of a company. Especially changes in external influences of the company, first and foremost the social, economic and technical influences, led to a decline in mass-marketing. For reasons such as a increase in market competitiveness, more sophisticated customers, more innovative technology, shorter life cycles and an increasing market saturation, mass-marketing was not sufficient anymore.^[11] But also changes inside the company, like an altering business philosophy - from a short-sighted orientation on the product only, to a farsighted orientation of company activities on the needs and wishes of the consumer - clearly demonstrated the change away from mass-marketing.^[12] Furthermore markets started to become increasingly segmented at that time - more products and services were provided to a rising number of target groups. To approach target groups in a direct and efficient way strategic planning became increasingly important. By taking advantage of strategic planning, not only external trends and impacts, but also corporate resources and capabilities as well as consumer likes and dislikes could be considered, when aiming for a certain target group.^[13] Furthermore new technology like UPC codes, point of sale scanners, and complex new research techniques gave the retailer and the marketer more and more specific information on their individual customers. To store this specific information databases were constructed and filled with purchase behaviour data. As a result communication marketing channels became more sophisticated and even new media forms, like the Internet, have been developed. Due to mass-marketing’s incapability to approach target groups, it was not able to fulfil all company needs anymore.^[14] Instead direct marketing was increasingly used for approaching target groups, because direct marketing’s segmentation and targetability possibilities were - and still are - superior in comparison to those of mass-marketing. In Germany, for example, direct marketing expenditure has constantly risen throughout the last decade. During the last 10 years the number of businesses that are taking advantage of direct marketing rose from 29% to 64%. While 10 years ago direct marketing was almost exclusively used from big organisations operating in specialised sectors of the economy, today direct marketing is a discipline basically all companies, regardless of their size or branch, use.^{[15] [16]} Before similarities & differences between direct marketing and traditional marketing will be further examined, direct marketing’s characteristics well be analysed first.

2.1.2 Fundamentals and core values of Direct Marketing

The definition of Direct Marketing has evolved over time to adapt to new and changing needs of today’s environment. The current "official" definition is given by the Direct Marketing Association (DMA). Direct Marketing can be defined as an “(...)interactive system of marketing using one or more advertising media to generate a measurable response/ transaction at any location“.16 This definition includes the key ingredients and can be dissected into several important aspects:

Firstly, the most essential aspect, is that direct marketing is an interactive system. This means that the marketer and the prospective customer engage in two-way communication. One-way communication, in contrast, can be described as a marketing situation where the marketer attempts to communicate information to the target audience, but has no opportunity to obtain precise feedback. Instead two-way communication with the target audience - which is either in case of business-to-business (btb) direct marketing another business or in case of business-to-consumer (btc) marketing a consumer - enables direct marketing to gather various information due to immediate feedback.^[17]

Secondly, direct marketing employs one or more advertising media. A medium can be defined as a channel through which information is distributed.^[18] Hence another important characteristic of direct marketing is that it is not an advertising medium itself (as are TV, radio, direct mail and so on), but a system of marketing - in other words a subset of marketing as a whole. The various media upon which direct marketing relies to convey messages to the target audience are simply means to an end - they are conduits or channel of communication.^[19]

Thirdly, of paramount importance is the fact that all direct marketing activities are measurable. Due to direct marketing’s specific two-way communication a response can be gained from a target group. As a result the direct marketer knows to which communication the target group responded and the exact nature of that response - a sale or a request for more information for example.^[20] It is also important to note that non-response also provides information to the direct marketer, information that can be used in planning the next marketing program.^[21] This information is added to existing information about the individual in the direct marketers database so that it will be available for the planning of the next marketing program. The direct marketer analyses customer data, uses it in planning new campaigns, and updates it after every customer contact. This database of information is the key to effective direct marketing. As database is an essential part of direct marketing it will be explained in further detail in the coming section.

Last but not least the fourth aspect of direct marketing, which is transaction at any location, describes that direct marketing as an interactive system is not restricted to any one location. This makes it possible to target any target audience, anywhere in the world. Hence direct marketing can be used very flexibly.^[22]

2.1.3 Database Marketing

The term database marketing is a more accurate description of the processes involved in basically all direct marketing media today. A customer database is an organised set of data about customers, including geographic, demographic, psycho-graphic or buying behaviour data.^[23] Databases are increasingly being used to store useful information on actual and potential customers, which can be continuously up-dated to provide a framework for changing demand patterns and customer requirements. A database is also used to tailor products and services to the special needs of targeted consumers and businesses, and maintain long-term customer relationships.^[24] Marketers can, by using a database, easily and regularly access in-depth, census-like information about their customers, allowing them to make more informed marketing decisions.^[25] This will be demonstrated by C&A, one of Europe's leading retailers. C&A has vastly improved its biannual direct mail campaigns, more than doubling the response rate and boosting profitability, by using data management software to better understand what customers buy, and when. Using the new software, the 550-unit retailer, which has one million customers enrolled in its loyalty card program, can customise special offers by analysing purchasing data collected in the last six years. By doing so, the company was able to better tailor its spring 1999 direct mail campaign. Response to the campaign more than doubled to 6%. The company reported that mailing contribution values, or profits generated by the mailing, increased 20 times.^[26]

Due to direct marketing’s ability to offer varied messages to different consumers a much more targeted offer can be made, to which the consumer can react. In addition the focus can be on the attractive target groups instead of addressing a whole group. Another example how different consumers can be targeted with different messages for the same product, provides the Canadian tourism board. The Canada tourism board sends out two separate mailings, one to sporting enthusiasts interested in skiing, backpacking, and other outdoor activities, and another to persons interested in the country’s rich culture and history.^[27] As database marketing becomes more widely understood and used, database management programs are likely to become more common and sophisticated. Today communication can even be targeted at single individuals, via direct mail, telemarketing or electronically. Thus database management is undoubtedly the key for adequate target group approaching and as a result is used as an underlying basis for practically every successful direct marketing campaign today.^[28]

2.1.4 Similarities & Differences between traditional Marketing and Direct Marketing

Due to direct marketing capability to reach the exact target audience, its usage increased enormously throughout the last decade. In Germany, for example, 1998 direct marketing investment exceeded more than DM 37 billion, compared to DM 23.3 billion in 1994.^[29] In exhibit T-1, Germany’s increasing usage of direct marketing and its shift away from traditional marketing can be seen.

Exhibit T-1: Germany’s 1997/98 division of marketing budgets in companies that use direct marketing

Abbildung in dieser Leseprobe nicht enthalten

Adapted from: Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 22.

Due to the fact that traditional marketing is a very broad term and advertising has been, and still is, the main tool for mass-communication, in the following traditional advertising and direct marketing will be compared.

The general differences between Direct Marketing and Advertising are pointed out by stating the American Marketing Association’s definition of advertising. The AMA defines advertising as: “Any type of paid form of non-personal communication about an organisation and/or its products that is transmitted to a target audience through a mass-medium.“^[30] Advertising speaks to the masses and neither tries to isolate consumers as individuals nor does it normally demand immediate action. However, it is designed to make people have feelings and inclinations so that they will make a decision in favour at the point of purchase, wherever or whenever that may be. ^[31] Where the definition of advertising talks about transmitting a message, direct marketing initiates a dialogue, due to its characteristic use of interactive, two-way communication. One-way communication targeted at a market in which the consumer is hardly known and is not given the possibility to react on the offer is no longer in use. By using two-way communication, customer response becomes accountable and the marketer knows precisely what worked and what did not. Therefore the marketer can allocate marketing expenditure much more effectively than with traditional advertising. Another advantage regarding direct marketing is the accumulation of information. With direct marketing information is not only spread out to the consumer but also comes back to be stored in a database. Due to the use of up to date database information, direct marketing can also actively discover new markets by targeting customers due to newly stored database information. However the initiative in this direct approach lies more and more with the consumer. Direct Marketing demands calls for specific and immediate action, typically the purchase of a product or a request for more information about it. This call for immediate action works against the consumer’s normal tendency to defer action, often permanently.^[32] Therefore as much relevant data as possible needs to be registered, to find out what the specific consumer really wants - the traditional non-personal communication changes into a personal way of communicating. This changes the marketing strategy considerably, because it can be constantly adapted based on concrete data, available per individual customer. To give a clear view of the differences between the two media following the above description, a comparison is made of the most important ones.^[33]

Exhibit T-2: Comparison between traditional advertising and direct marketing^[34]

Abbildung in dieser Leseprobe nicht enthalten

Adapted from: Handley, M., Crowcroft, J., The World Wide Web, Boston, 1996, p. 36.

2.2 Trends supporting the shift towards direct marketing in particular

Now that the basic meaning of direct marketing as well as the difference in traditional marketing has been clarified, the underlying trends of direct marketing will be anaysed. Various trends have been influencing the field of marketing, of which some have had a particular influence on the evolution of direct marketing. The individualisation tendency forms the most influential one. ^[35] Other important driving trends are time spending, computer-, and information technology, as well as media fragmentation, which are in the following described in further detail.

2.2.1 Individualisation

The individualisation tendency leads to the creation of individuals' own specific world and corresponding their own unique lifestyle in which they want to differentiate themselves from others. The individualisation of consumer’s style and taste has made buying behaviour difficult to predict, if not unpredictable, so that brand loyalty decreases. As a result demand and hence also the supply has become more fragmented. Consumers can now choose from a wide range of products which can be personally tailor-made for their specific needs.35 Evolving customer attitudes reinforce the trend towards personalised communication. The desire for one message for the whole public diminishes and the creation of personal contact becomes all-important. Although mass communication will remain effective in several fields, the direct, personalised direct marketing approach will more and more be the best way to get insight into individual preferences, attitudes, buying intentions and other relevant behaviour.^[36] By working on an enduring relationship with the customer these features can be recovered, so that the offer can be personalised and will result in a better fit between demand and supply. One can not only select very specific audiences for concentrated promotions, but also address them in a manner that dramatises the conviction that the product or service a company is offering is particularly right for each person who gets the message.^[37]

2.2.2 Product & Media Fragmentation

The second component that influenced direct marketing and its media is the increasing market segmentation and the rising number of products offered on the market. New target markets must be approached, because it becomes more difficult for companies to differentiate their products or services from the ones of their competitors. As a result niches are increasingly developed, so that companies can position their products as uniquely as possible. Consequentially a scattering in the media scenario took place as well.^[38] The number of television channels, radio stations, magazines and journals has increased enormously in recent years and several new media instruments have been born with which companies try to advertise their products as uniquely as possible. These developments not only led to a smaller target audience per instrument, but also to a diffusion amongst the public of these different instruments. In any case, research shows that the single individual spends less time watching television and more time on non-media activities.^[39]

2.2.3 Time spending

The relation between time and buying behaviour has become more and more evident. Convenience is becoming all important, especially for daily consumption goods. In today's market the average upper-income individual has less time, not just for shopping, but for leisure in general.^[40] One main reason for that is the number of single households and double-income households, that have increased dramatically over the last number of years. The growing participation of women in the work force and changing gender roles have all made time a precious commodity. ^[41] Individuals have woken up to the notion that in order to manage their time more efficiently, they have to look for alternatives in terms of purchasing goods and services. This new experience of putting a value on your time, combined with higher disposable income, is resulting in the increasingly important convenience trend. ^[42] As a result of this convenience trend, the importance of differentiated distribution is growing.

For the average supermarket it is impossible to have such an extended assortment, that all the different wishes of their customers can be served. The opening hours of the shops and supermarkets are often regarded as inflexible and not responsive to the customer. Direct marketing can adapt to this convenience trend by giving the consumer at home a personalised, based on preferences, offer- and an easy order possibility. Home delivery, for example, regarding services from supermarket goods to office supplies is increasingly offered by big organisations, like the UK supermarket chain Safeway.^[43]

2.2.4 Information Technology

The last important aspect today is the influence of the Information Technology (IT) sector. This sector develops at a rapid pace and changes, but especially improvements in digitalisation-, communication-, and computer technology, force organisations to continuous updates of their equipment in order to stay competitive.^[44] Advances in technology, such as improvements in telecommunication or payment systems not only offer new services, but also increase existing customer services by making it possible for consumers to perform certain transactions in a much easier and faster way. Technology advances concerning direct marketing are mainly used to lower cost, open new channels of communication and improve targeting.^[45]. The internet certainly had the biggest impact concerning the fast development of IT. Within just a few years the internet has changed how business was conducted and hence strongly influenced direct marketing’s development. Especially the development of online direct marketing and interactive electronic systems, like online shopping, which can adapt to individual buying behaviour, offers increased shopping convenience to the individual and thus is increasingly used.^[46]

Regarding the individualisation of the consumer, the changing value of time, developments in information technology, the scattering of products and media, and the other drivers, it can be concluded that direct marketing has become a powerful marketing tool and is still growing in importance. Direct marketing approaches the consumer in the desired way and makes use of the most recent advances in technology. To reach these consumers, however, direct marketing makes use of several media. A comparison of the advantages & disadvantages of the main direct marketing media in four different areas will be subject of the following chapter.

3. Comparison and Discussion of the main Direct Marketing Media

This section will provide an overview of the different marketing methods and channels used by companies to target and access customers. There will be a description of the different media used to this end and an evaluation of their respective advantages and disadvantages. The relevant advantages and disadvantages of three media will be evaluated on the basis of four different topics, namely communication, privacy, design and media specific advantages & disadvantages. None of these three media will be perfect as each particular medium will have its own unique strengths and weaknesses. As shall be seen, the choice of the tool used depends very much on the particular situation and the objectives needed to be achieved. Their usage will be displayed first and foremost by providing examples of direct marketing activities in Germany and the UK, because they are the two biggest direct marketing markets in Europe, as can be seen in exhibit T-3. In addition this analysis makes use of examples from all over the world, but especially from the United States (U.S.) - which is in terms of direct marketing 3 to 4 years ahead of Europe.^[47]

Exhibit T-3: European Direct Marketing Market 1998

Abbildung in dieser Leseprobe nicht enthalten

Adapted from: DDV(eds), Germany the economic powerhouse, DDV handout, Wiesbaden, 1999, p. 9.

3.1 Main direct marketing media in context

This section will put the use of the three most important main direct marketing media into its relevant context by explaining and defining them as well as showing their status in today’s world.

3.1.1 Dimensions of direct marketing and its media

First of all direct marketing’s “money dimension” will be demonstrated by naming the 1998 direct marketing total expenditure in the U.S. and Germany. In Germany, expenditure summed up to more than DM 37 billion, whereas U.S. expenditure for direct marketing communication exceeded more than $162 billion.^[48] For Germany, however, this means that more than 62% of all companies with an annual turnover higher than DM 500.000 were using direct marketing.^[49]

As shown in exhibit A-3 in the appendix, there are various forms of direct marketing. The focus of the thesis will be on the following three direct marketing media. On the one hand on the main conventional direct marketing media mail & telephone and on the other hand on online direct marketing, which belongs to the electronic channel. Direct mail and telemarketing are the two most commonly used direct marketing media and online direct marketing is the fastest growing direct marketing media world-wide. In exhibit T-4, the 1998 German direct marketing expenditure on the chosen direct marketing media can be seen.

Abbildung in dieser Leseprobe nicht enthalten

Exhibit T-4: Germany’s 1997/98 Direct Marketing Media expenditure

Adapted from: Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 20.

Before the different media will be analysed, they will be explained and their status will be illustrated now.

3.1.2 Direct Mail

Direct mail is the major medium of direct marketing all over the world. It stands for advertising, personalised either on name or only on address, which is sent to prospects on mailing lists. Moreover it comprises mailing letters, ads, samples, fold outs and other sales materials. Thus direct mail is well suited to direct one-to-one communication.^[50] Furthermore target markets can be selected and results can be measured easily.^[51] In Germany in 1998 the amount of DM 12 billion was spent for mailings alone.^[52] In the UK spending on direct mail was £1.665 billion during that time, which even meant a 12% rise in comparison to 1997.^[53] Direct mail in Europe represents around 60% of Europe's total spending on direct marketing. The Direct Mail Information Service(DMIS) provides UK growth figures from 1990 to 1998. The exhibit T-5 shows that since 1990 UK direct mail volume has almost doubled and can be regarded as being representative for the growth in direct mail volume all over Europe.

Exhibit T-5: UK Direct Mail Volumes 1990-1998 (million items)

Abbildung in dieser Leseprobe nicht enthalten

Adapted from: DMIS. Online in Internet. URL: http://www.dmis.co.uk/keystats/keystats.html [Stand 02.01.2000].

In general there are three distinct characteristics of a direct mail offer: Firstly, it makes a definite offer, secondly, it contains all the information necessary to make a decision, and thirdly, it contains a response device to facilitate immediate action.^[54] In Germany, more than 70% of all 1998 print media included some kind of response device. Response device means either an address, telephone number, fax or domain name are displayed or a coupon is added. In 1998 a domain name was with 49.1% (1997: 29.7%) the 2nd most often used response device, after the telephone with 67.9% (1997: 69.6%).^[55]

Catalogue marketing also belongs to direct mail. Consumers often associate catalogue marketing with the medium direct mail itself, because catalogue marketing could practically not exist without direct mail.^{[56] [57]} Strictly speaking catalogue marketing belongs to mail order. Mail order means “promoting a merchandise and/ or service directly to the customer. Orders are received by mail, telephone and/or fax and the merchandise is shipped my mail“.51 Examples of mail order catalogue operators in Europe include Otto Versand, Quelle and La Redoute. Mail order is best viewed as a method of doing business. It is not an advertising medium, rather it employs direct marketing as part of its communication weapons.^[58] Due to that catalogue business will not be separately dealt with in this thesis.

3.1.3 Telemarketing

Telemarketing is a wide ranging term which applies to the process of selling or marketing goods and services through use of either outbound and/or inbound telephone calls.^[59] This indicates that the telephone provides companies with a means to enter into a dialogue with individual customers, target key potential clients, and develop a corporate image in a targeted and measurable way. When used as an inbound tool, the eg toll-free number in a direct response commercial, a direct response ad, or a direct mail package is utilised.^[60] Outbound telemarketing is often used in a proactive way to sell directly to consumers and businesses. In this way, the medium is taken advantage of for (market) research, database building, or as a follow-up to previous contact.^[61] For professional inbound and outbound activities a call centre is needed. A call centre is a department dedicated to service customers and prospects and conducting business transactions over the telephone.^[62]

A 1997 study of the Deutscher Direktmarketing Verband (DDV), including the 5.000 most profitable companies, determined that already 30% of companies operating in Germany use a call centre offering

hotlines for eg order & service, customer care and appointment setting. 20% of the companies that did not have a call centre yet planned to implement a call centre or to work together with a telemarketing agency in the coming year. 74.4% of all companies were convinced that getting new customers or binding existing ones by using the telephone becomes more important in future.^[63] As a consequence in 1998 telemarketing in Germany reached its biggest annual growth throughout the last 10 years. Roundabout 30.000 new jobs were created in the telemarketing industry, especially due to the creation of new call-centres. ^[64] Telemarketing's meteoric growth has made it one of the biggest industries in some parts of the world. In the UK, for example, the total expenditure has been increased in 1998 by 40% and was estimated £1,33 billion.^[65] Currently, 1% of the UK population works in a call centre. By 2001, analysts expect the existence of 16.500 call centres compared with the current 5.000. ^[66] In a 1998 survey of 300 UK companies using telemarketing, the survey mapped, the biggest single telemarketing application is new business lead generation (28%) - which means the activity to produce enquiries which can be followed up by telephone, closely followed by the twin functions of customer care and customer service (26% each). In fact, if these two are taken together, the care/service focus remains paramount. While industry figures show that inbound has greater volume than outbound - although outbound is on the increase, albeit from a lower base - they are given almost equal weightings in this survey. A decisive 66% employ both, against 19% using inbound only and 15% exclusively using outbound. ^[67] According to a 1998 survey by the Federation of European Direct Marketing (FEDMA), these numbers can be regarded as being representative for the whole of Europe. ^[68]

There are basically four underlying reasons that made the progressive growth of telemarketing possible: Firstly, costs have fallen significantly due to the more efficient use of telerepresentatives, thus the telephone is now recognised as a cost effective way of doing business. Secondly, economical & political changes, like deregulation, have opened up the industry and businesses in general have become more competitive. ^[69] Thirdly, modern technology to communicate on a global basis becomes more & more sophisticated. Fourthly, the changing consumer expectations. People expect to speak to an operator day or night, any day of the year. ^[70] The society has become increasingly demanding and want things immediately and the telephone provides an immediate access route.

Later in this thesis the main focus will be primarily on outbound telemarketing, because in contrast to inbound telemarketing it is the direct way to approach the target audience.

3.1.4 Online Direct Marketing

Online services like the Internet, have made a tremendous contribution to the development of direct marketing and have facilitated the performance of online direct marketing. Because of the quick global reach of this medium, people all over the globe can be contacted within an instant. There are a number of different services that belong to the Internet: World Wide Web (WWW), Gopher, File Transfer Protocol (FTP), Telnet & Usenet.^[71] There also exist various additional online services like e­mail, mailing lists or commercial online services. In 1998, from the European population with internet access, 97.2% were using e-mail and 95.2% were using the WWW. The third most used Internet service FTP was only used by 78.4% of Internet users.^[72] Due to the reason that the World Wide Web and e-mail are not only the most common tools of online direct marketing, but also most of the time used in combination, those two will be dealt with exclusively later in the thesis. An overview of the other areas of the Internet is given in exhibit A-6 & A-7 in the appendix.

In the following a short overview concerning the terms Internet, e-mail & World Wide Web will be given. The Internet is a large collection of private and public networks that has expanded more than 2,000% in the last decade and is still doubling in size every 10 months. The Internet is based on standard methods of communication called “protocols", which can easily combine networks in many regions and countries with the Internet. The phenomenal global growth can partly be attributed to this open communication channel.^[73] Today there are more than 150 million people world wide who can connect to the Internet and the number is expected to raise to more than 500 million in the end of 2003.^[74] More than 1.5 million domain names (.com) are registered on the Internet. Traffic is estimated to double every hundred days. E-commerce in the U.S. was $20 billion in 1998 and is expected to rise to $327 billion by the end of 2002.^[75] European E-commerce, in comparison, accounted for $114 million in 1998.^[76]

An e-mail system allows a person to send text messages to one or more other persons via their computer. Some e-mail systems enable to send attachments which can include graphics and/or other elements. E-mail systems can be limited to an organisation. Most commercial online services and bulletin board systems allow their subscribers to send e-mail messages for free to anyone else connected through the Internet, regardless of where they live.^[77]

The World Wide Web is the part of the Internet that combines text and graphics, and if needed even sound and video. Pages on the WWW feature words and phrases, as well as graphics one can click on with his/her mouse to go to additional pages or information on the WWW or in other parts of the Internet.^[78]

The Internet is a splendid medium for direct marketing because it has the possibility to view every customer as an own market segment. However, where direct mail and outbound telemarketing fulfil every part of the direct marketing definition, online direct marketing does not. The Internet is an interactive channel through which information is distributed, but it does not show the exact nature of a response.^[79] This means concerning the WWW there are various ways through which the presence of a web site can be communicated, however, the medium through which an individual became prompted to visit a web site is not measured normally. Even if web sites have the possibility to identify the specific communication tool that prompted the individual to visit their web site, by eg asking to subscribe to a monthly newsletter for which the individual has to give information how he/she found out about the web site in return. But this forms of measurements are only used by few companies.^[80]

3.2 Advantages & disadvantages regarding communication

Communication is one of the main advantages of direct marketing today. Every particular medium, however, will have its own characteristics and hence also unique strengths and weaknesses regarding communication. This will be analysed in the following section.

3.2.1 Direct Mail

The ability to select mailing lists and to select specific names & target groups from those lists give direct mail the possibility to personalise its message. Generally speaking mailing lists are names and addresses of consumers or businesses having specific characteristics in common.^[81] Therefore by using lists direct mail can engage in precision targeting to a greater degree than any other medium of direct marketing.^[82] A company chooses exactly those customers from these lists who it wishes to target. Moreover a company can send these selected customers a message which is tailored to them. Thus people who are reached by direct mail are a much better target audience, because individuals are targeted according to their personal suitability, as well as likes & dislikes to receive particular offerings and promotions. Wastage is minimised by avoiding other individuals.^[83] In 1995, for example, when General Electric wanted to promote its wide line of television sets and other video products, it decided to use direct mail. Where general media would have spread a diluted message to a general audience, the direct mail campaign offered high tech products with explanation of engineering excellence to lists of people who would understand and appreciate technological advantages. ^[84]

Due to direct mail’s possibility of personalisation and relatively private communication it is a highly responsive medium. In 1997 the UK DMIS conducted a survey including 276 business-to-consumer direct mail campaigns. The DMIS found out that the average response rate - the amount of replies or orders received as a result of the mailing campaign - was an impressive 4.4%. The survey also showed that 77% of recipients opened the mailing, 59% opened and read it, and 27% kept it or passed it on to someone else. In another survey of 155 business-to-business direct mail campaigns, the response was even higher - an average of 5.2%. In this case 88% opened it, 12% re-directed it to a colleague, and 17% filed or responded to it. ^[85] Due to that direct mail is primarily used for btb rather than for btc purposes. This can be seen on the example of Germany in exhibit A-8 in the appendix. However, in comparison to that, outbound telemarketing achieves higher response rates than direct mail due to its advantage of personal two-way communication. According to a 1997 project for the Imperial Cancer Research fund, the U.S. charity specialist Pell & Bales made over 4.000 contacts, boosting donations to 49% by taking advantage of outbound telemarketing, compared with a 15% response from a previous direct mail campaign. ^[86] Although direct mail has no possibility for two-way communication, it has the opportunity to personalise to any useful degree. Moreover individuals recall direct mail better than other media. Direct mail has the advantage of no-direct competition. This means, when recipients open and read a piece of direct mail, there is no direct competition for their attention - at least for a limited period of time. In other media, recipients are ordinarily perusing the medium for reasons besides consumption of the advertising. Once a recipient opens the mail, a wide variety of involvement devices can be used to stimulate and retain the interest of the recipient while a decision to respond is being made. The no “commitment stamp“ in the U.S. Book of the Month Club is an example for stimulating the interest of the recipient by not only offering, but also including something for free. ^[87] In comparison, online direct marketing as well, can offer the prospect something for free immediately - eg a free software download.

On the one hand personalising communication like in the case of direct mail leads to an increase in cost. For example, in comparison with the mass media advertising medium TV, direct mail cost per person reached (CPR) are higher. Direct mail is even the 2nd most expensive direct marketing medium, after the telephone, a company can use.^[88] On the other hand direct mail is very measurable and thus very cost-accountable. The best way to measure the cost-effectiveness of direct mail is to find out its return on investment (ROI). The underlying thinking for calculating the ROI is quite simple: how many of the right type of people can be reached for a given sum in a particular medium?^[89] Using direct mail a fairly precise measurement of the ROI is possible. A company that takes advantage of direct mail, sends offers to specific individuals and can tally the number of persons requesting information or placing an order. The number and value of orders divided by the total direct marketing cost gives direct mail’s ROI.^[90]

Unfortunately, concerning precision targeting a serious downturn does exist. Lists are normally offered by list brokers. List brokers are defined as a specialist intermediary in the marketing process and subsequent rental of address lists on behalf of the list owner. List owner in turn are gathering names and addresses and their compilation into a list with the express intention of making them available for mailing purposes, also called list building.^[91] Many list brokers offer lists that do not target potential customers as precisely as they promise. The reason is that list brokers need an increasing number of lists to rent out and therefore try to offer the quantity of lists needed, but can not guaranty for their quality. Another phenomenon is the overuse of good outside lists, called “list burnout“. Individuals on such a list are barraged with so many offers that their value declines rapidly. This effect worsens if no list cleaning takes place. This means the removal or correction of list details does not happen on a regular basis or even does not happen at all.^[92] Consequently if a company buys a poorly researched or not updated list, direct mail cost can even exceed the costs of other media, because of a low ROI. Due to this risk, many companies began to create their own lists, called “house lists“, to increase the response rates of their direct mail campaigns. These so-called house lists can be seen as a company’s database.^[93] These databases carry all kinds of information about individuals that previously have shown their interest by eg purchasing a product or subscribing to some kind of product related service. An excellent example is Time Warner. Two years ago the company launched a magazine called Teen People. During that time the magazine developed a database of nearly 1 million subscribers. Time Warner then used this database to market its new Teen People Book Club. The club was marketed both through a monthly catalogue and a companion web site. A direct mail package was mailed to 500.000 teen prospects, 10% of which were active Teen People subscribers. The rest was mailed to names from both the Book of the month club database and outside lists of teens who have purchased through direct mail.^[94] Due to Time Warner’s possibility to take advantage of their own database, the new direct mail campaign is likely to create higher response rates than if Time Warner would have bought a mailing list from a list broker.

Especially the ability to take advantage of database management and computer applications to reach highly defined markets with highly targeted messages allows direct mail to communicate extremely targeted as long as market segmentation is done correctly.

[...]

---

^[1] Grainer, S., The ultimate book of business quotations, New York, 1998, p. 64.

^[2] Berry, M., The new integrated direct marketing, Brookfield, 1998, p. 4.

^[3] Nash, E., Direct Marketing, United States, 1995, p. 8.

^[4] Bird, D., Commonsense Direct Marketing, revised 3rd edition, London, 1998, p. 18.

^[5] Nash, E., Direct Marketing, United States, 1995, p. 2.

^[6] American Marketing Association. Online in Internet: URL: http://www.ama.org/about/ama/markdef.asp [Stand 18.12.1999].

^[7] Meffert, H., Marketing - Grundlagen marktorientierter Unternehmensführung, 8th edition, Wiesbaden, 1998, p. 9, in the following quoted as: Marketing.

^[8] Hellauer, J., System der Welthandelslehre, Bd. 1, Teil 1: AllgemeineWelthandelslehre, Berlin, 1910, p. 15.

^[9] Kotler, P., Kotler on Marketing - how to create, win, and dominate markets, New York, 1999, p. 96-99. in the following quoted as: Kotler on Marketing.

^[10] Kotler, P., Kotler on Marketing, 1999, p. 97-106.

^[11] Meyer, P., Integrierte Marketingfunktionen, Stuttgart, 1996, p. 27-30.

^[12] McCarthy, J., Basic Marketing - a managerial approach, Homewood (Illinois), 1960, p. 213-216.

^[13] Levitt, T., Marketing Myopia, Harvard Business Review, No. July/August, 1960, p. 45-56.

^[14] Reitman, J., Beyond 2000 - the future of direct marketing, Lincolnwood, 1995, p. 6, in the following quoted as: Beyond 2000.

^[15] Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 12.

^[16] Direct Marketing Association. Online in Internet: URL: http://www.the-dma.org/ [Stand 18.12.1999].

^[17] Roberts, M., Berger, P., Direct marketing management, 2nd edition, Englewood Cliffs, 1999, p. 3.

^[18] Sherr, L., Katz, D., Design for response - creative direct marketing that works, New York, 1999, p. 53.

^[19] Roberts, M., Berger, P., Direct marketing management, Englewood Cliffs, 1999, p. 43.

^[20] Berry, M., The new integrated direct marketing, Brookfield, 1998, p. 6.

^[21] Roberts, M., Berger, P., Direct marketing management, Englewood Cliffs, 1999, p. 3.

^[22] Bird, D., Commonsense Direct Marketing, revised 3rd edition, London, 1998, p. 19.

^[23] Jackson, R., Wang, P., Strategic database marketing, Lincolnwood, 1994, p. 15.

^[24] Nash, E., Direct marketing - strategy, planning, execution, 3rd edition, United States, 1995, p. 267, in the following quotated as: Direct marketing.

^[25] Bird, D., Commonsense Direct Marketing, London, 1998, p. 19.

^[26] Hye, J., Customer profiling sharpens C&A's marketing, WWD, August 11, 1999, p. 16.

^[27] Jackson, R., Wang, P., Strategic database marketing, Lincolnwood, 1994, p. 15.

^[28] Molenaar, C., Interactive Marketing, 1996, Amsterdam, p. 45.

^[29] DDV(eds), Germany the economic powerhouse, DDV handout, Wiesbaden, 1999, p. 9.

^[30] American Marketing Association. Online in Internet: URL: http://www.ama.org/_mem_bin/FormsLogin.asp?/members/conflux.asp [Stand 21.12.1999].

^[31] Bird, D., Commonsense Direct Marketing, London, 1998, p. 19-20.

^[32] Weber, A., Schmid, J., Desktop database marketing, Chicago, 1997, p. 66.

^[33] Handley, M., Jon, C., The World Wide Web - beneath the surf, Boston, 1996, p. 117.

^[34] Weber, A., Schmid, J., Desktop database marketing, Chicago, 1997, p. 66.

^[35] Jones, S., Creative strategy in Direct Marketing, 2nd edition, London, April 1998, p. 221.

^[36] Roberts, M., Berger, P., Direct marketing management, Englewood Cliffs, 1999, p. 4.

^[37] Nash, E., Direct Marketing, United States, 1995, p. 6.

^[38] Meloan, T., Graham, J., International & global marketing, 2nd edition, Atlanta, 1998, p. 313.

^[39] Office for Official Publications of the European Communities, Panorama of EU industry 1997, Brussels, Volume 1&2, 1997, p. 72.

^[40] Kotler, P., Kotler on marketing, New York, 1999, p. 77.

^[41] Akther, S., International Direct Marketing - export value chain, transaction cost, and the Triad, Journal of Direct Marketing, Vol. 10 (2), 1996.

^[42] Foch, D., United States cataloguers should enter Europe now, Journal of Direct Marketing, Vol. 60 (2), 1996.

^[43] Geller, L., Direct marketing techniques, London, 1998, p. 54.

^[44] McGonagle, J., The internet age of competitive intelligence, Dublin, 1999, p. 195.

^[45] Royal Mail. Online in Internet: URL: http://www.royalmail.co.uk/default_frames.asp?strSection=atwork&arrImagehref=atwork/direct/direct_home.as p [Stand 03.01.2000].

^[46] Katzenstein, H., Sachs, W., Direct Marketing, 2nd edition, New York, 1994, p. 295.

^[47] Kotier, P., Kotler on marketing - how to create, win, and dominate markets, New York, 1999, p. 23.

^[48] Roth, J., The good, the bad and the uncertain, American Printer, v223 i5 p38(3), August 1999.

^[49] Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 20.

^[50] Berry, M., The new integrated direct marketing, Brookfield, 1998, p. 7.

^[51] Maitland, I., How to plan direct mail, Cambridge (Mass), 1997, p. 34.

^[52] Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 20.

^[53] Direct Mail Information Service. Online in Internet. URL: http://www.dmis.co.uk/keystats/keystats.html [Stand 22.01.2000].

^[54] Akther, S. H., International Direct Marketing - export value chain, transaction cost, and the Triad, Journal of Direct Marketing, Vol. 10 (2), 1996.

^[55] Deutscher Direktmarketing Verband. Online in Internet. URL: http://www.ddv.de/knowledge/index.html [Stand 24.12.1999].

^[56] Foch, D., United States cataloguers should enter Europe now, Journal of Direct Marketing, Vol. 60 (2), 1996.

^[57] Nash, E., Direct Marketing, United States, 1995, p. 269.

^[58] Berry, M., The new integrated direct marketing, Brookfield, 1998, p. 12.

^[59] Canadian Marketing Association. Online in Internet. URL: http://www.the-cma.org/school/glossary.html [Stand 19.01.2000].

^[60] Stone, B., Wyman, J., Successful Telemarketing, 2nd edition, Lincolnwood, 1993, p. 5.

^[61] Canadian Marketing Association. Online in Internet. URL: http://www.the-cma.org/school/glossary.html [Stand 19.01.2000].

^[62] Cobb, R., Talking business, Marketing, Nov. 19 p31, 1998.

^[63] Deutscher Direktmarketing Verband. Online in Internet. URL: http://www.ddv.de/knowledge/index.html [Stand 16.01.2000].

^[64] Deutsche Post (eds), Direktmarketing in Deutschland - Direktmarketing Monitorstudie 10, Bonn, 10/ 1999, p. 13.

^[65] Cobb, R., Talking business, Marketing, Nov. 19 p31, 1998.

^[66] Miller, R., Revolution down the line, Marketing, July 9 p33(1), 1998.

^[67] Cobb, R., Talking business, Marketing, Nov. 19 p31, 1998.

^[68] Federation of European Direct Marketing. Online in Internet. URL: http://www.fedma.org/dm_in_europe.htm [Stand 28.12.1999].

^[69] Molloy, M., Romancing the phone, Direct Marketing, 59 (1), 1996.

^[70] Miller, R., Revolution down the line, Marketing, July 9 p33(1), 1998.

^[71] Swanson Russell Associates. Online in Internet. URL: http://www.sramarketing.com/sra/Tour/Database/WhatIsDatabase.html [Stand 28.12.1999].

^[72] Fritz, B., Vorlesungsskript Infomanagement, ISM Dortmund, 6. Sem., SS 1999, p. 7.

^[73] Bruner, R., Net Results - web marketing that works, Portland (Oregon), 1998, p. 119.

^[74] Cisco Systems. Online in Internet. URL: http://www.cisco.com [Stand 06.02.2000].

^[75] Kotler, P., Kotler on Marketing, 1999, New York, p. 205.

^[76] Fritz, B., Vorlesungsskript Infomanagement, ISM Dortmund, 6. Sem., SS 1999, p. 9.

^[77] Swanson Russell Associates. Online in Internet. URL: http://www.sramarketing.com/sra/Tour/Database/WhatIsDatabase.html [Stand 28.12.1999].

^[78] Swanson Russell Associates. Online in Internet. URL: http://www.sramarketing.com/sra/Tour/Database/WhatIsDatabase.html [Stand 28.12.1999].

^[79] Sherr, L., Katz, D., Design for response, New York, 1999, p. 53.

^[80] Deutsche Post (eds), Internet und Direktmarketing - Direktmarketing Monitorstudie 9, Bonn, 09/ 1999, p. 36.

^[81] Royalmail. Online in Internet. URL: http://www.royalmail.co.uk/default_frames.asp?strSection=atwork&arrImagehref=atwork/direct/direct_home.as p [Stand 20.01.2000].

^[82] Roberts, M., Berger, P., Direct marketing management, Englewood Cliffs, 1999, p. 219.

^[83] Berry, M., The new integrated direct marketing, Brookfield, 1998, p. 14.

^[84] Nash, E., Direct Marketing, United States, 1995, p. 5.

^[85] Direct Mail Information Service. Online in Internet. URL: http://www.dmis.co.uk/keystats/keystats.html [Stand 22.01.2000].

^[86] Marchetti, M., Is cold calling worth it?, Sales & Marketing Management, August v149 n8 p103(1), 1997.

^[87] Roberts, M., Berger, P., Direct marketing management, Englewood Cliffs, 1999, p. 219.

^[88] Friedman, L., Furey, T., The Channel Advantage, Oxford, 1999, p. 135.

^[89] Bird, D., Commonsense Direct Marketing, London, 1998, p. 125.

^[90] Kotler, P., Kotler on Marketing, 1999, New York, p. 108.

^[91] Royalmail. Online in Internet. URL: http://www.royalmail.co.uk/default_frames.asp?strSection=atwork&arrImagehref=atwork/direct/direct_home.as p [Stand 20.01.2000].

^[92] Royalmail. Online in Internet. URL: http://www.royalmail.co.uk/default_frames.asp?strSection=atwork&arrImagehref=atwork/direct/direct_home.as p [Stand 20.01.2000].

^[93] Nash, E., Direct Marketing, United States, 1995, p. 267.

^[94] Dmnews. Online in Internet. URL: http://bcaudit.exactis.com/sbct.cgi?s=31387227&i=168181&d=131896 [Stand 28.01.2000].