Direct Marketing:

Definition:

            Direct Marketing is an interactive Marketing system that uses one or more advertising media to affect a measurable response and / or transaction at any location.

            Today, many direct marketers see direct marketing as a broader role, that of building a long-term relationship with the customer (Direct Relationship Marketing). Direct Marketers occasionally send birthday cards, information materials or small premiums to select numbers in their customer database. Airlines, hotels and other business build strong customer relationship through frequency award programmes and club programmes.

Advantages of Direct Marketing:

• The following are the advantages of Direct Marketing-
• Delivers near-perfect solutions to customer’s problems
• Gives individual attention to customers
• Facilitates finalizing of offers through interaction with the manufacturers, wholesalers or retailers as the case may be.
• Offers customized products  as per the preference of the customers.
• Helps achieve excellence in products/services
• Eliminates the hassles of going through marketing channels / stores.
• Facilitates sharper segmentation and targeting, ultimately each individual becomes a specific target market.
• Facilitates relation building with the customers
• Is better measurable, compared to mass marketing
• Is more cost effective
• Saves channel costs for the most part
• Saves advertising cost almost totally
• Is a versatile form of marketing, helps being selective in treating customers and pay special attention to large accounts.
• Benefits the customers too by enabling them to shop by sitting at homes save their precious time
• With every development in IT, Direct marketing’s efficiency keeps increasing, cost keeps decreasing.

Forms of Direct Marketing:

            Direct Marketing has several forms as it incorporates a variety of media. Direct –Mail Marketing is one form of Direct Marketing. Customized Mailing through databases and “Mail Merge” of word processing is the medium used here. Telemarketing is another form of Direct Marketing. Here, the phone is the medium used. Today, Direct Marketing uses the new age tools such as Computers, Mobile phones and the Internet for reaching prospects customers individually. Their availability at a low-cost and high-reach has substantially enlarged the Direct Marketing Opportunities.

1. Direct Mail Marketing:

            Direct Mail Marketing is similar to Mail Order Marketing / Catalogue Marketing. Usually, when a trading house markets various products by mail order, it is referred to as Mail Order Marketing  and  when a manufacturer practices the same method it is known as Direct Mail Marketing. Certain softwares allow creation of personalized letters, messages and offerings. In direct mail marketing, not only letters / brochures   are mailed to the prospects, but product samples, gifts and complaints are also mailed, depending on the context.

Example: Mother Care India does Direct Mail Marketing .It targets the mothers who buy items meant for kids.

2. Direct Response Marketing:

            Direct Response Marketing  is another expression of direct marketing. Direct Response Marketing uses different media (including letters / mailers), like telephone, radio, TV and Internet. Some direct response marketing campaign, rely totally on television “infomercials” (Commercials which give information about products, benefits and usage aspects and obtain responses). Toll-Free telephones too serve as a useful tool of direct response marketing. Toll free telephones help better ordering by the customer, better dialogue between the customers and the company and better service to the customer.

Example:  Dell Computers is one Company that heavily relies on toll free numbers to elicit customer responses.

3. Database Marketing:

            Data base Marketing is yet another expression in direct marketing. Although all forms of direct marketing are data base-driven, some experts treat database marketing as distinct form of direct marketing.

4. Tele-Marketing:

            Telemarketing is yet another form of direct- marketing tool. Hence, the marketer goes direct to the customer using telecom / IT facilities. Telemarketing is less expensive as compared to most other forms of selling. Moreover, it can be used in respect of different types of products. It suits industrial products, services and consumer durables. Telemarketing is usually done through special campaigns. Contact is established with hundreds of prospects in a campaign that normally runs through a few days. Several tele callers are hired for the tele-call operations. The Call Centre is the real operation theatre in telemarketing.

5. Tele-shopping /Home Shopping:

            Tele-shopping, alternately known as home shopping is yet another of direct marketing. One of the major characteristic of Teleshopping is that it is a low cost retailing system. Here, the marketer hawks the products on air and the consumer watches it on his TV screen at home, phone up the marketer and buys his requirement. With tele-shopping, in addition to the convenience, discounts, gift offers are also given to the customers.

Example: Doordarshan, for example allowed its channel for tele-shopping by Dee’s network on a profit sharing basis. DD gained a share from every item sold by the network.

6. Face to Face Selling:

            The original and oldest form of direct selling is the field sales call. Today most industrial companies rely heavily on a professional sales force to locate prospects, develop them into customers, and grow the business or to hire the manufacturers representative agents to carry out the direct selling task. In addition, many consumer companies use a direct selling force. Insurance agents, stock brokers and distributors working for direct sales organizations such as Avon, Amway, Mary kay and Tupperware.

7. Email marketing:

            Email marketing is also a direct marketing tool. A major concern is spam, which actually predates legitimate email marketing. As a result of the proliferation of mass spamming, ISPs and email service providers have developed increasingly effective email filtering programs. These filters can interfere with delivery of e-,mail marketing campaigns, even if the person has subscribed to receive them as legitimate email marketing can possess the same hallmarks as spam.

8. Door to Door Leaflet marketing:

            Leaflet distribution services are used extensively by the fast food industries, and many other business focusing on a local catchments business to consumer business model. similar to direct marketing, this method is targeted purely by area, and costs a fraction of the amount of a mailshot due to not having to purchase stamps, envelopes or having to buy address lists and the names of home occupants.

9. Voice Mail Marketing:

            Another type of direct marketing which has emerged is personal voice mail boxes and business voice mail systems. Voice mail marketing is a cost effective means to reach people with warmth of human voice. More recently, business has utilized guided voice mail (an application where pre-recorded voice mails are guided by live callers) to accomplished personalized business-to- business marketing formerly reserved for telemarketing. As there are abundance of “voice spam”, jurisdictions have passed many laws for regulating consumer voice mail marketing.

 

10. Multi level Marketing:

            Multi level marketing is a modified version of direct selling .Some times, it is referred to as network marketing, member to member marketing and affiliate marketing. Only firms which do not mind experimenting in reading customers practice it. The Process begins with sales person cum distributors introduced to the company by a sponsor. Each distributor picks up a product worth a certain sum and sells directly .After they have sold first consignment, they are allowed to pick up next. The distributor can recruit a second ring of distributor. The distributor earns commission at two levels and the process goes so on. Amway, Avon, Oriflame are the largest MLM outfits in the world. The Indian firm Modi care also sell its range of house hold  and personal care products.

11. Online Marketing:

            As many people find way onto Internet, the cyberspace population is becoming more mainstream and diverse. As a whole, Internet population is younger more affluent and better educated, they are more likely to use Internet for entertainment and socialising. Marketers are doing  on-line marketing by creating an electronic presence on the Internet, placing ads online, participating in forums, newsgroups, bulletin boards and web communities, and using e-mail and web casting.

Other direct selling forms:

            Some direct marketers also use media such as door hangers, coupons, package inserts, magazines, newspapers, radio, television, email, internet banner ads, digital campaigns, pay per click ads, billboards, transit cards etc.

Direct Marketing in India:

            While direct selling has thrived in India all along in the Insurance business, in other businesses, it has been catching up in the country only in recent years. But the progress has been rapid in the short period. Amway, Avon, Oriflame, Tupperware are all present in India. And Modi care has been using the method for selling its homecare and personal care products. Hindustan Unilever has also set up in more schemes, its direct selling outfit for its Aviance range of cosmetics.

Differences between Conventional/Traditional marketing and Direct Marketing (DM):

	Conventional Marketing	Direct Marketing
1.	Conventional marketing is mass marketing	DM is de-massified  marketing, it deals with customers one-to-one
2.	Conventional marketing deals with customers indirectly	DM deals with them directly
3.	Conventional marketing is a one way activity	DM is interactive marketing, with two-way communication between the firm and each one of the customers
4.	Conventional marketing relies heavily on marketing channels/stores	DM is Channel-less
5.	Conventional marketing relies heavily on advertising/ mass promotion	DM does not involve them

Product Line and Product Mix

Product Line:

           

            A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. For example, Nike produces several lines of athletic shoes, Motorola produces several lines of telecommunications products, and AT&T offers several lines of long-distance telephone services.

Product Mix:

A product mix (or product assortment) consists of all the product lines and items that a particular seller offers for sale. Avon’s product mix consists of four major product lines: cosmetics, jewelry, fashions, and household items. Each product lineconsists of several sublines.

A company’s product mix has four important dimensions: width, length, depth, and consistency. Product mix width refers to the number of different product lines the company carries. For example, Procter & Gamble markets a fairly wide product mix consisting of many product lines, including paper, food, household cleaning, medicinal, cosmetics, and personal care products. Product mix length refers to the total number of items the company carries within its product lines. Procter & Gamble typically carries many brands within each line. For example, it sells eleven laundry detergents, eight hand soaps, six shampoos, and four dishwashing detergents.

 Product line depth refers to the number of versions offered of each product in the line. Thus, Procter & Gamble’s Crest toothpaste comes in three sizes and two formulations (paste and gel). Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Procter & Gamble’s product lines are consistent insofar as they are consumer products that go through the same distribution channels. The lines are less consistent insofar as they perform different functions for buyers.

Product Life Cycle :

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.

However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see the product promoted to regain customers.

Strategies for the differing stages of the Product Life Cycle.

Introduction.

The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

Growth.

Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise.

Maturity:

Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and uses a greater variety of media.

Decline:

At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

Problems with Product Life Cycle:

In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.

Seven phases to new product development Process:

            Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New opportunities appear from the changes in the environment.

Idea Generation: Continuous systematic search for new product opportunities.

• Marketing oriented sources--identify opportunities based on consumer needs, lab research is directed to satisfy that research.
• Laboratory oriented sources--identify opportunities based on pure research or applied research.
• Intrafirm devises--brain storming, incentives and rewards for ideas are given. Ideas should not be criticized, no matter how off-beat they are.

Product Screening and Evaluation

New product check list; list new product attributes considered most important and compare each with these attributes. Check list is standardized and allows ideas to be compared.

• General characteristics, Marketing Characteristics and Production Characteristics.

• Ideas with the greatest potential are selected for further research.
• Do they match the organizations goals (DuPont and ICI have many patents that they have not exploited for this very reason.)
• Look at companies ability to produce and market the product.
• Need to look at the nature and wants of the buyers and possible environmental changes.

Concept Testing

           

Sample of potential buyers is presented with the product idea through a written or oral description to determine the attitudes and initial buying intentions. This is done before investing considerable sums of money and resources in Research and Development.

This help to better understand product attributes and the benefits. Customer’s opinion on the product is most important on the following aspects:

• Would they like to buy the product?
• Would they replace your current brand with the new product?
• Would this product meet real needs?
• Business Analysis
• Analyze potential contribution to sales, costs and profits.
• Does the product fit into the current product mix?
• What kind of environmental and competitive changes can be anticipated?
• How will these changes effect sales etc.?
• Are the internal resources adequate?
• Cost and time line of new facilities etc.?
• Is financing available?
• Is there Synergies with distribution channel etc.
• MIS to determine the market potential sales etc.
• Find out if it is technically feasible to produce the new product.
• If you can produce the new product at a low enough cost so as to be able to make a profit.

Product Development

Develop a prototype, working model, lab test etc. Attributes that consumers have identified that they want must be communicated through the design of the product.

Test Marketing

Test Marketing helps to  observe actual consumer behavior. Limited introduction in geographical areas chosen to represent intended market. It aims to determine the reaction of probable buyers.It is the sample launch of the Marketing Mix. Determine to go ahead, modify product, modify marketing plan or drop the product.

PROS are:

• Lessens the risk of product failure.
• Reduces the risk of loss of credibility or undercutting a profitable product.
• Can determine the weaknesses in the MM and make adjustments.
• Can also vary parts of the MM during the test market.
• Need to select the appropriate MM and check the validity.

CONS are:

• Test market is expensive.
• Firm's competitors may interfere.
• Competitors may copy the product and rush it out..
• Alternatively, can use a simulated test market. Free samples offered in the mall, taken home and interviewed over the telephone later.

Commercialization

• Corresponds to introduction stage of the Product Life Cycle.
• Plans for full-scale marketing and manufacturing must be refined and settled.
• Need to analyze the results of the test market to determine any changes in the marketing mix.
• Need to make decisions regarding warranties etc (reduces consumers risk).
• Warranties can offer a competitive advantage.
• Spend a lot on advertising, personnel etc. Combined with capital expenditure makes commercialization very expensive.

Marketing Mix

            Marketing Mix is a combination of marketing tools that a company uses to satisfy their target customers and achieving organizational goals. McCarthy classified all these marketing tools under four broad categories:

• Product
• Price
• Place
• Promotion

          These four elements are the basic components of a marketing plan and are collectively called 4 P’s of marketing. 4 P’s pertain more to physical products than services.  Below is an illustration for marketing mix.

The important thing to note is that all these four P’s (variable) are controllable, subject to internal and external constraints of marketing environment. Marketers, using different blends of these variables, can target different group of customers having different needs. So, a customer may call  marketing  mix “the offering”.

Product

            Product is the actually offering by the company to its targeted customers which also includes value added stuff. Product may be tangible (goods) or intangible (services).

While formulating the marketing strategy, product decisions include:

• What to offer?
• Brand name
• Packaging
• Quality
• Appearance
• Functionality
• Accessories
• Installation
• After sale services
• Warranty

 Price

            Price includes the pricing strategy of the company for its products. How much customer should pay for a product? Pricing strategy not only related to the profit margins but also helps in finding target customers. Pricing decision also influence the choice of marketing channels. Price decisions include:

• Pricing Strategy (Penetration, Skim, etc)
• List Price
• payment period
• Discounts
• Financing
• Credit terms

            Using price as a weapon for rivals is as old as mankind. but it’s risky too. Consumers are often sensitive for price, discounts and additional offers. Another aspect of pricing is that expensive products are considered of good quality.

Place (Placement):

            It not only includes the place where the product is placed,  all those activities performed by the company to ensure the availability of the product tot he targeted customers. Availability of the product at the right place, at the right time and in the right quantity is crucial in placement decisions.

• Placement decisions include:
• Placement
• Distribution channels
• Logistics
• Inventory
• Order processing
• Market coverage
• selection of channel members

 Promotion

            Promotion includes all communication and selling activities to pursuade future prospects to buy the product. Promotion decisions include:

• Advertising
• Media Types
• Message
• Budgets
• Sales promotion
• Personal selling
• Public relations
• Direct marketing

      As these costs are huge as compared to product price, So it’s good to perform a break-even analysis before allocating the budget. It helps in determining whether the new customers are worth of promotion cost or not.

           

      It often takes time and requires market research to develop a successful marketing mix. You should not depend on one mix always try new mixes. While designing the mix, make changes to all mixes in such a way that all conveys the same message. Don’t confuse your customers by just changing one variable and keeping the rest same.

Limitation of Marketing Mix

            

      Marketing mix (4 P’s) was more useful in early 19’s when production concept was in and physical products were in larger proportion. Today, with latest marketing concepts, marketing environment has become more intergrated. So, in order to extend the usefulness of marketing mix, some authors introduced a fifth P and then seven P’s (People, Packaging, Process). But the foundation of Marketing Mix still stands on the basic 4P’s.

Cost/Benefit Analysis:

As plans and objectives are developed, statements should be produced which should say what the marketing strategy is to accomplish. There are two ways of evaluating the actual performance of these plans, these are sales analysis and cost analysis.

1. Sales Analysis: Sales is usually the best way to measure the performance of a marketing plan. This analysis should be broken down into:

·   Marketing area (geographical)

·   Company decision

·   Individual/Groups of sales representatives (Quota of sales Vs Individual/Group's sale)

2. Cost Analysis: This is a detailed study of the business' operating section of the organization's profit and loss statement. With cost analysis costs which occurred as a result of the marketing sector of a business are declared as profitable or unprofitable. This can be broken down into:

• Research costs
• Order-getting costs (Promotional costs)
• Order-filling costs (Distribution and insurance costs)

Strategies to achieve objectives:

Marketing strategies are the way marketing objectives are achieved. Development of a strategy involves:

            - Selecting and analyzing a target market

            - Creating and maintaining a marketing mix

            - Creation of advertising and promotional ideas

   When properly implemented, the firm achieves objectives.

1. Selection and analyzing of Target market: This area must be separated into three areas, as different areas have different needs, these areas are: 

• Retail market 
• Wholesale market 
• Industrial market

2. Creating and maintaining of Marketing Mix:This broken down into the four P's, they are:

                 

  Marketing Mix - Breakdown:

      PRODUCT:           PRICE:                          PROMOTION:                    PLACE:

      Quality                R.R.P. (List Price)             Advertising                           Transport

      Features              Bulk Discounts                 Personal/DirectSelling            Channels

      Options              Other Discounts/Offers?    Sales Promotions                   Coverage

      Style                   Allowances                       Publicity                                Locations

      Brand Name       Payment Period                                                             Inventory

      Packaging          Credit Terms                 

      Sizes                                         

      Service                                       

      Warranties                                   

      Returns                                      

      Positioning                                  

An additional part of the marketing mix now exists, it is called  'Service'. Factors here include:

• Customer Needs  
• Installation, Maintenance, and repairs
• Guarantees/Warranty period   
• After-sales Service
• Complaints & returns procedures 
• Comparison to competitors
• Credit offered

3. Creation of Advertising and Promotions: Once the marketing mix has been established, the company’s promotional aspects have now to be completed; these can be made up of plans to do:

• Advertising
• Personal or direct selling
• Sales Promotion
• Publicity (Public relations)
• Packaging and design

4. Staff Motivation: The effectiveness of the companies market will depend heavily upon the staff, and their degree of motivation.

Specific Objectives:

            Establishing objectives it is usually thought of as the most important feature in the planning process. The success and failure of a marketing plan are determined by how well the marketing objective reflects the organisations needs. Therefore it is vital objectives are set based around the companies overall goals. This is reflected in the diagram below:

        

                      Goals

                        |

     Opportunities      |         Resources

          |________ Marketing ________|

                    Objectives

           ____________ | ____________    Diagram of the

           |   Marketing Strategies   |    Objectives of a

           |    (Marketing program)   |          Business

           |--------------------------|

           | Selection  | Development |

           | & analysis | of Marketing|

           | of target  | Mixes       |

           |   market   |             |

           |____________|_____________|      

- Essential marketing objectives include the following:

Increasing market share   

Expanding product range

Targeting the geographical representation

And expansion of marketing opportunities

1. Market share: An increase in a companies market share shows how the company is gaining on competitors. To attain greater market share, the following strategies, which are generally thought of as sure winners include:

More aggressive pricing (lowering price or providing discounts)

Search for new outlets to distribute your products to

A change in some features of your products, to open up to a possibly wider market

2. Product Range: By expansion of a company’s product range, a company can attract a wider market than it's initial market, and maybe also expand into other markets

3. Geographical Representation: Some geographical markets offer greater market potential than others, and is in the interests of the firm to invest there to reach these markets whether they be regional, national or international. This allows a company to maximise on it's  profits.

4. Expansion: (I) Through exporting

                        (II) Maximizing customer service

The Entrepreneurship Development Institute of India (EDI):

An autonomous body and not-for-profit institution, set up in 1983, is sponsored by apex financial institutions, namely the IDBI Bank Ltd, IFCI Ltd. ICICI Ltd and State Bank of India (SBI). The Institute is registered under the Societies Registration Act 1860 and the Public Trust Act 1950. The Government of Gujarat pledged twenty-three acres of land on which stands the majestic and sprawling EDI campus.

In consonance with this belief, EDI aims at :

• creating a multiplier effect on opportunities for self-employment,
• augmenting the supply of competent entrepreneurs through training,
• augmenting the supply of entrepreneur trainer-motivators,
• participating in institution building efforts,
• inculcating the spirit of 'Entrepreneurship' in youth,
• promoting micro enterprises at rural level,
• developing and disseminating new knowledge and insights in entrepreneurial theory and practice through research,
• facilitating corporate excellence through creating intrapreneurs (entrepreneurial managers),
• improving managerial capabilities of small scale industries,
• sensitising the support system to facilitate potential and existing entrepreneurs establish and manage their enterprises,
• collaborating with similar organisations in India and other developing countries to accomplish the above objectives.

Salient Features of the National Training Policy

• Training for all- training to be imparted to all rungs of the civil service starting from the lowest and the cutting edge to the highest in policy making. All categories of civil servants shall receive (i) Induction Training - at time of entry (ii) In service Training- suitable intervals in their career

• Concept of 'once a trainer, always a trainer' shall be developed under which expertise developed as a trainer shall be used even after he/she returns to his/her department

• Systematic approach to training- put in place a system suitably grounded in training theory for development of a training process

• Training should focus on bringing right attitudinal change amongst the civil service

• A National Training Council, headed by the Minister-in0-Charge of Personnel shall be set up for advising the Government of India on matters related to training policy, training design and programmes as well as issues concerning their implementation.

• All organisations will designate training managers at appropriate level to develop and coordinate training programmes and monitor them.

• All cadre Controlling Authorities shall endeavour to develop suitable infrastructure for induction and in-service training at the cutting edge and middle levels.