Direct and Online Marketing: Building Customer Relationship

2. Direct and Online Marketing: Building Customer Relationship Foreword: Computer in the future may weigh no more than 1.5 tons. - Popular Mechanics, 1949-

3. OBJECTIVES After reading this chapter, you should be able to: • Define direct marketing and discuss its benefits to customer sand companies. • Identify and discuss the major forms of direct marketing. • Explain how companies have responded to the Internet and other powerful new technologies with online marketing strategies. • Discuss how companies go about conducting online marketing to profitably deliver more customer value. • Understand how databases can be used to develop direct marketing campaigns.

4. Direct & Online Marketing: Customer Relationships Papua New Guinea • Wiley Eiya, tribal chief of the Huli tribe in Papua New Guinea (PNG), is online as he presents his Web site on a laptop screen at the International Tourism Fair in Berlin. • The Internet allows places such as PNG, with a low tourism budget, access to tourists around the world. • While the government has not made a major effortto promote tourism in PNG, individual touroperators can have a presence on the Internet. • Tourists all over the world are discovering remote destinations through the Internet. tab

5. Direct & Online Marketing: Customer Relationships Papua New Guinea • Papua New Guinea is a remote island off coast of Australia with a population of a little over 5 million. • most living in rural villages • With over 860 distinct tribal languages, PNG is home to more than a fourth of the world’s languages. • Settled ten thousand years ago, its early residents credited as being the first farmers on earth. • Europeans did not come to the country until the 1930s, and tribes of the highlands had little contact with the outside world until the mid-20th century. tab

6. Direct & Online Marketing: Customer Relationships Papua New Guinea • Rich culture is only one of many tourist attractions, as PNG is rapidly becoming known for diving that rivals the diving at the Great Barrier Reef. • Other activities are white-water rafting in mountain streams and coastal and river cruising offer tourists the comfort of modern ships. • it also has many unique species of birds & mammals • Though potential for tourism in PNG is great, the government continues to focus on other industries. • Tourism potential is largely untapped, with only about 20,000 tourists yearly. tab

7. Direct & Online Marketing: Customer Relationships Papua New Guinea • While the Internet provides PNG great opportunityto build its tourism, growth still has to be managed. • A country such as Papua New Guinea must make sure it has the infrastructure to support tourism. • and policies in place to create sustainable tourismactivities that don’t destroy its culture & natural beauty • The Internet can be a two-edged sword, bringing more tourists, but forcing the destination to ensureit is able to support the tourists when they arrive. tab

8. Direct Marketing Introduction • Many of the marketing & promotion tools examined in previous chapters were developed in the contextof mass marketing. • targeting broad markets with standardized messagesand offers distributed through intermediaries • Many companies are adopting direct marketingas a primary marketing approach. • Direct marketing consists of direct connections with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships. tab

9. Direct Marketing Description • Direct marketers communicate directly with customers, often on a one-to-one, interactive basis. • they tailor marketing offers & communications tonarrowly defined segments or even individual buyers • Airlines, hotels, and others are building strong customer relationships through award programs, using customer database to match offers more carefully to individual customers. • They are approaching a stage where offers are sent only to those customers and prospects most able, willing, and ready to buy the product. tab

10. Direct Marketing Growth and Benefits • Beyond brand and relationship building, direct marketers usually seek a direct, immediate, and measurable consumer response. • In 2006 US companies spent $166.5 billion on direct marketing, for an estimated $1.94 trillion in sales, making it the fastest growing form of marketing. • The DMA estimates direct marketing sales willgrow 6.3% annually through 2011, compared witha projected 4.8% annual growth for total US sales. tab

11. Direct Marketing Growth and Benefits • Direct marketing is becoming more web-oriented, and Internet marketing now accounts for about 18% of direct marketing-driven sales. • Whether employed as a complete business model or as a supplement to a broader integrated marketing mix, direct marketing brings many benefits to both buyers and sellers. tab

12. Direct Marketing Benefits to Customers • For customers, direct marketing is convenient, easy, and private & direct marketers never close. • travelers can book airline flights & reserve hotelrooms on web sites at any time of the day or night • managers can learn about products & services without tying up time with salespeople • Unrestrained by physical boundaries, marketers can offer an almost unlimited selection to consumers almost anywhere in the world, and informationabout companies, products & competitors. tab

13. Direct Marketing Benefits to Customers • Companies use direct marketing to access guestsand gain information that will develop systems & products to better serve their guests. • Direct marketing is interactive & immediate & buyers interact with sellers by phone or on the web. • to create the configuration of information, products,or services they desire & then order them on the spot • Direct marketing gives consumers a great measure of control, as they decide which catalogs they will browse and which web sites they will visit. tab

14. Direct Marketing Benefits to Sellers • Direct marketing is a powerful tool for building customer relationships. • Using database marketing, marketers can targetsmall groups or individual consumers & promote their offers through personalized communications. • Because of the one-to-one nature, companies can learn more about customer needs & tailor products and services to specific tastes. • customers can ask questions & volunteer feedback • Direct marketing offers sellers a low-cost, efficient, speedy alternative for reaching their markets. tab

15. Direct Marketing Benefits to Sellers • Direct marketing has grown rapidly in business-to- business marketing, partly in response to ever-increasing costs of marketing via the sales force. • It permits privacy because the marketer’s offer & strategy are not visible to competitors. • In periods of low demand, companies can use direct marketing to target known customers and produce quick results. • Another benefit of direct marketing is measurability. • a manager can track response to a particular campaignand usually determine the revenue that it produced tab

16. Direct Marketing Benefits to Sellers • Direct-marketing efforts are measured three ways: • the number of inquiries generated • ratio of conversions or purchases realized frominquiries generated • communication impact • Direct marketing can also offer greater flexibility. • allowing marketers to make ongoing adjustments toprices & programs, or make immediate, timely offers • Direct marketing is compatible & often works best when used with other elements of the promotional mix in a multiple-stage campaign. tab

17. Direct Marketing Benefits to Sellers • Direct marketing gives sellers access to buyers that they could not reach through other channels. • Internet marketing is a truly global medium that allows buyers & sellers to click from one country to another in seconds. • Online direct marketing is an equalizer that independent restaurants, inns, and hotels haveagainst the brands, giving small marketers ready access to global markets. tab

18. Customer Databases and Direct Marketing Introduction • Effective direct marketing begins with a good customer database, a relationship-building tool. • data about individual customers or prospects, including geographic, demographic, psychographic & behavioral • In consumer marketing, the database might contain demographics, psychographics & buying behavior. • In business-to-business marketing, it might contain products & services the customer has bought; key contacts, past volumes & prices and much more. • some of these databases are huge, like Harrah’s Entertainment 30 terabytes of customer information tab

19. See this feature on page 473 of your textbook. tab

20. Customer Databases and Direct Marketing Description • Companies use their databases to locate good potential customers & generate sales leads. • they can mine their databases to learn about customersin detail & fine-tune market offerings • they can target communications to the special preferences & behaviors of segments or individuals • A database management problem in the hospitality industry is that a company may have a number of databases that do not talk to each other and/or arenot relational. tab

21. Customer Databases and Direct Marketing Data Mining • A hotel could have sales department, reservations, accounting, and front-desk databases. • if they not integrated, it is very costly todevelop a complete profile of each customer • Consolidation in the hotel industry has created a need for companies to build a centralized data warehouse for all their brands, for the purpose of data mining. • which stores data the company receives in a central repository • once stored, companies use the relational databaseto look at relationships in the data tab

22. Customer Databases and Direct Marketing Data Mining • Data mining is the exploration & analysis of a database by automatic or semiautomatic means to discover patterns or rules. • Data mining can predict which customers are most likely to respond to an offer, to segment a market, and identify a company’s most loyal customers. • It is not limited to relationships a marketing manager may think exists; it explores all relationships with a variety of techniques, a major benefit. • Data mining has increased the effectiveness and efficiency of direct marketing in the industry. tab

23. Customer Databases and Direct Marketing Maintenance • To be useful the data stored in a database must be accurate, so it is important that everyone using the database understand the importance of accurate data. • A clean database starts with accurate entry, and to be effective, duplicate files have to be combined & addresses must be accurate. • Employee training to ensure the database is clean isa critical, ongoing part of an effective system. • A well-managed database should lead to sales and customer-relationship gains more than covering cost. tab

24. Customer Databases and Direct Marketing Use • Finally, you should answer the question: • “If you were a customer, why would you want to be in our database?” • Answering this tells you if your database has a strategic focus or used mainly for tactical purposes. • most marketers use their database tactically, oneof the most frequent uses being direct marketing • Direct marketing campaigns often target recent customers, inviting returns or offering incentives. • as well as encouraging loyal customers to comeduring soft periods tab

25. Customer Databases and Direct Marketing Use • While there is nothing wrong with this use, and it often produces worthwhile results, much of the power of database marketing will be untapped. • The database is also used for service recovery, and companies who use a database to provide the guest with a better experience are gaining a major benefit. • companies need to provide benefits to customersfor being in their database tab

26. Direct Marketing Builds Relationships Introduction • Direct marketing is an important tool in customer relationship management (CRM) programs. • Airlines, hotels, travel agents, restaurants, and rental car companies operate in very competitive markets, and the major way to grow market share is to steal it from the competition. • Managers recognize that spending to develop loyalty among current customers can be more effective than spending to attract new guests, which costs four to seven times as much. tab

27. Table 16-2 Relationship Marketing compared to Traditional Marketing. Direct Marketing Builds Relationships Description • Relationship marketing is creating, maintaining, and enhancing strong relationships with customers. • the concept has expanded to include relationships withall stakeholders who can help the company serve its customers tab

28. Direct Marketing Builds Relationships Description • Relationship marketing has a long-term orientation, to deliver long-term value to customers, and measure of success in long-term customer satisfaction. • It requires that all departments work together to serve the customer, and involves building relationships at many levels, resulting in high customer loyalty. • economic, social, technical, legal tab

29. Direct Marketing Builds Relationships Five Levels of Customer Relationships • Basic - selling the product with no follow-up • Reactive - the company sells the product & encouragesthe customer to call with questions or problems • Accountable - the company’s rep phones the customer after the booking to check-up & answer questions • Proactive - the rep or others in the company phonethe customer from time to time with suggestions about improvements that have been made or creative suggestions for future events • Partnership - the company works continuously withthe customer and others to discover ways to deliver better value tab

30. Direct Marketing Builds Relationships Three Customer Value-Binding Approaches • The first relies primarily on adding financial benefitsto the customer relationship • The second approach is to add social, as well asfinancial benefits • The third is to add structural ties, as well as financialand social benefits • A company can adopt any of three customer value-binding approaches use to develop stronger customer bonding and satisfaction: • Building relationships with customers by creating value is part of relationship marketing. tab

31. Traditional Forms of Direct Marketing Direct Mail • Traditional forms of direct marketing in hospitality are direct-mail, telephone, and kiosk marketing. • Direct-mail marketing - involves sending an offer, announcement, reminder, or other item to a personat a particular address. • By far the largest direct marketing medium, the DMA reports direct mail (catalog & noncatalog) drives over a third of all US direct marketing sales. • E-mail and other new forms deliver direct mail at incredible speeds compared to the post office’s “snail mail” pace. tab

32. Traditional Forms of Direct Marketing Tele-Marketing • Telephone Marketing - involves using the phone to sell directly to consumers and business customers. • now accounting for 22% of direct marketing sales • Marketers use outbound telephone marketing tosell directly to consumers & businesses. • Inbound toll-free numbers to receive orders from television and print ads, direct mail, or catalogs. • The use of toll-free numbers has taken off in recent years, and to accommodate this growth, additional toll-free area codes, such as 888, 877 & 866, have been added. tab

33. Traditional Forms of Direct Marketing Tele-Marketing • The explosion in unsolicited outbound telephone marketing annoyed many consumers, and in 2003, U.S. lawmakers responded with a National Do-Not-Call Registry, managed by the Federal Trade Commission (FTC). • Consumers responded enthusiastically & have to date, registered more than 132 million numbers at www.donotcall.govor by calling 888-382-1222. • businesses that break do-not-call laws can be finedup to $11,000 per violation tab

34. Traditional Forms of Direct Marketing Kiosk Marketing • Many companies are placing information and ordering machines—called kiosks—in stores, airports, and other locations. • from self-service hotel & airline check-in devices toin-store ordering of merchandise not in sold the store • Business marketers also use kiosks. • Dow Plastics places kiosks at trade shows to collectsales leads & provide information on its 700 products tab

35. Digital Direct Marketing Technologies E-Mail • E-mail - customer databases contain a field for ane-mail address. Databases can generate mailing addresses; they can also create e-mailing lists. • Given its targeting effectiveness and low costs, e-mail can be an outstanding marketing investment. • According to a recent study, return on e-mail marketing investment is $52 for every dollar spent. • compared with direct mail at $15 per dollar spent • E-mail is a quick, good way to sell excess inventory. • Holland America Lines sent out 250,000 e-mails oneMay to try to fill up its spring and summer cruises tab

36. Digital Direct Marketing Technologies E-Mail - Spam • E-mail marketers walk a fine line between addingvalue for consumers & being intrusive. • The explosion of spam—unsolicited, unwanted commercial e-mail messages that clog our inboxes—has produced consumer irritation and frustration. • according to one research company, spam now accounts for 88% of all e-mail sent • A recent study found that the average consumer received four thousand spam messages a year. • more & more e-mail goes unopened & gaining permission to send someone e-mail is becoming more important tab

37. Digital Direct Marketing Technologies E-Mail - Effectiveness Checklist • Greeting should be personalized & other persons being sent the same message should not be listed. • Identify the the company sending the e-mail. • if an outside supplier is used, it is important that the organization sponsoring the e-mail has its name listed before the supplier • Subject needs to be relevant to the reader. • E-mails need to be short,with no more than 65 characters per line, to avoid formatting problems. • Text format is preferred, because some browsers cannot accept enhanced HTML messages. tab

38. Digital Direct Marketing Technologies Mobile Phone Marketing • More than 230 million Americans now subscribe to wireless services, so many marketers view mobile phones as the next big direct marketing medium. • A growing number of consumers are using their cell phones as a “third screen” for messaging, web surfing, watching downloaded videos, and e-mail. • Some companies are customizing 10-second video ads that are edging their way onto mobile phones. • Wireless gadgets are always-on, ever-present, and users can respond instantly to offers. • the mobile phone is very personal and always with you tab

39. Digital Direct Marketing Technologies Mobile Phone Marketing - Responsibility • Companies must use mobile marketing responsibly or risk angering already ad-weary consumers. • most people are initially skeptical about cell phone ads • They often change their minds if the ads deliver value, useful information, entertaining content, or discounted prices and coupons. • A recent study found that 42% percent of cell phone users are open to mobile advertising, if it’s relevant. • used properly, mobile marketing can greatly enrich the buyer’s experience tab

40. Digital Direct Marketing Technologies Podcasts and Vodcasts • Podcasting and vodcasting are the latest on-the-go, on-demand technologies. • podcast derives from Apple’s now-everywhere iPod • Consumers can download audio (podcasts) or video files (vodcasts) to an iPod or other handheld device & play them whenever, wherever they wish. • They can search for podcast topics through sites like iTunes or podcast networks such as PodTrac, Podbridge, or PodShow. • sitcom episodes, current sports features,National Public Radio shows, latest music videos, or commercials & more tab

41. Digital Direct Marketing Technologies Interactive TV • Interactive TV (ITV) lets viewers interact with television programming and advertising using their remote controls. • in the past, ITV has been slow to catch on • Satellite broadcasting systems such as DirecTV, Echostar, and Time Warner are now offering ITV. • it appears poised to take off as a direct marketing medium • As with other forms, marketers must target their direct marketing offers carefully, bringing real value to customers rather unwanted intrusions. tab

42. Online Marketing The Internet • Much of the world’s business today happens over digital networks connecting people & companies, with a dramatic impact on buyers and the marketers who serve them. • The web has fundamentally changed customer notions of convenience, speed, price, product information, and service. • it has given marketers a whole new way to create valuefor customers and build relationships with them • US 2008 Internet household penetration reached 69% • almost 500 million worldwide now have Internet access tab

43. Figure 16-1 Online domains. Online Marketing Domains • Shows are the four major online marketing domains • B2C (business to consumer); B2B (business to business) • C2C (consumer to consumer); C2B (consumer to business) tab

44. Online Marketing Business to Consumer (B2C) • The popular press has paid the most attention to business-to-consumer (B2C) online marketing—selling goods and services online to final consumers. • Online consumer buying continues to grow at a healthy rate, as 65% of US online users now usethe Internet to shop. • consumers can buy almost anything online—clothing, kitchen gadgets, airline tickets, computers and cars • In 2007, U.S. consumers generated an estimated $259 billion in online retail sales, up 18% from the previous year. tab

45. Online Marketing Business to Business (B2B) • B2B marketers use B2B Web sites, e-mail, online product catalogs & trading networks, to reach new business clients, serve current ones more effectively, and obtain buying efficiencies & better prices. • Major B2B marketers offer product information, customer purchasing, and support services online. • restaurants use their sites to sell gift cards & take reservations • Table 16–4 on page 486 show three basic principles of online marketing which apply to both B2C and B2B online marketing. tab

46. Online Marketing Consumer to Consumer (C2C) • The Internet provides a means by which consumers can buy or exchange goods or information directly with one another. • In other cases, it interchanges of information via forums appealing to specific special-interest groups. • organized for commercial or noncommercial purposes • Currently about 15 million active Web logs, or blogs, online journals which can be about anything, are read by 57 million people. • such numbers give blogs substantial influence tab

47. Online Marketing Consumer to Business (C2B) • Consumers are finding it easier to communicate with companies by Internet, and most companies now invite prospects and customers to send in suggestions and questions via company web sites. • Beyond this, consumers can search out sellers, learn about offers, make purchases & give feedback. • consumers can even drive transactions with business • Using Priceline.com, would-be buyers can bid for airline tickets, hotel rooms, rental cars, cruises, and vacation packages, leaving the sellers to decide whether to accept their offers. tab

48. Online Marketing Setting Up an Online Marketing Presence • All companies need to consider moving online, and can conduct online marketing in several ways: • creating a Web site; using e-mail • placing ads and promotions online • setting up or participating in online social networks • For most companies, the first step in conducting online marketing is to create a Web site. tab

49. Online Marketing Creating a Web Site • Web sites vary greatly in purpose & content, and Marketers must design an attractive site and find ways to get consumers to visit the site, stay around, and come back often. • The most basic type is a corporate (or brand) site, designed to build customer goodwill, collect feedback, and supplement other sales channels. • They typically offer a rich variety of information& features in an effort to answer customer questions, build closer customer relationships, and generate excitement about the company or brand. tab

50. Online Marketing Creating a Web Site • Other companies create a marketing site to engage consumers in an interaction that will move them closer to a purchase or other marketing outcome. • Expedia, Priceline, and Sheraton are examples • To attract visitors, companies aggressively promote their Web sites in line print & broadcast advertising, and through ads & links on other sites. • users are quick to abandon a site that doesn’t measure up • Companies must constantly update their sites to stay current & useful, and provide enough excitement to get consumers to stick around, and come back again. tab