Direct Marketing

INTRODUCTION
If a person is a Citibank, Visa or Master card holder, living in a
metro or Class one town, by now he would probably be accustomed to
receive some unexpected mail inviting him to a launch function of a new
product, a live demonstration of a gadget, an exhibition of designer
jewellery or a music concert sponsored by some business firm. He may
also get some promotional literature about an investment scheme or
some share application forms for public issue of companies, or be
offered a hefty discount on subscription of a magazine or an early bird
incentive in booking a residential flat.

Even in the class two and smaller towns, people are getting surprise
gifts and greetings cards on occasions like anniversaries, birthdays and
the New Year. This is an indication that direct marketing is catching up in
the post-liberalization era in India. Several firms, otherwise marketing
their products through conventional channels, are now also using the
direct approach to communicate with and retain their customers.
Different firms use different methods to zero in on the prospects
included in their hit lists.
Direct marketing as a concept has evolved to its present-day form
through various stages of transformation. Originally a form of marketing
in which goods moved from producer to consumers without involving
middleman, firms selling directly to the end users through their own
retail outlets and / or

Salesperson were said to be involved in direct marketing. With the

development of other form of personal communication, such as the
telephone, direct marketing was redefined.

Direct Marketing

According to the direct marketing association of the U.S.A (as

quoted in Kotler 1991 ), Direct Marketing is a international
system of marketing which uses one or more advertising media
to effect a measurable response and/ or transaction at any
location.
Direct marketing thus includes any activity whereby firms reach the
customer directly as an individual, who responds to them directly. It
differs from conventional marketing in sense that it talks directly to the
prospect on a one-to-one basis without involving any intermediary.
Direct marketing firms are usually designed to achieve a measurable
result in a relatively short duration of time. These differ from other
promotional activities, though they may use the same media or
sometimes the same techniques, such as coupons and samples.
In the absence of conceptual clarity, direct marketing is often defined
very narrowly as a synonym of some simple specific function such as
direct selling, mail order selling or distribution. In fact, it is much more
than all these. A complete system of integrated functions aimed at
satisfying customer needs more effectively, it is much more than all
these. A complete system of integrated functions aimed at satisfying
customer needs more effectively, it is by no means a short-term quick
buck affair.
In conventional marketing, firms wait for the customer to walk into their
stones, whereas in direct mode firms prefer to go out and get the
customer before he steps out of his home. It is a much focused activity
that follows a firm to concentrate on a chosen segment of customers
and interacts with them more effectively through different media. Being

Direct Marketing
a more precise and goal-oriented activity it is more suitable for firms
operating in specific niche markets.
According to the number one direct-selling firm in the word, Amway
Corporation of the U.S.A. (estimated sales for 1995 US$ 6.3billion0,
Direct Selling moves products from the manufacture/ supplier to the
seller and consumer without intermediaries. It differs from direct
marketing in a sense that direct marketing companies depend more on
mailing, catalogue sales, direct responses an coupon sales, telephone
and telemarketing and the like; and now they are also selling via
computer networks such as the Internet. In contrast, direct selling is
always performed through the sales person. (As quoted at the CIIAmway seminar 1996).

In direct marketing goods move from

Manufacturer

----------------------------

Consumer

In direct selling goods move from

Manufacturer

---------

Distributor

-----------

Consumer

Some newer forms of direct selling such as multiplayer marketing (MLM)

may involve different layers of distributors and sales persons selling to

Direct Marketing
the customers directly. Amways definition not withstanding, direct
selling as a concept is nothing than a mode of direct distribution.

The early practitioners of direct marketing in India include Readers`

Digest magazine, bull worker exerciser and some regional language
publications that used mail coupons to increase circulation. Of late,
catalogue-shopping firm such as Burlingtons have also made forays into
the Indian market, but achieved only limited success. However, in the
late 1980`s it was the success of Eureka Forbes vacuum cleaners and
Real Value Appliances Cease Fire brand of fire extinguishers (will you
call it direct marketing or direct selling?) that signaled the dawn of direct
marketing in India.
At the professional level, the credit of pioneering direct marketing in
India goes to the media person Ram Nathan Shridhar who founded O &
M Direct in 1987, exclusively to handle and promote direct marketing
activities in a professional manner. Since then, he has been selling the
idea of Direct Marketing to savvy marketers with missionary zeal and
spirit.
Today, all major advertising agencies in the country such as Hindustan
Thompson Associates (HTA), Lintas, Mudra, Trikaya Grey, Response,
Contract and many others have set up separate divisions to cope up
with the growing demand for direct marketing. Presently, direct
marketing accounts for only about 14 percent of the Rs.45,000 million
ad spend, but going by the current trend of 35 percent annual increment
in expenditure on direct marketing, it is going to be a big business in the
next couple of years.

Direct Marketing

The Direct Marketing Association (DMA) defines direct marketing as

follows:
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.
This definition emphasizes a measurable response; typically a customer
order. Thus direct marketing is sometimes called direct-order marketing.
Today, many direct marketers see direct marketing as playing 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 members in
their customer base. Airlines, hotels, and other business build strong
customer relationships through frequency award programs and club
programs.

Direct Marketing

THE SCOPE OF DIRECT MARKETING

What Is Direct Marketing?

It is only within the past 10 or 15 years that direct marketing has

come of age. It has grown faster than almost every other marketing
activity for nearly two decades. Most companies that make up the
Fortune 500 use some form of it, as do the largest firms in the service
sector of our economy. It is extensively practiced by retailers, banks, and
other local businesses.
What is direct marketing? It is many things. The full answer to this
question is the theme of this book, which, it is hoped, will yield valuable
insights as to how business can profitably use direct marketing in its
operations.
Although direct marketing has come to prominence in recent
times, the activity is old and has been described in many ways. The
most common definitions include direct mail, mail order, and direct
response advertising. All three of these concepts are related to each
other.
Direct mail is a promotional medium whereby postal services
provide the means of communicating with would-be buyers. These

Direct Marketing
commercial messages come in different shapes and sizes-letters,
postcards, catalogs, leaflets, coupons. Hardly a mailbox in America has
escaped the vigorous assaults of these promotions. Advertisers in 1989
spent just short of $22 billion for direct mail, putting it behind only
newspapers and television in terms of expenditures in measured media.
Mail order is a device for advertising goods and services through
any medium: television, magazines, or newspapers. But orders are
fulfilled by mail. Today, mail order has been expanded to telephone to
telephone. The modern customer finds it easier to phone in an order
than to write it out on a standard form, stuff it into an often ill-fitting
envelope and remember to drop it into a mailbox on the way to work.
Whether the response is written or oral, the mail order technique is
basically a method of product distribution and accounts for a little less
than 10 percent of all retail sales.
Direct response advertising sends out sale s messages by any
medium, like mail order, but does not confine fulfillment to the narrow
post office boundaries. In that respect, direct response advertising
embraces the broadest range of activities
Direct marketing includes all three of these somewhat overlapping
concepts, and more. To put it into one succinct statement, direct
marketing is paid-for communication in media, expressly eliciting a
direct, measurable response, such as an order, an inquiry, or a visit to a
store or showroom. Direct Marketing magazine defines it as follows:
Direct Marketing is an interactive system of marketing that uses
one or more advertising media to affect a measurable response and/or
transaction at any location.

Direct Marketing

CHARACTERISTICS OF DIRECT MARKETING

A definition is like a reference file. It differentiates a thing from all
other things in one clear statement and makes it easier to look up
particular subjects. But it tells little about content, the inner workings of
what has been defined. For a better understanding of direct marketing,
we must cross the boundary of definition and go from outward to inward,
from lookup labels to functioning details, from superficial titles to
practical elements used in the day-to-day conduct of business.
Direct Marketing is an obvious tool of promotion. Like most
promotions, it tries to make things happen by affecting customer
behavior. Yet direct marketing also contains qualities that set it apart
from other forms of promotion. What are they? Three in particular come
to the fore: advertising action unity, specificity, and feedback.

Unity of Advertising and Action

In so far as direct marketing communicates through paid media, it
differs little from advertising. Messages in both direct marketing and
advertising are sponsored by an interested source, usually a firm selling
a good or service that identifies itself as such. Then how does one
distinguish direct marketing and general advertising?

Direct Marketing

The biggest difference lies in communication objectives. Direct

marketing unites advertising with action; it solicits an immediate
response. The typical national advertisement does not do that. Rather, it
is part of a campaign, a series of ads, aimed at creating some desired
image, favorable attitude, or buying predisposition.
Actually, general and direct-response advertising have the same
ultimate goal-making sales. But the former sees the road to sales as
indirect, a devious passageway winding through the confusing and littleunderstood labyrinths of consumer minds. It presumes that the right
mental image must exist prior to purchase; attitudes precede purchases.
In accordance with this philosophy, advertising is often produced as an
obscure. After about a century of consistent effort, general advertisers
have yet to prove a strong connection between their messages and the
sales they are supposed to generate.
Direct marketing makes no claim that carefully built-up attitudes
are prerequisites to sales. They help, yes. Direct marketers do not deny
that. But they do not concern themselves much with gentle appeals to
consumer psyches and shun everything else. They forgo oblique
innuendoes and ask directly for orders. Every direct marketing message
focuses on performance. It pleads with customers to do something, to
act. Now!
Indeed, direct marketing has much in common with retailing,
whose advertising often exudes a keen sense of urgency. Headlines
scream at their audiences to buy now.

Direct Marketing
Oriental rug Sale. Fantastic Super values!
No limitations, not machine-made, no looks-alike
Limited quantities!!!
Largest Sale Ever, Plus No Interest & No Payments til
July!

The marriage of advertising and selling goes a long way toward

explaining why direct marketing holds great attraction for retailers. Of
the 300 leading mail houses listed in the Scourge Directory, almost one
fourth run retail operations. The sales volume of these establishments is
proportionately greater than their numbers, for they include such giants
as Sears, J.C. Penney, Neiman-Marcus, Marshall Fields, Bloomingdales
and Saks Fifth Avenue. All these stores conduct extensive mail order
businesses. J.C. Penney reports more than 300 million catalogs
distributed each year. Sears does not release figures on the number of
annual mailings. But it issues more than 50 full-color catalogs per year,
in addition to brochures and newspaper inserts across the country.
Catalog supplements al9one total more than 300 million copies annually,
and in 1985 the firms catalog sales amounted close to $7 billion.
By combining advertising and selling, direct marketing eliminates
the need for personal selling or, for that matter, shopping at sellers
premises. In many merchandise lines direct marketing thus acts as a
substitute for retailing. The two rivals-direct marketing and retailing-vie
for sales in ready-to-wear apparel, sporting goods, books, records, tapes,
and crafts.

10

Direct Marketing
At the same time, direct marketing complements retailing in many
ways. A symbiotic relationship exists in which both distribution systems
draw support and sustenance from each other. Dependence flows in two
directions, from retailing to direct marketing and vice versa.
In the first instance, retailers can extend their trading zones
without incurring large capital expenditures. J.C. Penney, for example,
sent catalogs into Texas and fulfilled orders from out-of-state distribution
centers before any stories were opened in the Lone Star State. Brooks
Brothers, long known for quality mens clothing, tapped new markets by
an aggressive program of specialty catalogs in the 1980s. Offerings
such as Brook gate, geared to young male executives, attracted
customers living beyond easy traveling distance to brooks Brothers
stores. The group of new catalogs filled huge gaps between the firms
major trading zones and increased the number of customers on a
national scale.
Another way in which in-store operations breed mail order is when
retailers seek better returns from self-space. Large department stores
carry as many as 50,000 items or more but find space limited. All
possible variations in a line, or even just the profitable ones, cannot be
displayed in the store. Generally speaking, replacing low-turnover
production with better-selling ones produces more revenue per linear
foot of space. If that is the name of the game, a retailer has two choices:
drop the slow mover or sell the vacated merchandise by direct
marketing. The latter alternative gives the retailers the option of
maintaining full product lines without sacrificing economical use of
space. It also yields incremental revenue by adding products that would
ordinarily not be offered.

11

Direct Marketing
The other scenario is retailing that follows direct marketing.
Spiegel, one of the largest mail order companies in the United States,
opened more than a half dozen outlet store for overstocks. Here the
retail store is used as a device to move excess merchandise resulting
from direct marketing. Likewise, Lillian Vernon in 1985 opened a test
store in New Rochelle, New York, to see if its 3000 plus items sold by
catalog can form a base for a retail business.
Sharper image provides another example of retail following direct
marketing. The firm originally sold customer electronics, apparel, and
health-related products. In the early 1980s, it decided to use its mail
order facilities as a springboard into retailing. The first store opened in
San Francisco in 1983, and within five years some 15 outlets came into
existence.
No matter which comes first, direct marketing and retailing are
often inseparable. As so aptly phrased in a Royal Silk management
report, stores generate new customers for catalog mailings and, in turn,
catalogs serve as in-home advertisements for the stores.
The marriage of retailing and direct marketing does not always
have a fairy-tale ending. The Royal silk cohabitants did not live happily
ever after; in December of 1988 the company filed for bankruptcy under
chapter 11. Having leveraged itself to ride the swelling waves to growth,
the corporation foundered when unforeseen events hit. Royal Silk sold
off its 17 retail stores and, at this writing, is busy trimming off the
corporate fat that it added imprudently in the go-go days of the 1980s.
Royal Silks failure does not discredit the mutual benefits of direct
marketing and retailing that management described in an hour of
optimism. The majority of such ventures perform satisfactorily. All

12

Direct Marketing
business

holds

risk,

but

that

is

no

reason

to

avoid

business

undertakings.

Specificity
A second characteristic unique to direct marketing is the use of
media to transmit messages to specific, reselected individuals. For lack
of a better word, we call this feature specificity.
Some idea of the scope of direct marketing can be gotten by
examining advertising expenditures. These are given in table 1-1, which
shows advertising expenditures in measured media.
Except for direct mail, which forms the backbone of direct
marketing, and the yellow pages, all media in table 1-1 reflect general
advertising. Some prints and broadcast advertising solicits direct
response, but such ads make up insignificant proportion of the total.
Such means of general advertising, both national and local, are
open systems. Messages cannot be directed precisely to particular
individuals. Rating surveys give broadcasters estimates of audience, but
they cannot tell exactly who watches and who does not. People are
treated as a mass and are given probabilities, which apply to no
particular individuals.
The audience for magazines is a little more precise, especially
those that distribute a goodly portion of their copies by subscription. Yet
all subscribers do not read every issue, and for many magazines the
major part of their readership is composed of non-subscribers. At least
that is the conclusion of the syndicated audience studies, such as
Simmons and MRI. Unless delivered directly to homes, newspapers

13

Direct Marketing
similarly cannot direct advertising to particular homes or individuals,
and unless no circumstances can they control readership.
Medium

Expenditu

Newspapers
Television
Direct mail
Yellow pages
Radio

re
32.368
26,891
21,945
8,330
8,323

Magazines
Business publications
Outdoor
Miscellaneous
Total

6,928
2,763
1,111
15,271
123,930

Outdoor advertisers also reckon circulation in terms of broad,

overall averages. They make counts of road traffic but cannot say
exactly who drives past a billboard, let alone who sees it and takes note.
Advertisements in these media take on the characteristics of their
carriers. Marshall Mc Luhan many years ago epitomized this tendency:
the medium is the message.
Media that convey general advertising reach out in unrestricted
fashion to find audiences, and the coupling is a chance encounter.
Advertisements thus are generalized messages, addressed to whom it
may concern.
In contrast, direct mail and telephone calls, the two pillars that
support the direct marketing edifice, go to specific homes. A mail out
must have an exact address to be delivered, even if sent to an unnamed
occupant. A phone call is made to a specific number and is answered
only by a person in that home- or sometimes by an answering machine.

14

Direct Marketing
But that automation is nevertheless an extension of a person. These
media, direct mail and telephone, account for some 85 percent of total
direct marketing expenditures.
These specifically directed media have obvious advantages over
their generalized cousins. Messages are not transmitted haphazardly.
They are finely focused. They communicate one to one. But control
extends only to transmission, not reception. People may throw mailings
into a thrash can without reading them. They may hang up on telephone
solicitors, not wanting to be disturbed at home. Marketers thus control
only one part of a communication system. The firm produces and sends
commercial messages, but cannot how these messages are received or
acted on.
However, although marketers cannot mandate customer response,
they can influence it. This is done in two main ways. The first way is to
segment the marketplace so as to appeal to those sectors of the general
population that are most likely to buy. Putting this notion into practice
calls for market analysis, product design, and media selection. The idea
is to offer the most appropriate products to the right audiences.
Specificity gives direct marketing the ability to fulfill individual
tastes and demands, to tailor products to particular customers. The oneon-one approach is perhaps best exemplified by GMs Saturn model.
Customers can choose from many alternative features, and cars are
manufactured to order by programmable robots. The have it your way
concept has come full circle from simple hamburgers to complex
products such as automobiles.
The second way of influencing response is by presenting the offer
in an attractive and interesting manner. This job entails creativity and

15

Direct Marketing
skill of copywriters, layout specialists, art directors, and production
people and goes under the name of copy development.

Feedback
Direct marketing gives its practitioners the ability to measure
response objectively. An order for goods or a request for information is a
hard, indisputable fact. By keying advertisements, these actions can be
traced directly to a particular communication source. When carrying
direct response advertising, even such generalized media as print and
broadcast identify buyers by name and address and specify the source
of such response.
Tracking individual transactions is often referred to as feedback.
This term came from cybernetics, the science of control, and applies
strictly to mechanical systems. Whether ideas of the physical sciences
can be carried over to marketing is debatable. For one thing, marketing
lacks the high degree of regulation that is inherent in a mechanical
system. Unlike engineers, marketers cannot control every part of the
communication system with which they are involved. Governance of
output is especially weak, although that is the most vital part of a
marketing system. The vast majority of consumers who receive a
telephone call or a mailing piece do not respond in a positive way. After
all, isnt all marketing geared toward accomplishing some predetermined
result?
Yet direct marketing, more than any other branch of selling or
advertising can rightly claim the advantages of feedback. Direct
marketers dont have to fall back on John Wane makers oft-quoted
remark to evaluate their effort: I know that half my advertising works,

16

Direct Marketing
but I dont know which half. They know what worked, what didnt, and
how much response came from each ad.
Direct marketing measures advertising results specifically and
objectively. There are no inferences drawn from sets of disputable
assumptions. Advertising thus becomes more accountable. A firm can
judge the value of its advertising by comparing expenditures with
returns.
Feedback is enhanced by the ever-decreasing costs of data
processing.

Computerized

databases

have

enormously

expanded

capacities to record and store information. Companies can track

individual transactions as never before, and many experts think that this
development forms the essence of direct marketing.

Products and Markets

Many practitioners insist that almost any product can be sold by direct
marketing. The goods and services sold by this method, however, are
not random. Some items rely heavily on direct marketing and others not
at all. When would a business lean toward direct marketing, and others
when would it move away from it? The answer depends on the nature of
the products and the markets the firm enters.

17

Direct Marketing
On the whole, specialties and general merchandise make up a
substantial portion of the goods category. Insurance and credit cards
hold prominent positions in the service area. Exact figures are hard to
come by, but a number of consumer surveys provide estimates. Table 12 presents a select list of items ordered by mail or phone, as reported by
Simmons Market Research Bureau. These figures are based on a national
probability sample of some 38,000 interviews conducted over a two-year
period.
The percentages are small, but when they are projected to the
entire adult population, the numbers become imposing. For example,
the 4.2 percent who bought audio cassette tapes translates into more
than 7 million customers 18 years of age or older. According to Simmons
Market Research Bureau, roughly 45 percent of adults bought something
by mail or phone during a 12-month span.

The products listed in Table 1-2, excluding insurance, were

the

most

commonly

mentioned

in

the

Simmons

survey.

Insurance is bought less frequently than magazines, books, or

records, but prices of insurance policies are much higher.
Consequently, insurance vaults to the top of direct marketing
sales in terms of dollar volume. This conclusion is buttressed by
examining the companies-12 in all- whose mail order sales in
1998 amounted to $1 billion or more. Of the 12 leading mail
order operators, five offer insurance. General merchandise,

18

Direct Marketing
publishing materials, apparel, and entertainment rank among
the top sellers.

TABLE 1.2

Products Ordered by Mail or Phone in Last 12

Months
Product

Percent of Adults Ordering

Magazines

13.3

Clothing

11.6

Books from book clubs

5.3

Other books

4.1

Travel information

4.2

Audio cassette tapes

4.2

Records

3.6

Credit cards

3.5

Toys

3.4

Plants, trees, seeds

3.3

Insurance

1.9

What do these leading products have in common? What

generalizations apply to items that lend themselves to direct
marketing?
PRODUCTS WITH GAPS IN DISTRIBUTION

The most popular items said by direct marketing lack wide,

extensive coverage in distribution. Products available everywhere are
more

conveniently

purchased

at

local

stores-

drug

outlets,

supermarkets, variety stores. Packaged goods are a prime example. Why

19

Direct Marketing
wait for such merchandise to arrive by mail or private carrier when it can
be obtained with so little effort, and cheaper?

PRODUCTS WHOSE CUSTOMERS ARE WIDELY DISPERSED

Low customer density makes retailing uneconomical, especially for

low-priced goods and services. Consumers order in small quantities, and
store traffic is a major contributor to profitability. When demand is low,
nonstore selling becomes a viable alternative.
The same holds for industrial goods. Firms cannot support
personal selling when customers are scattered and unit prices are lowunless order size is large. In the absence of quantity orders. Direct
marketing offers an attractive way of overcoming spatial gaps in
demand.

FAMILIAR PRODUCTS WITH STANDARD SPECIFICATIONS.

By the very nature of direct marketing, customers buy sight

unseen. A picture in print or on television is not the same as the actual
product, and people have a natural reluctance to order things when they
are not sure exactly what they are getting.
Buyers want dependability and freedom from risk. I usually buy
from companies I have heard of before. That refrain was sounded most
often in a recent Gallup purchase survey of more than 1,550 consumers.
A good reputation is a valuable corporate asset, not only in direct
marketing nut in all fields of business. But reputation does not come
about overnight; it matures over a lengthy period of time.

20

Direct Marketing
To reduce risks of sight-unseen buying, unconditional guarantees
have become an almost permanent feature of direct marketing. Ads
frequently assure buyers of satisfaction or money back. This has been a
long-standing policy of Sears, Penney, and many other resellers.
Another way of lessening buyer risk is to offer products for
examination, on a trial basis. Many books and records, the contents of
which are not precisely known, are sold in this manner. Such items can
be returned within a specific period free of charge if a buyer isnt
satisfied.
Nevertheless, steps to assure consumers that their expectations
will be met encounter various obstacles. Many consumers regard
nonstore buying as a hassle. Most companies issuing unconditional
guarantees stand behind their products but do not pay for returned
merchandise.
Product

familiarity

is

closely

related

to

questions

of

standardization. If a size 10 shoe varies from one manufacturer to

another, there is no telling whether the footwear will fit. Similarly,
purchasing agents are not prone to order goods for their companies if
product specifications are not standardized.
Company familiarity is not the only quality that breeds orders.
Product awareness is also a prominent factor. Items must have common
meanings among consumers with respect to product features and
specifications.
DELIVERY TIME

21

Direct Marketing
Delivery

time

looms

important

in

business-to-business

transactions, especially with the growing trend toward just-in-time

inventories. The most popular items sold to industry through direct
marketing are standardized, off-the-shelf supplies. When they are
produced for future demand, they can be shipped in minimum time.
Likewise, consumer markets may make stringent demands on
delivery time. Almost 50 percent of consumers surveyed by the Gallop
Organization agreed with the statement: I find it difficult to order
products through the mail because of the time it takes to get them. The
telephone has shortened the time from order placement to receipt of
goods, and the toll-free 800 numbers encourage consumers to call from
a distance. Yet time of delivery has remained a major concern.
Consumer complaints about delays in shipments have occasioned a host
of federal and state regulations.

TASKS OF DIRECT MARKETING

Like other businesses, direct marketing is a performance system. It

is called on to perform certain tasks, which are quite diverse. From a

22

Direct Marketing
marketing perspective, we can group tasks into two broad categories:
those that are product related and those that are not. Each of these
categories, in turn, can be subdivided into two parts.
Product- related ads can do the entire selling job or play a supportive
role. Advertisements that do not feature products can have commercial
transactions as their goals, or they can be devised with no commercial
transaction in mind. These tasks are related as below 1. Product - Related Tasks ---- 1. Does entire selling job
2. Supports the selling effort
2. Tasks Not Product-Related ---- 1. Related to transactions
2. Unrelated to transactions

Product Related Tasks

Most direct marketing efforts are geared toward sales in the short
run. No matter what the long-term strategy may be, the operational
focus is on the present.
Results can come in one of two ways. First, a direct response as
can do the entire selling job. For example, direct mail pieces have
merchandise order forms. Telephone solicitors frequently try to close
sales. Printed ads with coupons and TV commercials with 800 numbers
urge people to buy goods and services directly.
On the other hand, a number of direct marketing techniques are
designed as supportive devices. That is, they work with other elements
of the marketing mix in a somewhat subordinate role. Business-tobusiness marketing, for example, often confines direct marketing to lead

23

Direct Marketing
generation, leaving closing to sales personnel. Service industries such as
airlines employ direct marketing in much the same way. Advertisements
for special tours and flights direct interested prospects to get in touch
with

their

nearest

manufacturers

and

travel
real

agent

estate

or

airline

operators

representative.

may

run

Auto

sweepstakes,

contests, and incentive offers to increase traffic at sellers premises.

Here, direct marketing functions like lead generation programs, relying
on personal selling to bring about the transaction.
Non product Tasks
Some direct marketing solicitations, probably about 10 percent, feature
neither goods nor services. Then what sort of response do they seek?
One kind promotes an organization. Such advertising aims at
inducing

requests

for

company

brochures,

annual

reports,

and

information about corporate projects and related company concerns.

These

activities

have

two

prime

objectives.

One

involves

transactions of some sort, but the route is indirect. For example, utilities
may offer free literature on energy conservation. Whether such
promotions eventually result in less electric or gas usage, additional
insulation, or installation of storm windows, they effect transactions.
Another objective of transaction-related activity is to enhance the
value of a corporation, usually the value of its stock. This job must be
done circumspectly, for it is illegal to tout company stock by advertising
or promotion.

Regardless of whether objectives encompass products or financial

assets, products are not featured. Rather, the focus rests on the
corporation. Results ensue indirectly; they

are not

measurable. In

24

Direct Marketing
that respect, the approach is not much different from that of general
advertising. The response is an intermediate one and not traceable to
eventual action.
A second sort of solicitation involves no commercial transaction
whatsoever. These direct marketing messages concern themselves with
social or political issues, such as fund raising for charities, political, and
social causes, and candidates running for office. Although direct
marketing techniques are commonly used in these endeavors, there are
serious questions as to whether they can really be called marketing.
These actions, which have the same outward form as product
advertising, do not give rise to exchange in a marketplace.

25

Direct Marketing
THE FLOW OF INFLUENCE
Tasks are duties that people set for themselves or for others. They arise
from a set of objectives, which can be laid our formally, as in a
marketing plan, or simply kept in an individuals head. It matters little
whether these objects are formal or private. In either case, they depend
heavily on products and markets. These relationships suggest a flow of
influence illustrated by a familiar planning model, portrayed in figure 15.
The general planning model shown in figure 1-5 depicts objectives
as dependent on analyses of a firms products and markets. This view
accords with a management science philosophy of decision making, in
which procedures follow a rational, problem-solving approach.
Every problem in the context of decision theory must specify a
goal or objective, something management wants to attain. In keeping
with rationalism, goal setting takes place after in-depth analysis of the
marketing context. For example, a goal to generate a certain number of
leads for an industrial product assumes that personal selling is the best
instrument for closing sales. This is based on an intimate knowledge of
an industry, of both its products and its markets. An objective to renew a
certain proportion of magazine subscriptions has some realistic basiseither past experience, new knowledge about renewals trends, a market
test, or any combination of these information sources.
MARKETS
I
I

--- OBJECTIVES

--- STRATEGY TACTICS

---

RESPONSE
I

26

Direct Marketing

PRODUCTS
Strategies and tactics are ways of accomplishing objectives. Strategies
are long-term plans. Tactics are means of implementing a strategy.
Consider the following:
1. Objective: to increase sales of our product by x amount
2. Strategy: to generate more leads so as to give our sales force more
opportunities to make sales.
3. Tactics: a saturation campaign in the business press, offering free
brochures and literature through reader service cards.

Installation of an 800 number to handle requests for information

A follow-up program whereby outgoing phone calls are used to

qualify these leads
Integration of this program with personal selling, so that qualified

prospects can be contacted by our sales personnel in y days at the

latest.
The type of response is largely a consequence of the tactics
employed. A mailing of cents-off coupons results only in redemptions at
the store. An offer of a prospectus by a mutual fund yields only requests
for the financial literature. What ensues depends on the actions that are
called for.

27

Direct Marketing
The level of response is another matter. Several factors have a
bearing on results: what is offered, to whom the offer is made, and how
it is presented.
An offer is what a seller proposes in an exchange. The more
attractive its items, the higher the level of response. A free catalog will
bring a greater response than one for which consumers must pay.

Determining who gets the offer involves media selection-the

choice between mailing lists, magazines, and TV shows, for example.
The better an offer is matched with markets, the higher the response. An
ad read by interested prospects will get a more favorable reception than
one seen by the general public.
A bigger response, however, is not necessarily a more profitable
response. The free catalog offer, for instance, may produce more
requests for the publication, but it may lead to fewer orders than a
catalog for which consumers pay. The marketer must consider the tradeoff between a larger market potential with lower purchase probabilities
and a more selective market with more likely buyers.
Finally, the way an offer is presented influences the level of
response. In advertising parlance, this refers to copy quality, a unique
combination of verbal and visual elements that make up a message.
Response is not uniform. It varies markedly across products and
markets. A coupon for 50 cents off will bring in more redemptions than a
$1,000 rebate on an automobile. In part, this is because the market
potentials of the two products are very unequal. Second, 50 cents may
represent a higher proportion of the respective products price than the
$1,000 rebate. Each product market has its own range of effective

28

Direct Marketing
response, and planning for direct marketing requires an understanding
of the limitations.
The flow-of-influence model implies that response is a mix of
various activities, including both planning and implementation. The job
of coordinating these widely diverse activities falls to marketing
management.

29

Direct Marketing

DIRECT MARKETING IS DYNAMIC

So far, direct marketing has been portrayed in accordance with its

mainstream features. Yet direct marketing is not a body of unchanging
practices. Although its growth slowed toward the end of 1989, direct
response is still expanding at a faster rate than majority phases of
marketing. After adjustment for inflation, direct marketing advanced
more than 5 percent per annum during the entire decade of the 1980s
that rate of increase is about double the real growth of the total
economy.
Growth usually breeds change. For one thing, the more an idea is
used, the more it is altered. Although mail and telephone are still
mainstays of the industry, direct marketing is slowly changing its face.
Among the emerging agents of change is technology. The computer
has introduced completely new ways of doing business. It has allowed
database to be used in new and profitable ways, such as identifying
prospective customers through a wider range of demographic and
purchasing criteria. The following are just a few concrete examples of
how the computer has impacted the industry.

Supermarkets have begun frequent shopping programs. With the

use of cards that are electronically scanned with purchases at
checkout counters, retailers can get a more accurate picture of
individual or household buying habits.

30

Direct Marketing

More firms are adopting computer-aided telemarketing systems.

These handle towering amounts of information, including customer
profiles, past contracts and purchases, daily call reports, progress
reports on leads and statistical summaries of activities, campaigns,
and results.

More than 300 billion coupons, or some 3,600 per home, are
disturbed each year. Advances in computer technology have made
this gigantic volume easily manageable.

Although the industry is littered with past failures, home electronic

information services keep appearing. The most notable is that of
Trintex, a joint venture of Sears and IBM, whose development costs
are estimated at better than $250 million. The service, called Prodigy,
made its market entry in the latter part of 1988. It offers computer
owners access to news from USA Today and The Associated Press,
stock quotations from Dow Jones, and merchandise orders conducted
electronically.

Other changes have come from technological developments and

innovations in business practice. Cable TV systems sport alphanumeric
formed on special events and promotions. More relevant to direct
marketing are shopping programs that allow viewers to order by dialing
an 800 number.

Some marketers have begun to exploit videocassettes as a selling

tool. Real estate developers send out videos to brokers, who can show
different properties to clients. Some have marketed these videos directly
to individuals, who can inspect homes of various styles prices in the
comfort of their living rooms. Cadillac in 1987 demonstrated its new

31

Direct Marketing
ultra-luxury model, Allente, in videotapes mailed to upscale homes.
Several large retailers have developed videocassette catalogs to expand
marketing alternatives. Video stores are even renting tapes with
coupons and direct response offers inside video boxes.
Many of these changes were occasioned by large national advertisers
embracing direct marketing in major ways. Indeed, these large
companies have acted as a powerful force in propelling the rapid growth
of direct response. When large companies adopt direct marketing, they
seldom substitute it completely for other selling techniques. Rather, they
add direct marketing to their already-bulging bag of tools, incorporating
it into their

Marketing mix, For example, the Allente videotape promotion ran

side

with

heavy

schedule

of

television

spots

and

printed

advertisements that extolled the graceful lines created by the famous

Italian designer Sergio Pininfarina. Ina similar vein, Visa, Master Card,
and American Express spent millions on television advertising at the
same time American consumers were being deluged by various mail
offers of credit cards.
When direct marketing is part of an integrated advertising program,
its results are difficult, if not impossible, to measure. What proportion of
Allentes sales resulted from videotapes as opposed to the TV ads? How
many cardholders were brought in by direct mail when ad campaigns
were saturating other media, such as television and top-selling
magazines? Like the mythical Gordian knot, the combination of direct
marketing with other types of promotion cannot be disentangled to
measure results by source of expenditure. Feedback acquires murky
boundaries.

32

Direct Marketing
Fifteen years ago, direct mail usage would have approached 100
percent in virtually every case. Direct mail still reigns as the top direct
response medium, but its eminence is weakening.

HOW DIRECT MARKETING WORKS

Direct marketing, as practiced by professionally managed firms is a fourstep process:
Identifying prospects
Establishing contact
Booking the order
Maintaining contacts to develop a mutually beneficial,
long-term business relationship
Identifying prospects and segmenting them into various categories
based on certain specific criteria is critical to the success of direct
marketing. This is done in different phases. In the first phase, a
preliminary list of potential or may be customers is made through
random mailing, house calls, or mass media advertisements using
coupons or some other contact device. In marketing parlance is termed
cold listing.
This cold list is thoroughly scrutinized and attempts are made to
identify those who are not likely to use the proposed product or service
due to those who are not likely to use the proposed product or service
due to incompatibility of need, income, age, sex, occupation or any

33

Direct Marketing
other reason. All such people who dont qualify as prospects are dropped
from the list. The residual list is then known as the hot list. Firms may
sometimes seek to gather additional information about those included in
the initial list by contacting them on telephone or through other
convenient media.

The next step is to draw a detailed profile of the prospect. This

may include information on consumption habits, purchase behavior,
personality

and

lifestyle,

social

class,

exposure

to

media;

and

demographic particulars such as age, income, education, profession,

family size, domicile, and complete postal address. Technically this step
is known as profiling the respondent or response graphic.
The list is further split into separate cluster of identical groups,
using some demographic, psychographic, or behavioral parameters. This
exercise is termed segmentation. Firm now adopt many innovative ways
of clustering, using novel parameters such as traveling habits, food
preferences, ownership of automobiles, possession of assets and
durables, and taste for music and art.
Finally, each cluster is researched using some predetermined
criteria, to identify the specific segment or segments to be targeted for
the marketing the product. This exercise is known as targeting. If the
product is a high-value item such as jewellery, a computer or an
expensive gadget direct marketing goes into further details and makes
an elaborate study of each individual included in the target segment.
This is known as individualization. Now the firm may focus on the
specific needs of the individual customer. Let us now see how it works in
actual practice.

34

Direct Marketing
Having identified the customer and prepared a database of
individual profiles, the next step is to call at the residence of individual
prospects for live demonstration or to offer a free sample of the product.
Since the individualistic approach ensures better chances of being
heard, it is far less difficult to get an order for the product. In the aforesaid example, the firm was successful not only in selling its gadget to a
majority of the host-listed respondents, but in the future too, this
database may be of immense help in identifying and targeting
customers if it introduces some related product such as a blood sugar or
body weight monitor, or a self testing kit for diabetic patients.

Finally, having been able to sell the product or service to a

customer, it i9s essential to keep in touch with him / her through mail,
telephone or any other means of communication, to retain him / her as a
customer. To create a lasting relationship, firms must maintain regular
contact and update their data according to the changing needs and
tastes of the customers.

35

Direct Marketing

THE BENEFITS OF DIRECT MARKETING

Direct marketing benefits customers in many ways. Home shopping
is fun, convenient, and hassle-free. It saves time and introduces
consumers

to a larger

selection

of merchandise. They can do

comparative shopping by browsing through mail catalogs and on-line

shopping services. They can order for goods for themselves or others.
Business customer also benefits by learning about available products
and services without trying up time in meeting sales people.
Sellers also benefit. Direct marketers can buy a mailing list
containing the names of almost any group: left-handed people,
overweight

people,

and

millionaires.

They

can

personalize

and

customize their messages. According to Pierre Passavant: We will store

hundredsof messages in memory. We will select ten thousand families
with twelve or twenty or fifty specific characteristics and send them very
individualized laser-printed letters. Direct marketers can build a
continuous relationship with each customer. The parents of the newborn
baby will receive periodic mailings describing new clothes, toys, and
other goods as the child grows. Nestles baby food division continuously
builds a database of new mothers and mails six personalized packages
of gifts and advice at key stages in the babys life.

36

Direct Marketing
Direct marketing can be timed to reach prospects at the right
moment, and direct marketing material receives higher readership
because it is sent to more interested prospects. Direct marketing
permits the testing of alternative media and messages in search of the
most cost- effective approach. Direct marketing also makes the direct
marketers offer strategy less visible to competitors; finally, direct
marketers can measure responses to their campaigns to decide which
have been the most profitable.

FACTORS CONRIBUTING TO GROWTH OF DIRECT

MARKETING IN INDIA
In the international market direct marketing has evolved through the
catalogue route. It was the catalogue marketer of the 1930s who set the
pace, but it took direct marketing several decades to reach its presentday multimedia, interactive modes status. In India, direct marketing was
launched on the mail-order platform in the 1950s but the growth in the
earlier days was sluggish and the practice was confined to only a
product categories. Most major developments in this area took place
only after the consumer boom in the mid 1980s.
Direct marketing in India has since grown by leaps and bounds. With
the advent of competition in the 1990s, several firms such as Philips,
Telco, Titan and BPL who were earlier marketing their product through
conventional channels only are now turning to direct marketing to
strengthen their marketing efforts and increase their consumer base.
They are integrating direct marketing with conventional distribution to
get closer to their customer.

37

Direct Marketing
The following major factors have contributed to the quick growth of
direct marketing in India:

Successful replication of overseas products and marketing

practices in India.
Eureka Forbes made history of sorts in India by successfully

marketing vacuum cleaners through door-to-door selling. The firm had,

in fact not done anything new. It had only been replicating here the
strategy, which was earlier used in the European markets quite
successfully. Nevertheless, its success in India provided a role model for
other firms to emulate.

Change

in

the

Indian

business

environment

due

to

liberalization
Some major changes in the Indian business environment, especially
after 1991, made the domestic markets for many consumer and
industrial products more competitive. For the first time, several business
firms that were well entrenched in their markets felt the heat of
competition. It was now essential for them to get closer to the
customers to protect their markets. Many of them, such as ONIDA, HMV,
BPL and Titan who were selling their products only through agents and
middlemen, switched to a parallel channel of direct marketing by
opening several exclusive retail shops. The aim was to keep in direct
touch with the customers and provide certain services that were not
being provided by the middlemen.
Another objective of opening exclusive showrooms was to build an
up-market image of the company by demonstrating the full range of
products. The ambience and dcor of the exclusive showrooms also
helped these firms in adding value to their brands. LML Vespa, Liberty

38

Direct Marketing
shoes, Bausch & Lomb eye care products and several others ventured
into direct retailing probably due to this reason alone. Service firms such
as ITC Hotels and ANZ Grindlays Bank found direct marketing very
effective in retailing customers and weathering competition.

Middlemen getting stronger.

Several firms such as those in the publishing business are now

increasingly opting for direct marketing to reduce their costs of

distribution. Over the years, middlemen in India have become very
strong and demanding. In pharmaceuticals, IMFL (Indian made foreign
liquor), packaged food and several other industries, the market is in fact
controlled by middlemen, who dictate terms to manufacturers. In the
FMCG category any new firm wanting to enter the market is virtually at
the mercy of middleman. Because of the higher mark-ups the cost of
distribution for products like soft drinks, confectionery, ice-cream and
frozen goods has gone up to the extent that in some cases it is even
higher than the cost of production. If the trend continues, it may prompt
many more firms to check the direct marketing alternative.
Another reason for the spurt in direct marketing activities is that
dealers usually push brands selectively, depending upon their equation
with the manufacturers. Therefore to protect their brands from
discrimination and to get direct aces to the market, more and more firms
are now opening their exclusive showrooms, especially in large cities
and towns.

Advent cable television.

Proliferation of satellite television channels and the resultant rise in

cable TV connections in urban and semi-urban India has offered an

39

Direct Marketing
excellent opportunity for marketing firms to exploit this new high-tech
medium for direct communication. Teleshopping firms such as Dees
Teleshopping, Teleshopping Networks (TSN) and Asian Sky Shop (ASS)
are now marketing jewellery, toys, cosmetics, watches, leisure products,
domestic gadgets, car finance and many more products and services
through their small screen.
The UPS of Teleshopping is the convenience of shopping from home
and getting the goods delivered at ones doorstep. The selection of
products to be marketed through teleshopping, therefore, depends
largely on the target audience and the timing of the programme. As this
medium of retailing is relatively new to Indian firms, companies are
mostly concentrating on unique household items and targeting upmarket housewives.

PRODUCT SUITABLE FOR DIRECT MARKETING

Industrial goods are traditionally sold through the companys own
sales force. In case of high-value industrial products, such as machines,
equipments, high-tech engineering goods, and projects where long-term
standing in the marketing and one-to-one relationship with the
customers are both important, direct marketing may produce better
results as compared to other approach. Madras based medium sized
engineering firm, RKKR Steels has demonstrated that even construction
grade steel products (such as bars, angles and frames) can be marketed
directly to builders, contractors and individual buyers.
Services come next in the list of favorites for direct marketing. In
service oriented business, retaining the customers and getting repeat
business is critical for the success of any venture. Perhaps because of

40

Direct Marketing
this an ever-increasing number of foreign and private sector banks,
hotels, airlines, corporate hospitals, health clubs and couriers firms are
now banking more on direct marketing.
Individual approach, as used in direct marketing helps in creating
customer loyalty, the backbone of service organization. In India, firms
like ANZ Grindlays bank, DHL Worldwide, ITC Hotels, NEPC Airlines and
many more have benefited immensely by direct marketing during the
last couple of years.
Direct approach is also being used extensively in the marketing of
financial products such as new issues of shares, fixed deposits schemes
and mutual funds. Real estates and plantation firm like Anasals
properties, sterling Holiday resorts, Anubhav Plantation, teak Equity and
many more have been making the most direct marketing. Nevertheless,
direct marketing is Viable only if the margins in the business are high
enough to absorb the cost of maintaining regular contract with
customers; otherwise it may turn out to be a losing proposition.
The next category of products suitable for direct marketing is
high value, high involvement

consumer products such as expensive

cars, jewellery, designer watches and furniture, some specialty products

that have a small customer base, such as medical equipment, health
care products and special application gadgets may also be marketed by
making direct contracts with prospects.
High-value, low volume niche marketing items such as Single malt
whisky, ray-ban sunglasses, Bausch & Lomb eye care products and
premium blends of tea (e.g., editors choice) are ideally suited for direct
marketing. Many such products like exercisers, executive diaries, new
compact music disks, car accessories, new kitchen appliances and

41

Direct Marketing
expensive perfumes are normally not available at retail stores. Because
of their novelty value, these may evoke better response if marketed
directly to the consumers.
Amway Corporations lists of items more suitable for direct selling
includes cosmetics, vitamins, books, cutlery, domestic electronic goods,
air and water filters, clothing, food and wine, Kitchen appliances,
Kitchenware, cleaning products, toys and crafts, hobby items, hand
tools, automobile accessories, as well as an endless variety of catalogue
items either unique to the company or sourced from third parties.
Direct marketing is also effective where the firm has a family of
products to offer to the same person or household. It is far more
economical and makes better business sense to sell to the known
customers rather than finding a new customer every time. Some
publication groups such as Living media and Spectrum Communication,
who offers a variety of publications for different tastes, have taken this
route successfully. Eureka Forbes benefited immensely from their
database about the vacuum cleaner buyers, when they introduced
another novelty product (water purifier) in the market.
With the advent of multinational brands in the Indian market, direct
marketing may also penetrate into lifestyle product categories such as
fashion garments, perfumes, shoes, wristwatches and toiletries. ITC has
already shown the way by opening exclusive showroom in a few select
metros for its Classic brand premium cigarettes and golf accessories.

42

Direct Marketing

STRATEGIES FOR DIRECT MARKETING

Strategies for direct marketing a product or service to the target
customer would normally encompass the following equally importance
elements:

Planning the product offer

Pricing policy
Media strategy
Distributing
Evolving the basic strategy for direct marketing requires a careful study
of the market and the product, and logical planning.

Planning the product offer

43

Direct Marketing
A product offered through direct marketing may be one of the three
types.

A product specifically developed for direct marketing

A product designed and priced exclusively for direct marketing is

not available in retail shops or through any other outlet. Its

designing, packaging, pricing and positioning is normally done in a
way that it may be offered with or without some add-on attachments
for free trail, and distributed directly through post or courier. Bull
work exerciser, cease fire extinguisher, editors choice tea and many
other were developed (or blended) especially for direct marketing.
Several electrical gadgets, kitchen appliances, hand tools and fashion
items marketed exclusively but tele shopping organizations are still
not available through any other outlet.

A retail product adapted for direct marketing

Retail may be adapted with minor changes for use in direct

marketing. There are several ways of making such changes. Changing

the packaging, accessories, attachments and even the brand name
are some of the common techniques of adoption. A multi-part product
such as different volumes of an encyclopedia may be marketed as
separate units. Dramatization of some features of product to make it
look like different offer is another way of adapting a retail product for
direct marketing. For instance it is a no-frills, basic products, the firm
may stress on simplicity, user-friendliness and responsible price. On
the contrary, if the product is complicated and difficult to operate,

44

Direct Marketing
you may stress on advance technology. Nash (1986) termed this
strategy as turning lemons into lemonade.
Another method of adaptation involves repositioning the product
on some different attributes or usage patterns so that it looks like a
different product. Nash (1986) calls it changing the product without
changing it. Anyone who doesnt believe this may have a hard look
at some of the products currently being offered through mail order
and telescoping.

retail

product

marketed

without

any

modification

through both conventional as well as direct channels.

It is always possible for a firm to use direct marketing as an
additional channel to market its products, without making any change
or modification in the retail version of the products. Most magazines,
music CDs, encyclopedia, premium whiskeys, exercising equipment,
computers, etc., are usually marketed through direct as well as
conventional channels in identical forms and formats.
In the US markets, many computer firms are hawking their hardware
with identical configurations by using the conventional as well as
direct route. Let us examine the following case.
Pricing strategy
In direct marketing, price is often used to spearhead the overall
marketing strategy of the firm. Not only the price but the way it is
expressed is also very important. It may be quoted in several ways: as
net price excluding all accessories, freight and forwarding costs and
taxes or as a package-deal price including all of these; or with some

45

Direct Marketing
additional offers such as free gifts, guarantee or credit offers. The Tele
Shopping Network (TSN), for example, offered BPL microwave oven to
buyers in Mumbai and Madras at the same price as ion the market, with
free Borosil bowls.
A new product may be launched with a special introductory offer,
or at a low invitation price or special subscription price, or with an
opportunity to participate in some contest or sweepstake. Pricing
strategy for direct marketing thus has to be flexible and adaptable to
different situations.
Media strategy
Media strategy for direct marketing may incorporate a logical
testing plan with some calculated risk, to exploit a productive campaign
as quickly as possible. The media commonly available to direct
marketers are direct mail, press coupons, telephone, cable TV, and
television and computer networks. Each of these has its own merits and
demerits. Press Coupon is gaining popularity because it is economical
and gives quick feedback. The advantage of direct mail lies in its highly
individualized communication. The activity of the firm therefore remains
unnoticed by the competitors for a long time. Due to this unique benefit,
many new products in the West are launched through direct mail.
Direct markets may use different media depending on the nature
of the product and the target audience. Mumbai-based Burlingtons, for
instance are currently using mail order catalogue; Music Today is using
direct mail; Shie perfume and Dollop ice-cream use the telephone. O &
M direct had earlier used television to enroll volunteers for the national
Literacy Mission Campaign.

46

Direct Marketing
In India, teleshopping is an emerging mode of direct marketing. The
shape it will acquire in the future will depend more on how the current
players perform. In order to increase the visual appeal and make the
communication more authentic and believable, the display of products is
important; equally important is how and by whom. TSN has therefore
hosts which images go well with the products they present. So, Priya
Tendulkar (of Rajani fame) with her quality conscious housewife image
demonstrated kitchen appliances, Mandira Bedi with all her charm hosts
jewellery shows, and health products are hawked by sports star Mickey
Mehta. These carefully selected hosts add the much-needed zing to
mundane selling and buying.

MAJOR DECISIONS IN DIRECT MARKETING

In preparing a direct-marketing campaign, marketers must decide
on their objectives, targets, offer, strategy, various tests, and measures
of campaign success. Here we will receive these decisions.

Objectives:

The direct marketer normally aims to secure immediate purchases

from prospects. The campaign success is judged by the response rate. A

47

Direct Marketing
response rate of 2% is normally considered good in direct marketing
sales campaign. Yet this rate also implies that 98% of the campaign
effort was wasted.
That is not necessarily the case. The direct marketing presumably
had some effect on awareness and intension to buy at a later date.
Furthermore, not all direct marketing aims to produce an immediate
sale. One major use of direct marketing is to produce prospects leads for
the sales force. Direct marketers also send communication to strengthen
brand image and company preference; examples include banks that
send birthday greetings to their best customers. Some direct marketers
run campaign to inform and educate their customer to prepare them for
later purchases; thus Ford send out booklets on how to take good care
of your Car. Given the variety of direct marketing objectives, the direct
marketer needs to carefully spell out the campaign objectives.

Target customers:

Direct marketer needs to figure out the characteristics of customers and

prospects that would be most able, willing, and ready to buy. Bob Stone
recommends

applying

the

R-M-F

formulae

(recency,

frequency,

monetary amount) for rating and selecting customers from a list. The
best customers target who bought most recently, who buy frequently
and who spend most. Points are established for varying R-M-F levels, and
each customer is scored; the higher the score, the more attractive is the
customer.

Direct marketers can use segmentation criteria in targeting prospects.

Good prospects can be identified on the basis of such variables as age,
sex, income, education, previous mail-order purchases, and so forth.

48

Direct Marketing
Occasions also provide a good segmentation departure points. New
mothers will be in the market for babys clothes and baby toys; college
freshman will buy computers and clothing and newly married will be
looking for housing furniture, appliances and bank loans. Another good
segmentation departure points are consumer lifestyles. There are
consumers who are marketers have targeted these groups and won their
ears and minds. Companies and industries 24-1 provides the survey
findings of Japanese consumer who tended to purchase through direct
mail.
Once the target market is defined, the direct marketer needs to
obtain names of good prospects in the target market. Here is where list
acquisition and management skills come into play. The direct marketers
best list is typically the house list of past customers who have bought
the companys products. The direct marketers can buy additional lists
from list brokers. Manes on these lists are priced at so much a name. But
external lists have problems, including name duplication, incomplete
data, obsolete address, and so on. The better list include over lays of
demographic and psychographic information, in addition to simple
addresses. The main point is that the direct marketer needs to test in
advance to know their worth.

Offer strategy:

Direct marketers have to figure out an effective offer strategy to

meet the targets needs. Nash sees the offer strategy as consisting of
five elements-the product, the offer, the medium, the distribution

49

Direct Marketing
method, and the creative strategy. Fortunately all of these elements can
be tested.

Each medium has its own rule for effective use. Consider direct
mail. In developing a package mailing, the direct marketer has to decide
of five components. Each component can help or hurt the overall
response rate. The outside envelope will be more effective if it contains
an illustration, preferably in colors and / or a catch reason to open then
envelope, such as the announcement of the contest, premium, or
benefit to the recipient. Envelops are more effectivebut more costly
when they contain a colorful commemorative stamp, when the address
is hand typed or hand written, and when the envelope differs in size or
shape from standard envelops.
The sales letter should use a personal salutation and start with a
headline in bold type in the form of news lead, a how / what / why
statement, a narrative, or a question to gain attention. The letter should
be printed on good quality paper and run for as many pages as are
necessary to make the sale, with some indented paragraphs and
underlining of pertinent phrases and sentences. A computer-typed letter
usually out pulls a printed letter and the presence of a pithy P.S. at the
letters end increases the response rate, as does the signature of
someone whose title is appropriate and impressive. A colorful circular
accompanying the letter will also increase the response rate in most
cases by more than its costs. The reply should feature a toll-free number
and contain a perforated receipt stub and guarantee of satisfaction. The
inclusion of postage-free reply envelope will dramatically increase the
response rate.
Consider on the other hand, a telemarketing campaign. Effective
telemarketing depends on choosing the right telemarketers, training

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Direct Marketing
them well, and incentivizing them. Telemarketers should have pleasant
voices and project enthusiasm. Women are a script an eventually move
towards more improvisation. The opening lines are critical. They should
be brief and lead with a good question that catches the listeners
interest.

The telemarketers need to know how to end the conversation if

the prospect seems to be poor one. The call should be made at the right
times, which are late morning / afternoon to reach business prospects
and the evening hours between 7 to 9 to reach households. The
telemarketing supervisor can build up telemarketer enthusiasm by
offering prices to the first one who gets an order to the top performer.
Given the higher cost per contact telemarketing and privacy issues
precise list selection and targeting is critical. Clearly, other media, such
as catalogue mail order, TV home shopping, and so on, have their own
rules for effective use.

TESTING DIRECT MARKETING ELEMENTS

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Direct Marketing
One of the great advantages of direct marketing is the ability to
test under real marketplace conditions the efficiency of different
components of the offer strategy. Direct marketers can test product
features, copy, prices, media, mailing lists, and the like. Although directmarketing response rates are at the single-digit level, testing these
components can add substantially to the overall response rate and
profitability.
The

response

rate

to

direct

marketing

campaign

typically

understates the long-term impact of the campaign. Suppose only 2% of

recipients of a direct-mail piece advertising Samsonite luggage place an
order. A much larger percentage became aware (direct mail has high
leadership), and some percentage form an intension to buy at a later
date (the purchase will occur at a retail outlet). Furthermore some
percentage of the audience may mention Samsonite luggage to others
as a result of seeing the promotion. Some companies are now measuring
the impact of direct marketing on awareness, intension to buy, and
word-of-mouth to derive a large estimate of the promotions impact than
is measured by the response rate alone.

Measuring the campaigns success:

By adding up the campaign costs, the direct marketer can figure

out in advance the needed break-even response rate. This rate must be
net of returned merchandise and bad debts. Returned merchandise can
kill an otherwise effective campaign. The direct marketers needs to
analyze the main causes of return merchandise, such as late arrival,
defective merchandise, and damage in transit, not as advertised and
incorrect order fulfillment.

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Direct Marketing
By carefully analyzing past campaigns, direct marketers can
steadily improve their performance. Even when a specific campaign fails
to break even, it might still be profitable.
Suppose a membership organization spends $10,000 on a newmember campaign and attracts hundred new members each paying
$70. it appears that the campaign has lost $3,000 ( =$10,000 - $7,000 ).
But if 80% of new members renew their membership in the second year
the origination gets another $5,600 without any effort. It has now
received $12,600 (=$7,000 + $5,600) for its investment of $10,000. To
figure out the long-term break-even rate one needs to figure out not
only the initial response rate but the percentage that renew each year
and for how many year they renew.
This example introduces the concept of customer lifetime value.
The ultimate value of the customer is not reveled by the customers
purchase during a particular mailing. Rather the customers ultimate
value is the profit made on all the customers purchase overtime less the
customer acquisition and maintenance costs. For an average customer,
one

would

calculate

the

average

customer

longevity,

average

customers annual expenditure, and average gross margin, properly

discounted for the opportunity cost of money, less the average
customers whose expected life time value the company wants to assess.
After assessing customer lifetime values, the company can focus its
communication efforts on the more attractive customers. These efforts
include sending communications that may not even sell the customer
anything-but maintain the customers interest in the company and its
products. Such communications include free news letters, tips and
birthday greetings, all serving to build a customer relationship.

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Direct Marketing
Direct marketing has spawned a growing body of theory,
measurement,

and

competent

practice.

It

adds

number

of

communication concepts and capabilities to the marketers toolbox.

When tied to a carefully developed customer database, it can increase
sales and profit yields and strengthens customer relationship. It can
provide more accurate prospect leads and trigger new sales at a lower
cost. Ultimately, marketers will make direct marketing and database
marketing an integral part of their marketing strategy and planning. Yet
they must do this responsibility.

Channels of distribution:

Direct marketing use several channels of products to the target

customers. Pioneers of direct marketing in India have successfully tried
door-to-door selling. This versatile mode of distribution can be used with
equal effectiveness for high-value gadgets such as water purifiers,
specialty items such as health care product, life style products like
perfume and cigarettes, as also for items of mass consumption such as
detergent, toilet soaps and eatables. The only problem is its high costs.
Mail order delivery has its limitations. It is more suitable for books,
magazines, audio and video cassettes, small gifts and specialty items
such as fashion garments. Distribution through firms exclusive shops is
more suitable for up-market consumer product that requires selective
distribution and / or efficient after- sales services.

PUBLIC AND ETHICAL ISSUES IN DIRECT MARKETING

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Direct Marketing

Direct marketers and their customer usually enjoy mutually rewarding

relationships. Occasionally, however, a darker side emerges:

Irritation:

Many people find the increasing number of hard-sale directmarketing solicitations to be a nuisance. They dislike direct-response TV
commercials that are too loud, too long and too insistent. Especially,
bothersome are dinner time or late-night phone calls, poorly trained
callers and computerized calls placed by an auto-dial recorded-message
player.

Unfairness:

Some direct marketers take advantage of impulsive or less

sophisticated buyers. TV shopping shows and infomercials may be the
worst culprits. They feature smooth-talking hosts, elaborately staged
demonstrations, claims of drastic price reductions, while they last time
limitations, and unexcelled ease of purchase to capture buyers who have
low sales resistance.

Deception and fraud:

Some direct marketers design mailers and write copy intended to

mislead buyers. They may exaggerate product size, performance claims,

or the retail price. Political fundraisers sometimes use gimmicks such
as look-alike envelopes that resemble official documents, simulated
newspaper clippings, and fake honors and awards. Some nonprofit
organizations pretend to be conducting research surveys when they are

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Direct Marketing
actually asking leading questions to identify donors. The Federal Trade
Commission

receives

thousands

of

complaints

each

year

about

fraudulent investment scams or phony charities. By the time the buyers

realize they have been hiked and alert the authorities, the thieves have
fled to another location.

Invasion of privacy:

It seems that almost every time consumers order products by mail or

telephone, enter a sweepstakes, apply for a credit card, or take out a
magazine subscription, their names, addresses, and purchasing behavior
may be added to several company databases. Critics worry that
marketers may know too much about consumers lives, and that they
may use this knowledge to take unfair advantage. Should AT&T be
allowed to sell marketers the names of consumers who frequently call
catalog companies 800 numbers? Is it right for credit bureaus to compile
and sell lists of people who have recently applied for credit cards? Is it
right for states to sell the names and addresses of drivers license
holders, along with height, weight, and gender information, allowing
apparel retailers to target people with special clothing offers?
People in the direct-marketing industry are attempting to address
these issues. They know that, left untended, such problems will lead to
increasingly negative consumer attitudes, lower response rates, and
calls for greater state and federal regulation. In the final analysis, most
direct marketers want the same thing that consumers want: honest and
well-designed marketing offers targeted only to those consumers who
appreciate hearing about the offer.

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Direct Marketing

NEWER DIMENSIONS OF DIRECT MARKETING

Some emerging trends in direct marketing are telemarketing
(marketing through telephone) and electronic shopping. In India,
suppliers of industrial components and materials catering firms and
service organization (such as hotels and transporters) have being
booking orders on telephone since long. But telemarketing in an
organized for emerged only in 1990s new-concept products such as
perfect ice and brands of established firms such as lakme (shie),
Cadbury (dollops) and Shaw Wallace (single malt whisky) were the
earlier

practitioners

of

tele

marketing.

With

the

expansion

of

communication network this phenomena is catching up fast. Citibank

has come out with tele banking in the metros.
Television marketing is a visual of telemarketing. The marketers buy a
time-slot on television to demonstrate and describe the product, and
customers can call toll free number and order the product. Private Cable
TV network are also being used for television marketing.
Electronic shopping has two firms the videotext system permits a
customer having interactive cable TV connection to order products
displayed on TV screen by operating a small terminal. Alternatively, he
can computer network to receive information about different products
and their prices, compare various offers, choose the product and key in
his product. Many firms have also started hawking their ware on the
worldwide computer web Internet.
Another significant development in the Indian context is the
emergence

of

syndicated

distribution

network

services

like

the

Bangalore based fresh force the organization has created a pool of

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Direct Marketing
about 15,000 educated and trained sales persons ready for hire by any
direct marketing firm. In the beginning, only a few publishing firms have
shown interest, but if the experiment is successful several, consumer
goods companies may follow suit. More so because this is not only cost
effective but also promises quicker cash inflow. More recently, another
distribution trend to hit the Indian market is multi-layered marketing
(MLM), detailed as part of distribution. But this may not exactly fit the
definition of marketing. In the changing business environment, direct
marketing is an important alternative mode of approaching the
customers. It makes sense for the companies to integrate direct
marketing with conventional marketing, to keep track of the customers
and maintain regular contract with him. Not only will it promise a more
customer-friendly and caring image of the company; it will also facilitate
creation of a long-term customer relationship. Firms such as Telco
Philips,

titan

and

nestle,

who

otherwise

their

market

through

conventional channels have already developed large database on their

customers and maintain regular contract with them through direct
communication. With more and more firms realizing the value of
retaining a customer, an integrated approach towards marketing will
gain more currency.

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Direct Marketing

CASE EXAMPLE
Direct marketing of a blood pressure instrument.
An electronic gadgets manufacturing firm wanted to market
in India a small, hand-held electronic instrument for measuring blood
pressure at home. The price of the instrument was fixed around Rs.3,000
a piece. Being a specialty product, it was perceived to have only a
limited clientele. As the firm had no establishment channel of
distribution, it decided to take the direct-marketing route. The product
was unique in the sense that it offered the convenience of constant
monitoring of blood pressure at home, in the office, or anywhere,
without having to visit the doctor. It could save a lot of time and
inconvenience,

especially

for

busy

professional,

executives,

businessmen and all those who had a hectic work schedule. Since it was
relatively

expensive

product,

senior

executive,

professional

and

businessman over 45 years of age, having an income of more than

Rs.15,000 per month were expected to be the perspective buyers. The
firm adopted the following procedure for identifying and enlisting
prospects.
In order to prepare a cold list, an advertisement of the product, along
with a coupon, was released in two leading newspapers in Mumbai.
Interested individuals were asked to fill up the printed coupon, and send
it to the firm within 10 days to get a free booklet on management of
blood

pressure.

Personal

particulars

relevant

to

identifying

the

qualifying prospects such as income, age, profession, residential

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Direct Marketing
address and details of any health-related problem were to be filled in the
coupon.

A majority of people who responded were found to be suffering from

blood pressure, obesity or heart-related problems. A cold list of about
5000 individuals was generated on the basis of filled-in coupons. This list
was further scrutinized and names of apparently non-serious responding
who might have sent the coupons more out of curiosity. The residual list
of about 3500 respondents was treated as the hot list.
Another alternative to this newspaper ad approach, as suggested by the
research agency was to obtain a list of credit card holders from reputed
banks such as ANZ Grindlays, Citibank, Canara bank, State Bank of India
and Bank of Baroda. The firm could then have sort out the names of
cardholders who were above the age of 40 and occupied senior
executive positions in private or public organizations. This would have
formed the cold list. Next the firms could have sent a brochure and a
personal letter to them offering to arrange a free demonstration would
have formed the hot lists. However this approach was not taken due to
some logistic problem.
The respondents were then clustered into different segments on the
basis of their health status: those who had only mild blood pressure but
no other problem; those suffering from obesity and blood pressure both;
those suffering from blood pressure and some cardiac problems; those
who had blood pressure and diabetes with or without some cardiac
problem; and so on. This database of all the listed people with their
detailed profiles helped the firm in identifying specific needs of the
respondents.

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Direct Marketing

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