Direct and Internet Marketing - Research Paper Example

Direct and Internet Marketing The American Marketing Association (1995), representing marketing professionals s that "Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders." This definition stresses the importance of delivering genuine value in the goods, service and ideas marketed to customers. Organization doing the marketing and the stakeholders affected such as customers, employees, suppliers and shareholders should both benefit. External forces such as social, technological, economic, competitive and regulatory factors also affect marketing activities. From appearing first in 1952 in annual report of GE (Annual Report, New York: General Electric Company, 1952) marketing concept has acquired the most important aspect for any organization. An organization that has a market orientation focuses its efforts on 1) Continuously collecting information about customers needs 2) Sharing this information across departments and 3) Using it to create customers values (Narver, Slater, and Tietje, 1998). The ever changing situation of the market i.e. of buyers, suppliers, customers, employees or technological could change the equilibrium of any organization. Organizations normally adjust to these changes by changing their overall all-round policies and strategies. The market-led approach has three components: Consumer orientation, Competitor orientation and Inter-functional co-ordination (See Appendix). The result is today's "Customers era", in which firms seek continuously to satisfy the high expectations of customers. An important outgrowth of this focus on the customer is the recent attention placed on customers relationship management (CRM), the process of identifying prospective buyers, understanding them intimately and developing favorable long term perceptions of the organization and its offering so that buyers will choose them in the market place (Srivastava, Shervani and Fahey, 1999). This process requires the involvement and commitment of managers and employees throughout the organization and a growing application of information, communication and Internet technology. Now reaching perspective buyers either, directly or indirectly is a prerequisite for successful marketing. To reach out to the customers organizations use different channels through which goods and services from the producer/providers flows to buyers either through intermediaries or without them. To communicate with customers, a company can use one or more of five promotional alternatives: advertising, personal selling, public relations, sales promotions and direct marketing. The first three alternatives are often use mass selling because they are used with groups of perspective buyers. In contrast, personal selling uses customized interaction between a seller and a perspective buyer. Personal selling activities include face-to-face, telephone and interactive electronic communications. Direct marketing also uses messages customized for specific customers. Direct marketing uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet (Economic impact: U.S. Direct marketing today, New York: Direct marketing Association, 1998). The communication can take many forms including face to face selling, direct mail, catalogs, telephone, oscillations, direct response advertising (on television and radio and in print), and online (Internet) marketing. It has an advantage of being customized to match the needs to specific target markets. Messages can be developed and adopted quickly to facilitate one to one relationship with customers. Direct marketing have certain disadvantage First direct marketing requires a comprehensive and up to date data base with information about target market. Developing and maintaining the database can be expensive and time consuming. In present circumstances, the growing concern about privacy has lead to the decline in response rates among some customer groups. The increasing Internet in customer relationship management is reflected in the dramatic growth of direct marketing. The ability to customize communication efforts and create one-to-one interactions is appealing to most marketers. While direct marketing methods are not new, the ability to design and use them has increased with the availability of database. In recent years, direct marketing growth in terms of spending revenue generated and employment has out paced total economic growth. Direct marketing expenditures of $217 billion in 2004 are expected to grow 18% by 2007. Similarly, 2004 revenue of $2.3 trillion are expected to grow $3.0 billion by 2007. Employment has also grown and now numbers more than 17 million employees (Economic impact: U.S. Direct marketing today, New York: Direct marketing Association, 2000). Amazon.Com is one of the examples of the companies fueling growth in direct marketing. Amazon.com appears to be presuming a strategy to make itself the Wal-Mart of the Internet. Amazon.com is the Internets No.1 retailer. Amazon.com open its virtual doors on the World Wide Web in July 1995 and today offers Earth biggest selection along with online auctions and free electronic greeting cards. Amazon.com seeks to be the world's most customers centric company, where customers can find and discover anything they might want to buy. Amazon.Com's more than 25 million customers and with Amazon.com payments sellers can accept credit card transaction avoiding the hassles of offline payments. In a very short period of time Amazon.com has become one of the worlds most recognized brands with core value of customers' satisfaction. This shows another component of the growth in direct marketing in the increasing popularity of the newest direct marketing channel-the Internet. Total online sales have raised form close to nothing in 1996 to projections approaching $144 billion today. Continued growth in the number of consumers with internet access and the number of business with Websites and electronic commerce offerings is likely to contribute to the future growth of direct marketing consumers report many benefits including: they don't have to go a store, they can usually shops 24 hrs a day, buy of direct saves times, they avoid hassles with sales people, they can save money, its fn and entertaining and direct marketing provides excellent customers service (Statistical Fact Book' 98, New York: Direct marketing Association, 1998). Toll free telephone numbers, customers service representative with access to information regarding purchasing preferences, overnight delivering services and unconditional guarantees and help create value for direct marketing customers. A Land sand.com when customers need assistance, they can click a 'help' icon and a sales rap will take control of their browsers until the correct product is found. It's like we were walking down the aisle in a store," says one lauds End customers (Berner, 2000). The value of direct marketing for seller can be described in terms of the responses it generates (Economic impact: U.S. Direct marketing today, New York: Direct marketing Association, 1998). Direct orders are the result of offers that contain all the information necessary for prospective buyer to make a decision to purchase and complete the transaction. Club Med, for example uses direct e-mail offers to sell "Last minute special" to people in its databases. The massages, which are sent midweek, describes rooms and air transportation available at a 30 to 40% discount if the customer can make the decision to travel on such short notice (Krol, 1998). Lead generation is the result of an offer designed to generate Internet in a product or service and a request for additional information. Finally traffic generation is the outcome of the offer designed to motivate people to visit a business. Mitsubishi recently mailed a sweepstakes offer to 1 million perspective buyers to encourage them to visit a Mitsubishi dealer and test drive the new Galant. The name of prospects that took test drives was entered in the sweepstakes, which included a Galant, a trip to Hawai and large screen TVs as prize (Halliday, 1998). Most of the leading organizations are now taking direct marketing as a strategy to sustain market share and growth. They use it as business to customers as well as business-to-business approaching strategy. They use this real time control systems for monitoring the impact of promotional activity and use this knowledge to gain competitive advantage. The customer database can also be used to analyze markets, determine why orders are won or lost, evaluate the effectiveness of promotions and generate revised sales forecasts (Nash, 1994). By tracking customer order patterns and collecting data on which promotional device prompted customer response, these firms are in a position to assess rapidly both the effectiveness of various promotional activities in relation to specific customers target groups and to forecast future near term demand patterns for each of the many items which constitute their entire, often highly diversified, product portfolio. Even organizations rely on direct marketing to institutions business organizations or Govt. Here the buyers' needs and expectations are different from customers. Every business seller is a business buyer as well to add value; many business sellers use the Internet to help business buyers to do their jobs. Cisco systems for example, invite customers to go online to put together different network router components and see prices before they buy one customer, sprint, found the Cisco's system slashed the time needed to complete networking projects from 60 days to as little as 35 days (Tully, 1998). Institutional marketing has achieved larger proportions such as allegiance Healthcare, who is largest US supplier of medical, surgical and laboratory products to schools, Hospitals etc. By using Allegiances value link system Hospitals save an average of $5,00,000 or more yearly and gain faster, easier access to the items they need. This shows that direct marketing is the most upcoming trend in marketing whether to customers, organizations, institutions or government each area of business will be affected by this approach. Now we have seen that in almost in every organization the information technology and database management as well as marketing are the core elements of direct marketing system. Database are the result of organizations efforts to collect demographic, media and consumption profiles of customers so that direct marketing tools, such as catalogs, can be directed as specific customers. While most companies try to keep records of their customers past purchases, many other types of data are needed to use direct marketing to develop one-to-one relationship with customers. To translate data into information the data must be unbiased, timely, pertinent, accessible and organized in a way that helps the marketing manager make decisions that lead to direct marketing actions. Technology may also prove to be important in the global growth of direct marketing. Development of communication technology, creating many new direct marketing opportunities. Developments in international marketing research and database management will also facilitate global growth. Global and domestic marketers both face challenging ethical issues today. Concerns about privacy, however have led to various attempts to provide guidelines that balance consumer and business interests. The European union recently passed a consumer policy law, called the data protection Directive, after several years of discussion with the federation of European Direct marketing and U.K.'s Direct marketing Association. In US, the federal trade commission and many state legislatures have also been concerned about privacy (Koranten, 1998; Glazer, 1998). Another issue, the proliferation of e-mail advertising, has received increasing attention from consumers and marketing recently. But the present technological revolution provides certain opportunities to direct marketing. The greatest market space opportunity for marketers, however lies in its potential for creating form utility. Interactive two way Internet enabled communication capabilities in market space invites consumers to tell marketers specifically what their requirement are, making customization of a product or service to fit the buyer's exact needs possible. Marketers also benefit from two unique capabilities of Internet technology that promote and sustain customer relationships. One is interactivity the other in individuality (Mohammed et al., 2004). Internet technology allows for interaction, individualization and customers relationship building to be carried out on a scale never before available and makes interactive marketing possible. Interactive marketing involves two-way buyer seller electronic communication in a computer mediated environment in which the buyer. Controls the kind and amount of information received from seller. Interactive marketing today in characterized by sophisticated choice board and personalization system that transforms information supplied by customers into customized response to their individual needs. Similarly collaborative filtering is a process that automatically groups people with similar buying intensions, preferences, and behaviours and predict future purchases (Hanson, 2005). Choice boards and collaborative filtering represents two important capabilities of Internet technology and have changed the whole concept of marketing. Both concepts are marketers imitated effort to provide customized responses to the needs of individual buyers. Personalization systems are typically buyer-initialed efforts. Personalization is the consumer initiated practice of generating content on a marketer's website that is custom tailored to an individual's specific needs and preferences. For example yahoo allows users to create personalized My Yahoo pages. An aspect of personalization is a buyer's willingness to have tailored communication brought to this or her attention. Obtaining this approval is called permission marketing the solicitation of consumer consent to receive e-mail and advertising based on personal data supplied by the consumers. A continuing challenge for companies is to design and execution of marketing programs that capitalize on the unique and evolving customers value creation capabilities of Internet technology. Companies now realize that simple applying Internet technology to create time, place from and possession utility is not enough to claim a meaningful market space presence is measured. From an interactive marketing perspective, customers experience is defined as the sum total of the interactions that a customer has with a company's website from the initial look at a home page through the entire purchase decision process (Rayport, and Jaworski, 2004). So it has been quite evident that Internet marketing opens a new avenue for the marketers in general and Direct marketers in particular. Direct marketing cannot be thin of without Internet. Presently it becomes synonymous to each other. Internet technology, communication system and computers are so embedded with direct marketing that almost every level of direct marketing has to be performed with the help of above technology. The organizations who operates through direct marketing provides their customers, an information interchange channel through which customer is seeking to purchase the standardized goods at lowest prices and as per their specifications. Organizations have to maintain the two-way communication channel so that customers and organizational move towards better customer relationship management. In business to business markets, as organizations move towards a relationship marketing orientation, the tendency is for the number of inter organizational contact sources to increase as both parties promote the concept of maximizing the number of communication links between employees in both organizations. Typically, this change in nature of the organizational relationship is accompanied by a sharp rise in the overall volume of data exchange. After passing through relationship building and commercial confidentialities sharing organizations move towards a far more complex web information exchange between the organizations. Many firms device have the front-end system with behind the scenes online response system. This latter element is critical to ensure the customer receives an appropriate response. It is based on an integrated computerized, customer data based system, which permits the responding employee both to validate the background of the customer and to record actions, which have been initiated in response to each enquiry. It inter organizational and/or intra organizational communication are poorly managed, the mistakes will occur that can lead to massive customer dissatisfaction. So a more effective solution is to recognize that IT permits a quantum leap in the volume of data interchange, if operating systems are correctly designed. Additionally, the technology can be used to ensure that all parties are kept completely informed about all issues that may influence employee effective execution of assigned responsibilities. For this organizations has to design an effective promotional communication system through which the required data and information flows. Direct marketing practices are spreading day-by-day through adoption of newer technological innovations. Direct mail and catalogs have achieved greater importance in direct marketing system. E-mail is the latest tool used through Internet technology provides personalized relationship with customers and enhance the quality of relationship between customer and organizations. Catalos improve marketing efficiency through segmentation and targeting and they create customer value by providing a fast and convenient means of making a purchase. The Direct marketing Associations predicts that catalog sales will reach $175 billion by 2008. Furniture retailer IKEA delivered 130 million copies of its catalog to 36 countries in 28 languages (U.S. Catalog sales to top $175bn, Precision marketing, May 14,2004, p.9.). As consumers direct mail purchase have increased the number of catalogs and the member of products sold through catalogs have increased. Similarly online marketing allows consumers to search for, evaluate and order products through the Internet. The advantages for consumers through online marketing are 24 hour access, the ability to comparison shop, in home privacy and variety online marketers are trying to improve, the online marketing experience by adding experiential or interactive activities to their Websites. Marketers emphasized the customer value creation possibilities, the importance of interactivity, individuality and relationship building and producing customer experience in the new market space. However consumes typically refers to six reasons why they shop and buy online: convenience, choice, customization, communication, cost and control. The advent of modern process technologies permits producers to experiment with adding value by customizing output to suit individual customer needs (e.g. Levi-Strauss's in store computer system which collects information that enables their factories to produce jeans which are individually tailored to fit the specific shape of individual customers). Linked to this picture of new millennium markets is the need to "think global, but respond locally" by exploiting the power of computerized databases to identify newly emerging micro market niches and the respond with appropriately tailored products or services. As we enter the new millennium marketers will have to be increasingly vigilant about changing power bases and technological innovations within their marketing channels. The impact of electronic connectedness demands that firms recognize the growing importance of technology such as EDI, the Internet and video conferencing for communicating with others in their sectors supplier customer chain. In An electronically inter linked borderless world, only if firms desire to sink into oblivion showed they resist adopting innovations such as home page sites with 'hot buttons' to be used by customers seeking more information, comparing offerings placing orders and or seeking post purchase services from their suppliers. ****************************************************************** References: 1. American Management Association (1995) from website accessed on 23rd March 2007. 2. Annual Report (New York: General Electric Company, 1952), pp. 21. 3. Narver, John C., Slater, Stanly F. and Tietje, B. (1998) " Creating a market orientation," Journal of market focused management, no. 2, pp. 241-55; Narver, John C., Slater, Stanly F. (1995) "Market orientation and the learning organization," Journal of marketing, July, pp. 63-74; Day, George S. (1994) " The capabilities of market driven organizations," Journal of marketing, October, pp. 37-52. 4. Srivastava, R.K., Shervani, T.A. and Fahey, L. (1999) " Marketing business processes, and shareholder value: An embedded view of marketing activities and the discipline of marketing," Journal of marketing, special issue, pp. 168-79. 5. Economic impact: U.S. Direct marketing today (New York: Direct marketing Association, 1998), p. 25. 6. Economic impact: U.S. Direct marketing today (New York: Direct marketing Association, 2000), p. 24-30. 7. Statistical Fact Book' 98 (New York: Direct marketing Association, 1998). 8. Berner, R. (2000), "Going that extra inch," Business week, September 18, p. 84. 9. Economic impact: U.S. Direct marketing today (New York: Direct marketing Association, 1998), p. 25-26. 10. Krol, Carol (1998) " Club Med uses E-mail to pitch unsold, discounted packages," Advertising age, December 14, p. 40. 11. Halliday, J. (1998) "Taking direct root," Advertising age, September 7, p. 17. 12. Koranten, J. (1998) "European privacy rules go into effect in 15 EU states," Advertising age, October 26, p. S31: Glazer, R. (1998) "The illusion of privacy and competition for attention," Journal of interactive marketing, Summer, pp.2-4. 13. Mohammed, R.A., Fisher, R.J., Jaworski, B.J. and Paddison, G.J. (2004) "Internet Marketing: Building Advantage in a Networked Economy," 2nd ed. Burr Ridge, IL: McGraw-Hill/Irwin. 14. Hanson, W. (2005) "Principles Of Internet Marketing," 2nd ed. Cincinnati, OH: South-Western College Publishing, pp. 215-30. 15. Rayport, J.F. and Jaworski, B.J. (2004) "e-Commerce," 2nd ed. Burr Ridge, IL: McGraw-Hill/Irwin. 16. U.S. Catalog sales to top $175bn, Precision marketing, May 14,2004, p.9. 17. Nash, R. (1994) "How to transform marketing through IT," London: Management Today Publication. 18. Tully, Shawn (1998) "How Cisco Mastered the net"; Fortune, August 17, pp 107-110. Appendices Appendix-1 The market-led organisation (Source: Jaworsky and Kohli, 1990) The first two involve the organisation-wide generation of market intelligence regarding current and future customer needs, and making this information available to all departments. Customer orientation also involves continuously monitoring customer information in order to be able to create superior value. Inter-functional co-ordination concerns the organisation-wide co-ordination of resources in response to customers. Inter-departmental 'connectedness' has a key role to play in the dissemination of and the responsiveness to market intelligence by the organisation (Jaworski and Kohli, 1990). Appendix-2 One of the organizations Water Aid (www.wateraid.org.uk) an international charity, based in UK works for poor communities in Africa and Asia improved and managed marketing process through applying concepts like segmentation and analysis to decrease donor attrition. It has conducted two major direct marketing campaigns that results in more than 21,000 new regular donors each year. By developing innovation and analysis of information and by applying specific project "The information Edge" the organization gleaned a better understanding of who is giving, what creative packages work best, and when it is appropriate to ask for larger gift. The charity is applying this knowledge to its ongoing test and control cycle to improve the return on its direct marketing investment. Water Aid collected gift and donor information and applied direct marketing segmentations techniques to develop a clear picture of post donor behavior. Normally in not-for-profit organization volunteer, who is marketing for the organsiation, most of the time have regular face-to-face contracts with beneficiary and with donor whether they are individuals or institutions, volunteers direct contact is less and therefore organization contact through E-mail and through websites using Internet and other forms of contact. Most of the organizations engage in relationship marketing with their beneficiaries and donors alike. Competition among charities for donor income has increased dramatically in recent years. Moreover, charities have to compete against each other for cause relating marketing contracts with commercial enterprises and sponsorship deals and must bid competitively for govt. grant. Competitors' analysis shows that factors such as market commonality; resource similarities, competitive reward structures and environment turbulence have similar influence on not-for-profit organizations. A large number of UK charities have extended their products; sales into areas not traditionally associated with non-profit organization, charity's image and reputation exert a strong influence on donor behaviour. Charity sector is one of the UK's biggest users of direct marketing. The organizations, which placed high value on the marketing function, are in general more successful. In UK, a high value is placed on parity of services across the whole country in NHS. The introduction of NHS direct service, which is fast, convenient to access, range of services supported by considerable amount of technology enhances the users. Other allied and supportive services has been added to NHS direct services and interfaced with people results that NHS a public sector, came closer to its users (Monro et al., 2000). Read More