global gadgets

GGI 1

Running Head: DIRECT MARKETING AT GGI

Direct Marketing at GGI

Dr. Gilmore

Athabasca University

Marketing Assignment 1

Marketing Management

2

TABLE OF CONTENTSObjective....................................................................................................................................3

Introduction................................................................................................................................3

Direct marketing.........................................................................................................................3

Forms of Communication in Direct marketing..........................................................................4

Direct Mail Marketing...........................................................................................................5

Text Message Marketing........................................................................................................5

Email Marketing.....................................................................................................................5

Marketing through Websites..................................................................................................6

Benefits and Challenges of Using Direct Marketing Media......................................................6

Direct Mail Marketing: Benefits and Challenges for Marketers and Consumers.................6

Text Message Marketing: Benefits and Challenges for Marketers and Consumers..............7

Email Marketing: Benefits and Challenges for Marketers and Consumers..........................8

Internet Marketing: Benefits and Challenges for Marketers and Consumers.......................8

Sources of Consumer Information.............................................................................................9

Issues Faced in Using Consumer Information Effectively.......................................................10

Data Mining Techniques......................................................................................................10

Authenticity of Information..................................................10Privacy and Integrity of Data..............................................................................................................10Online Harassment.......................................................................................................10Personalized Marketing.............................................................................................................................................11

Personalized Marketing versus Direct Marketing...............................................................11

Activities Involved in Personalized Marketing.....................................................................12

Examples of Personalized Marketing...................................................................................12

Goals of Personalization Strategy.......................................................................................13

Key Factors in a Personalization Approach........................................................................15

Recommendations for GGI......................................................................................................17

REFERENCES.........................................................................................................................19

3

OBJECTIVE

The objective of this report is to describe the nature, scope and key issues involved in

direct marketing with a view to make concrete recommendations to the management at

Global Gadgets Imports for using direct marketing to increase its stagnant sales.

INTRODUCTION

After beginning operations as an importer and wholesaler of home décor and gift

items in 1992, Global Gadgets Imports opened its own retail store in 1995. Since then both

the retail and wholesale businesses have grown until recently when sales through the

wholesale channel have been declining while retail sales have become stagnant.

This report describes direct marketing along with the common modes of

communication used in direct marketing. The benefits and challenges of direct marketing to

consumers and marketers are discussed next. The sources of consumer information are

identified. Personalized marketing is discussed in detail along with real life examples. The

goals and key issues in personalized marketing are discussed. The report concludes with

some specific recommendations for GGI management for using direct marketing to stimulate

revenues.

4

DIRECT MARKETING

Direct marketing represents an important stage in the evolution of marketing strategy. It is

a marketing strategy that is more direct, customized, interactive, and measurable than its

predecessors, namely mass marketing and niche marketing. In contrast to these two

strategies, direct marketing involves interacting with one customer at a time without invading

his or her privacy. In other words, this may be called as Permission Marketing because here

the customer allows the marketing company to contact him or her with promotional

information about new goods and services. This element was missing in the earlier strategies

and resulted in a huge waste of resources (Thomas, 2008)1.

Direct marketing is more customized and direct than mass marketing. In mass marketing,

the same message is delivered to a wide audience through impersonal media. This results in

interrupting the activities of the passive recipient who may not be interested in making a

purchase. Therefore, the resources of the marketing company are wasted. Direct marketing

delivers messages only to individuals who allow or invite it. In this way, the probability of

their making a purchase increases and the marketing investment yields profitable results

(Thomas, 2008).

In contrast to niche marketing, direct marketing is more cost-effective. Certain niches that

are more attractive also attract the most competition, which increases the amount of resources

spent on niche marketing. There may be other smaller niches with clearer needs that can be

satisfied more easily by the company. Therefore, by targeting smaller and fewer niches or

segments, the marketing company may increase its chances of success. This is how direct

marketing operates—by targeting individual customers instead of niches or segments

(Thomas, 2008).

1 Thomas. A. R., (2008). Direct Marketing in Action: Cutting-Edge Strategies for Finding and Keeping the Best Customers. Greenwood Publishing Group

5

Direct marketing is also more interactive because it relies more on interpersonal

communication and uses interactive tools like the Internet and other forms of interactive

communication, giving customers and companies the opportunity to speak and listen to one

another (Thomas, 2008).

FORMS OF COMMUNICATION IN DIRECT MARKETING

To achieve the direct, targeted, focused communication, direct marketers use different

forms of communication media to transmit their message to the audience. Some of these

media include direct mail marketing, text message marketing, email marketing, and websites.

These media are discussed below.

Direct Mail Marketing

Direct mail marketing is one of the oldest methods of direct marketing. Traditionally,

direct mail marketing involved the mailing of printed product catalogues to prospective

customers. Although this has reduced in importance due to the emergence of more rapid

means of communication, direct mail marketing is still used extensively in business-to-

business marketing where printed product catalogues are regularly mailed to existing and

prospective customers. Direct marketing may also take the form of solo mailings where a

single product or service, instead of a complete range of offerings, is marketed to the

customer (Roberts & Berger, 1999)2.

Text Message Marketing

Text message marketing is a modern version of telemarketing, which was an intrusive

form of marketing causing unpleasant interruptions. Text message marketing involves

sending marketing messages via SMS to current and prospective customers. These tend to be

less customized and are addressed to a mailing list.

2 Roberts, M. L., & Berger, P. D., (1999). Direct Marketing Management, 2nd Edition. Prentice Hall

6

Email Marketing

Email marketing occurs when an individual shares his or her email address with a

company to receive regular updates and promotional messages about its products. This is an

effective means of marketing because the recipient is in a receptive frame of mind and may

not ignore the message. Companies can then communicate the tangible and intangible value

of their products more effectively (Butler, 2009).

Marketing through Websites

Marketing through websites is also known as Internet marketing. The company uses

its own and other websites to deliver marketing messages to the target audience. Internet

marketing takes the form of banner ads, online discussion groups, seminars, fan pages, and so

on to attract online customers. The most attractive feature of Internet marketing is the scope

for interaction. The company can listen to the comments and suggestions of customers and

customers can share their opinions with other customers (Jones, 2008)3.

BENEFITS AND CHALLENGES OF USING DIRECT MARKETING MEDIA

Direct mail marketing, text message marketing, email marketing, and Internet marketing

pose some unique benefits and challenges to direct marketers and consumers. These benefits

and challenges are discussed in the sections below.

Direct Mail Marketing: Benefits and Challenges for Marketers and Consumers

Direct mail marketing consists of mailing postcards, sales letter, brochures, catalogues

and other print material to prospective and existing customers. From the marketers’

perspective, this approach has some benefits. It offers an opportunity to provide detailed

information about products to customers, including key features, photographs and even

3 Jones, S. K., (2008). Business-to-Business Internet Marketing: Seven proven Strategies for Increasing Profits through Internet Direct Marketing, 5th Edition. Maximum Press

7

testimonials. This strategy is flexible as it allows the marketer to deliver relevant material to

customers based on their previous purchasing history. The challenges include the high cost of

producing the print material and postage. Moreover, it should be distinguished from other

junk mail that the customer may receive and should provide an easy way of following up with

a purchase.

From a consumer’s point of view, this strategy has the benefit of being more durable

and hence it can even be viewed later by the customer at his or her convenience. Information

about a wide variety of products is available. The challenges for the consumer include

ensuring that the brochure or catalogue does not become ignored and end up with other junk

mail (Kurtz, MacKenzie, & Snow, 2009)4.

Text Message Marketing: Benefits and Challenges for Marketers and Consumers

Text message marketing is also known as SMS marketing. This method offers several

benefits to the direct marketer. It is much cheaper and faster to transmit a text message than

mail a product catalogue. The direct marketer can reach a much larger number of customers

through SMS marketing. Often the mailing list is provided by a third party but the company

may develop its own database and mailing list. SMS marketing is appropriate for brief

messages like important notices, announcements, reminders, congratulatory messages, and

thank you messages. It is also more interactive and can be used for voting and polls. The

challenges include keeping the message brief and relevant because of the small screen size.

There are no spam filters on mobile phones so irrelevant messages can cause customer

inconvenience. Prior permission of the customer is necessary. It is also important to

customize the message (Botha, Bothma, & Geldenhuys, 2008).

4 Kurtz, D. L., MacKenzie, H. F., & Snow, K., (2009). Contemporary Marketing, 2nd Edition. Cengage Learning

8

From a consumer’s perspective, SMS marketing is a quick way of getting reminders

about upcoming sales, events and product launches. Customers can also forward the message

to their friends and family members. The challenges include ensuring one’s privacy. Often,

customers are added to mailing lists without permission. It is also necessary for them to be

sure of the authenticity of the message and its source. Managing large numbers of incoming

messages can also be a challenge for many people.

Email Marketing: Benefits and Challenges for Marketers and Consumers

Email marketing consists of sending promotional email messages to customers. This

approach has several benefits for the marketer. It is cheaper and faster than direct mail

marketing. In addition, it allows a greater volume of information to be conveyed than in SMS

marketing. The effectiveness of an email message can also be easily measured by the number

of replies from the recipients. Email marketing can also be done more frequently and creates

top-of-the-mind awareness in the customer, making a purchase more likely. Some challenges

associated with this include the likelihood of the message being directed to the spam folder.

For this, prior permission from the recipient needs to be sought. There is also a need to make

the message memorable and interesting (Groves, 2009)5.

From a consumer’s point of view, email marketing can be informative and

entertaining. It can also provide a means to interact with the company and obtain additional

information. Email messages can also be stored for a longer time than text messages. Some

challenges associated with this include an increase in too frequent and unwanted messages

cluttering the inbox. Sometimes, relevant messages might be delivered to the spam folder

because of faulty spam settings.

5 Groves, E., (2009). The Constant Contact Guide to Email Marketing. John Wiley and Sons

9

Internet Marketing: Benefits and Challenges for Marketers and Consumers

Internet marketing has several benefits for the marketer. The Internet or website

provides the greatest scope for interactivity with the customer. Since the customer initiates

this contact by visiting a website, the marketer has the complete attention of the customer to

deliver the message. In addition to text, visual, audio, and other multimedia tools may be

used to deliver an attractive message. Information can be better organized with the help of

hyperlinks. Customer activity can be tracked and used to develop more targeted messages in

the future. The challenges include ensuring customer privacy and integrity of data shared

over the Internet.

For the consumer, the Internet provides the opportunity to interact with other

customers and share opinions and reviews about a company or product. He or she can

participate in online forums, focus groups and surveys. The key challenge is again to ensure

privacy and confidentiality of personal data.

SOURCES OF CONSUMER INFORMATION

Direct marketers obtain consumer information from a variety of sources. This field has

grown in recent years with the increasing sophistication of Internet tools and online

participation.

Infomediaries are third party organizations that provide information about consumers to

various corporations. They track online activity of consumers on different forums and

organize the information for relevance to different companies. They use sophisticated data

mining techniques to organize this information and sell it to clients for a fee.

Infomediaries obtain consumer information from a variety of online sources. Search

engines are one such example. Internet users visit search engines to look up websites on their

subjects of interest. Their search activity is tracked and provided to companies selling

products similar to the topics searched. These companies then use Internet marketing

10

companies to place banner ads and online advertisements on the web pages of the search

engine website (Saarinen, Tinnila, & Tseng, 2005)6.

Online chat rooms are another source of information. Customers participate in these chat

rooms and share biographical information and personal interests and preferences.

Infomediaries use this information to develop profiles and sell it to marketing companies

(Saarinen, Tinnila, & Tseng, 2005)7.

Online retailing websites are another rich source of information. These websites provide

specific information about customer purchases and preferences. This information can be used

by direct marketers to develop focused and customized marketing messages (Saarinen,

Tinnila, & Tseng, 2005).

Often, marketing companies may generate consumer information on their own instead of

purchasing it from infomediaries. They may track user activity on their website and monitor

the types of products browsed or purchased. They may host online discussions or surveys.

Often customers may provide valuable information to subscribe to a newsletter or alerts

(Saarinen, Tinnila, & Tseng, 2005).

ISSUES FACED IN USING CONSUMER INFORMATION EFFECTIVELY

There are several issues involved in using consumer information effectively and

appropriately for direct marketing. These issues are of a technical as well as ethical nature.

These issues are discussed in the sections below.

Data Mining Techniques

Data mining involves the creation of a database and using database management

techniques to access and use relevant data. Improvements in data mining techniques have

6 Saarinen, T., Tinnila, M., & Tseng, A., (2005). Managing Business in a Multi-Channel World: Success Factors for E-Business. Idea Group Inc.

7 Saarinen, T., Tinnila, M., & Tseng, A., (2005). Managing Business in a Multi-Channel World: Success Factors for E-Business. Idea Group Inc.

11

been occurring at a rapid rate and may be too complicated for managers with average

technical skills.

Authenticity of Information

An important issue in using consumer information for direct marketing arises from the

authenticity or accuracy of information. Because of the geographical distance between the

provider and receiver of information, it is likely that accurate information may not be given.

Any strategy or policy based on this data may be ineffective as well.

Privacy and Integrity of Data

When customers do share personal information on a website, it is important that

confidential information may not be disclosed to unauthorized persons or without the

approval of the customer. It is also important to prevent any chance of misuse or illegal use of

data such as credit card theft or other online crimes.

Online Harassment

It is important to consider the convenience and comfort of the customer in collecting

personal information. Customers should not be stalked or have their personal space invaded.

Any information collected should be done with the consent and approval of the customer.

PERSONALIZED MARKETING

Personalization or personalized marketing is also known as one-to-one marketing. This

concept is different from the traditional concept of mass marketing or niche marketing where

a common message is sent to large and small groups of individuals. In personalized

marketing, the content and features of the marketing message are tailored to reflect the

personality of the recipient (Strauss, 2009)8.

8 Strauss, R. E., (2009). Marketing Planning by Design: Systematic Planning for Successful Marketing Strategy. John Wiley and Sons

12

Personalized Marketing versus Direct Marketing

Personalized marketing may seem the same as direct marketing but there is a difference

between the two. While direct marketing emphasizes the creation of marketing messages to

individuals who have allowed the company to send such messages, personalized marketing

involves adapting those messages so that they seem less impersonal and more personal. This

helps to promote enduring relationships with the customer.

Activities Involved in Personalized Marketing

In personalized marketing, the marketer tries to adapt the message to the personality and

needs of the recipient. For instance, the products that are promoted in the message may be

selected after analyzing the purchasing history of the recipient. Similarly, the message may

open with a personalized greeting with the name of the recipient. The marketer may also

congratulate the recipient on key personal milestones such as a birthday, anniversary, or

purchase of a new house or car (Strauss, 2009)9.

In online forms, personal information like customer name, credit card number, postal

address, and so on may be inserted automatically so that the customer may be saved of the

need. This increases customer convenience and loyalty (Strauss, 2009).

Examples of Personalized Marketing

Several examples of personalized marketing can be found in real life. Three such

examples are discussed below:

Amazon

Amazon is a leading online retailer of books and other consumer products. The company

also practices personalized marketing or selling. Once an online customer has made a

purchase of a book, he or she is prompted towards other books related to the book purchased


13

or to books purchased by other customers who also bought the same book as the customer.

This is a more personalized form of suggestive selling and provides relevant information to

the customer in accordance with his or her preferences (Strauss, 2009).

Porsche

The leading automaker Porsche has implemented an integrated customer relationship

management system for its North America operations. Customer information from ten

databases has been consolidated into a single database. One personalized service is predictive

complaint management under which customer representatives are given advance notifications

of complaints that are likely to occur as when a car has been detained longer than promised

for service repairs. Customer data is also updated regularly so that promotional messages may

be delivered at the right address automatically (Strauss, 2009)10.

Postbank

Postbank is a German bank that has developed a unique approach to personalized

marketing. Promotional brochures bear the recipient’s name. Requests for product

information are responded to with additional relevant information. In addition, most

information on forms is pre-filled to save the customer’s time and promote convenience

(Strauss, 2009).

Goals of Personalization Strategy

The personalization strategy has several benefits over mass marketing and niche

marketing. In addition to these comparative benefits, the personalization strategy also enables

the marketer to achieve his or her marketing goals more effectively and efficiently. These

goals are discussed in the sections below.

Developing Products to Address Specific Needs


14

Customers are increasingly demanding products that meet their unique needs. They are no

longer satisfied with using products that may not have all the features that they prefer.

Because of technological developments it has become easier for manufacturers to move from

a mass production approach to a mass customization strategy where each customer is treated

as an individual market. Personalized marketing helps to communicate the benefits of such

customization to the customer in the most congenial manner. Personalized marketing does

this by tailoring and wording the message to address the unique concerns and informational

needs of the recipient (Strauss, 2009)11.

Addressing Variety Seeking Behavior

Another outcome of mass customization is that customers are no longer satisfied with a

limited range of product versions being offered to them. Variety has become a valued need of

the customers and they want to experience and use a variety of products. Therefore,

companies have to satisfy this need by offering the maximum number of product versions

possible.

The same need can also be addressed through promotional messages. Personalized

promotional messages can be delivered in a variety of forms and using a variety of media to

address the interest needs of the recipients. It also serves to reinforce the message when it is

delivered using various media (Strauss, 2009).

Dealing with Increased Segmentation

In the evolutionary process of marketing strategy, mass marketing was gradually replaced

with niche marketing as marketers began to divide the entire market into distinct segments

based on differing needs and preferences. Therefore, the market became divided into segment

or niches. Later on, the segments themselves were being divided into smaller segments as

distinct needs and preferences were identified. Segmentation also resulted in some wastage of


15

resources because certain attractive segments invited a lot of competition which required

heavy investment of resources. Personalized marketing helps to overcome this by obtaining

prior approval from customers. In this way, competitive activity does not distract the

marketer from marketing activities (Strauss, 2009).

Creating Value

Value is defined as the difference between the benefits the customer receives and the

price he pays. Increasing the value of a product or service makes the product more attractive

for the customer. The marketer tries to increase the perceived value of the product to

encourage purchase by the customer. Since customers value products customized to their

needs, personalized marketing messages and products can help to increase the value of a

product and increase the likelihood of purchase (Strauss, 2009).

Creating Points of Difference

Companies may compete on price or non-price factors. Most competition tends on

creating points of difference that help to make a product seem distinct from the product of a

competitor. The extent to which a product or marketing message is personalized or

customized can be a strong and compelling point of difference (Strauss, 2009).

Key Factors in a Personalization Approach

To develop and implement a personalization approach effectively, it is necessary to

address the key factors in a personalization approach. These include factors related to

technology, customer relations, and communication skills. These and other key factors are

discussed in the sections below.

Technological Factors

We have been discussing personalization in terms of production and marketing. To

achieve success in both, it is necessary to apprise the technological factors involved in both.

16

In personalized production, the importance of technological factors is paramount. It is

necessary that the company possess the technological capability and operational processes to

produce customized and personalized versions of a product while maintaining economies of

production.

Similarly, technological factors are also involved in personalized marketing. Special word

processing and desktop publishing tools are necessary to produce and deliver personalized

marketing material to the relevant audience. Data mining techniques are also necessary.

Quality of Data

The quality of data available is also a strong determinant of the success of any

personalization strategy. Personal information such as residential address or bank account

number might change and needs to be updated. Similarly, tastes and preferences might

change making regular customer surveys essential.

Customer Relations and Mutual Trust

The quality of customer relations also determines the success of a personalization

approach. A successful personalization approach depends on the quality of information

available about customer needs, interests and preferences. In some situations, personal

information is also required.

In order to share such information with a marketer, it is necessary that there exist mutual

trust and confidence between the two parties. The customer should trust that his or her

information will be used in confidence and will not be misused or shared with a third party

without prior consent or approval.

Communication Skills

Personalized marketing depends on effective communication. Effective communication

skills include skills in the selection of appropriate content for the message. The content

should be expressed using the appropriate words and tone. The selection of the appropriate

17

media is also important. Equally important is the timing and delivery of the message. The

marketer needs to be skilled in these areas to adopt a personalization approach successfully.

Because personalization involves treating each message as unique, it becomes even more

necessary to exercise communication skills to each message with careful attention. The

content, words, tone and timing of the message should be chosen according to the personality

and needs of the recipient.

Financial Feasibility

Personalized marketing involves the expenditure of considerable time and effort. It is

important that the value delivered by personalized marketing efforts be made apparent and

measurable by management. The nature of personalized marketing makes it more amenable

to measurement than other forms of marketing. Because of interactivity and the fact that each

message is targeted to one individual, the success or failure of the message may be measured

in the form of ROI measures and response rates. This increases the accountability of the

process and makes improvement possible.

RECOMMENDATIONS FOR GGI

To improve wholesale and retail sales, GGI should adopt a personalization approach to

marketing while maintaining the privacy of its customers. The following points describe how

CI may develop such a system.

GGI should conduct a survey of its existing customers to determine their needs,

interests and preferences. The company should collect this data either through a paper

survey or an online survey. The management should clarify to customers that all the

information collected would be used to improve services for customers and will be

protected against unauthorized use.

GGI should then invest in a database to consolidate all the information acquired. It

should provide training to customer service and marketing staff in database

18

management and data mining techniques so that they can develop accurate customer

profiles, mailing lists and address lists for text message marketing, email marketing

and Internet marketing.

While developing the database, it would be essential for GGI to incorporate security

checks and mechanisms to prevent data theft and unethical use of data. Security

against computer viruses and hackers should be ensured.

There should be means of updating data regularly through an Internet website.

GGI should develop integrated marketing strategies and develop messages for email

marketing, SMS marketing and Internet marketing. Marketing staff should be able to

personalize these messages using customer data from the database and deliver them

through appropriate channels.

19

REFERENCES

Botha, J., Bothma, C., & Geldenhuys, P., (2008). Managing E-Commerce in Business, 2nd Edition. Juta and Company Ltd.

Butler, M. R. (2009). Email Marketing: A Guide to the Internet’s Most Effective Marketing Tool. The Butler Publishing Group

Groves, E., (2009). The Constant Contact Guide to Email Marketing. John Wiley and Sons

Jones, S. K., (2008). Business-to-Business Internet Marketing: Seven proven Strategies for Increasing Profits through Internet Direct Marketing, 5th Edition. Maximum Press

Kurtz, D. L., MacKenzie, H. F., & Snow, K., (2009). Contemporary Marketing, 2nd Edition. Cengage Learning

Roberts, M. L., & Berger, P. D., (1999). Direct Marketing Management, 2nd Edition. Prentice Hall

Saarinen, T., Tinnila, M., & Tseng, A., (2005). Managing Business in a Multi-Channel World: Success Factors for E-Business. Idea Group Inc.

Strauss, R. E., (2009). Marketing Planning by Design: Systematic Planning for Successful Marketing Strategy. John Wiley and Sons

Thomas. A. R., (2008). Direct Marketing in Action: Cutting-Edge Strategies for Finding and Keeping the Best Customers. Greenwood Publishing Group

global gadgets

Documents