Of the thousands of people in advertising and marketing, many will tell you proudly that they are not just in marketing, they are in direct marketing.
There is a substantial difference.
Like marketing, direct marketing involves analyzing the needs of a target audience and considering how best to design, package, and market a product or service that meets those needs.
It means estimating the size of a market, thinking about the competitive environment, pinpointing customer preferences, establishing a customer profile, and devising a strategy to promote the product or service to that customer. But in direct marketing, the customer communication process is far different and so often is the way products actually reach the purchaser.
In the traditional advertising, marketing, and sales process, a product is shipped to a distribution point such as a retail store. Advertising and promotion draw interested customers to the store, where salespeople can close the sale.
Direct marketing uses media to deliver a message that often asks the consumer to purchase through a separate, non-store distribution channel, usually the mail or a private package delivery service like UPS. It may also direct the consumer to make a purchase through traditional channels.
HOW IT WORKS
Getting a message "direct" to the customer or prospect means using a medium like direct mail or the telephone that can target a specific group of consumers with certain characteristics, instead of a medium like television that addresses millions of people at a time. In direct marketing, the message always requests a response, the "immediate action" that it seeks to produce.
Responses can take a number of different forms. A catalog or a direct mail package asks recipients to purchase items by placing a mail or telephone order. A direct mail fund-raising appeal is carefully constructed to persuade recipients to make a generous contribution. But costly goods and services like an expensive security system are sold through "two-step" offers, in which people calling in response to a message are given additional information, sent a printed package of material for review at home, and are then called again ,sometimes more than once , in an attempt to close a sale.
But whether the response comes by phone or mail, it can be measured. This means that the success of every direct marketing offer is evident as soon as all the responses are in. A lot of responses equal a successful offer, while less than you predicted means the offer failed.
According to most experts, the classic formula for direct marketing success is to build a list of satisfied customers, and then go back to them for repeat sales. That's why a database captures name and purchase information whenever a customer orders a down jacket or a piece of furniture, sends in a check to a charity, or decides to go ahead with a security system installation.
This "house file" is a direct marketing company's most important asset. It can be used to sell additional goods and services, or generate revenue by renting those names to noncompeting direct marketers. Even traditional marketers, such as package-goods manufacturers, are discovering that communicating with a customer database can boost in-store sales.
At bottom, direct marketing is sales, pure and simple. Although some marketers are beginning to measure its results in terms of image, it is still radically different from traditional image advertising-those million-dollar shots of a bull running through an empty Wall Street, or a canine party animal living it up with beer drinkers. No, direct marketing is response advertising-advertising, through the mail, in a magazine, over the radio, or on TV, that is geared to making a sale. It succeeds or fails on its response: how many people raise their hands and buy the product.
THE RISE, FALL OF RELATIONSHIP MARKETING
In the old world and in the early days of the new one, merchants knew their customers' tastes and habits inside and out.
But when the twentieth century rolled around, a rising emphasis on manufacturing began to change the face of retailing in the United States. Small stores and one-to-one selling were pushed aside by large chains that offered lower-priced goods and made money on volume. National brands like Quaker Oats cereal or Ivory soap, recognized by consumers in every corner of the country, did not need to be personally sold. Brand loyalty was built by national advertising campaigns, cost-effective thanks to network radio and television, and national-circulation magazines.
As the "mass market" grew, personal selling began to disappear. Retailers grew less interested in tracking an individual customer's tastes and more interested in increasing volume through products that meet the needs of the larger population. Accessibility, price, and convenience were emphasized over individual service and preferences until the last two decades, when consumers began once again to pride themselves on their individuality instead of their commonality.
But even during the peak years of the mass market, one corner of marketing was quietly refining its ability to communicate with consumers personally - direct marketing.
When few merchants were bothering to remember preferences and tastes, direct marketers were busy tracking their customers' buying behavior, noting the size, quantity, color, and price of every item their customers purchased, so they could offer similar merchandise in the future. They were also learning more about what made customers open envelopes and consider offers in the first place, what reassurances helped them decide in favor of a purchase and what incentives helped them pay promptly.
In essence, this attention to customer preferences is what direct marketing is all about. And that is why direct marketing stands poised to help the marketer of the '90s reach the ultimate target, you. One individual, whose preferences and buying habits can be tracked and catered to the advantage of both the marketer and the consumer.
HOW DIRECT MARKETING STARTED
There are historians who will argue that the roots of direct marketing are actually much older, but in the U.S. its Mr. Ward and Mr. Sears who are credited with launching and refining the direct mail phenomenon. Both men, based in Chicago, used their "wish books" to market goods to farmers and small town citizens all across the country.
Aaron Montgomery Ward was a traveling salesperson who discovered that he could offer rural customers quality goods at up to 40 percent off if he purchased large quantities of goods for cash directly from manufacturers, and then sold them for cash directly to rural consumers. In 1872, he issued a single-page sheet listing items for sale and explaining how to order them. The single-page sheet quickly grew to 8 pages, and by 1884, Ward's catalog had 240 pages and listed ten thousand items.
As a railroad station agent, Richard Warren Sears took advantage of special freight rates to sell watches wholesale to other station agents, who marked them up and sold them again. When Sears, Roebuck & Company began in 1893, Sears branched out beyond railroad station agents, eventually serving the same largely rural audience developed by Ward. By 1897, Sears, Roebuck &Company had 318,000 catalogs in circulation and by 1907, 3 million.
When Ward's and Sears began, catalog distribution was problematic. The U.S. Postal System was still rudimentary in the late nineteenth century; while urban customers took home delivery of letters for granted, it wasn't until 1898 that "Rural Free Delivery" brought catalogs and first-class mail directly to farmers and small town residents.
Fulfillment that is, how packages from Sears and Ward's actually reached rural patrons was another challenge. Before 1913, the U.S. Postal Service delivered letters only. Packages were shipped via rail or by private carriers like American Express and Wells, Fargo. To receive a package, one had to go to the nearest railroad freight station.
In 1913, the U.S. Postal Service introduced Parcel Post. Within a year, 300 million packages were shipped! a boon to both companies. In the first year of Parcel Post, Sears received five times the number of orders it had the year before, and the increase at Ward's was almost as dramatic.
HOW WARD'S AND SEARS SUCCEEDED
How did two companies in Chicago convince consumers in Nebraska, Utah, Idaho and other far-flung states to order merchandise they had never seen from people they had never met?
Mr. Ward used a technique that continues to work successfully today, "third-party endorsement." He played up his affiliation with the Grange, a farmers' organization, to build farmers' confidence about buying from Ward's. Testimonials from satisfied Grangers calmed many fears and established Ward's catalog as a real boon to farmers. Both Sears and Ward's overcame customer hesitation with ironclad guarantees: all goods were sent "subject to examination" and any item found unsatisfactory could be returned to the company, which paid for transportation both ways.
Both Sears and Ward's brought a personal touch to their treatment of customers. All letters were responded to, most by hand. This practice persisted even after the typewriter came into use, because the largely rural clientele were offended by "machine-made" letters.
Third-party endorsements and personalization remain important direct marketing techniques today. So do dozens of other techniques discovered earlier this century by direct marketers who carefully tracked the results of each mailing, and determined the factors that improved them. Over the decades, for example, direct marketers observed that
Offering a premium to first-time buyers was an effective way to pull in a new customer. (This was first tested in the 1930s, when the Book of the Month Club became a big success by offering free books to subscribers.)
Some months were better than others for direct mail campaigns. In certain months, a mailing would pull more response; in others, response would be depressed.
Certain kinds of magazines and newspapers-and certain sections of them offered a profitable environment for mail-order ads; others just didn't work at all.
Adding "involvement devices" like "yes" and "no" stickers, plastic membership cards, parchment certificates, "lift" letters and hand-printed passages helped keep a prospect's attention and encouraged order placement.
These time-honored tactics have been supplemented by a host of more recent innovations that have made direct marketing even more precise and more effective.
First, the victory of the computer over the typewriter and the index card has revolutionized the way customer names and purchasing data are recorded.
Next came the discovery that sophisticated demographic data can be overlaid on a list of names to create ever smaller market segments.
Finally, the advent of credit cards, telephone and fax ordering, and private delivery services shortened the order and shipment cycle from the old "four to six weeks" to a handful of days.
As a result, direct marketers have developed an almost scientific ability to
- Identify a likely customer.
- Construct an offer that will appeal to that customer.
- Write and design a letter or package that the customer will open, read, and respond to.
- Sell and deliver merchandise quickly.
At one time, jokes about "junk mail" were a dime a dozen. Fortunately, that term is disappearing, as consumers by the millions begin to acknowledge and appreciate the benefits of non-store shopping. Recent statistics from the Direct Marketing Association indicate that
- 52.6 percent of the U.S. population ordered merchandise by phone or mail in 1991, spending almost $35 billion on catalog purchases alone.
- Nearly 10 percent of those consumers spent over $300 on merchandise ordered by mail or phone.
- Among their purchases, 27.5 percent were for clothing, 16.8 percent for magazines, and 11.5 percent for books ordered by mail.
- 16 percent bought items by mail or phone six or more times in 1990.
- Annual sales of goods and services through direct marketing are over $200 billion.
- The total percentage of American adults shopping direct has increased nearly 70 percent since 1983.
WHY BUSINESSES LIKE DIRECT MARKETING?
Businesses appreciate direct marketing for its versatility. Time has demonstrated that there is almost nothing direct marketing can't sell. Today it can be used to
- Sell products directly to customers.
- Sell corporate season tickets for professional sports teams.
- Launch new credit cards and attract new credit-card customers.
- Sell insurance and other financial services.
- Generate leads and convert them to sales.
- Generate traffic for retail stores.
- Establish consumer demand for products that can be converted to retail.
- Books, videos, cassettes, and compact discs.
- Clothing.
- Furniture.
- Fresh flowers.
- English muffins.
- Steaks and Wine.
- Condominiums and Retirement Communities.
- Mobile Homes.
- Expensive Business Equipment and Supplies.
- Automobiles.
WHY YOU SHOULD CONSIDER DIRECT MARKETING?
Direct marketing is at the vortex of a decade of marketing change. It's cutting edge. It's exciting. It's effective. And it's mesmerizing to the people who call themselves direct marketing professionals.
Direct marketing is a technique as well as an industry. The situations where the technique is practiced multiply almost daily. A person who understands how to reach and motivate consumers through direct marketing can be an asset to almost any company.
This means that a career in direct marketing will be full of variety. Over the course of a career, a direct marketing copywriter might write direct response magazine ads for a direct marketer of collectible plates, and then move to developing and executing creative strategies and advertising copy for packages that market luxury consumer goods to holders of premium credit cards. Later, he or she might move to the agency side and become a copy supervisor, coaching junior staff through an ever-changing collection of assignments. Eventually, the writer might go free-lance or move up to creative director or even head an agency. Opportunities for marketing planners and strategists are just as exciting and just as diverse.
In fact, each place where direct marketing is practiced is bound to be different. In an agency, you may handle a number of different direct marketing assignments for a number of clients, or just one big one. In a direct marketing company, you will specialize in just one or two lines, developing a deep appreciation for your company's market.
In a catalog company, you may participate in the general management of a catalog, or focus on marketing, creating, or stocking certain divisions within it.
You might find yourself managing one or more house lists for a direct marketer or a professional list management company. You might become a list broker, knowledgeable in matching marketers with lists of likely prospects. You might become a consumer data expert who helps marketers design and build proprietary databases.
You might write copy, design visuals, or manage a product line. You might conduct brainstorming sessions where new creative concepts are generated, or present those concepts to clients. Whatever you do in direct marketing, it will be stimulating and exciting and, in all likelihood, well compensated.
There's one more reason why direct marketing is an excellent choice: it's a career of the future. As the sun sets on mass marketing and rises on micromarketing, direct marketers are ideally positioned to create the brave new world of one-on-one marketing communications that, pundits say, will characterize consumer and business-to-business marketing in the twenty-first century.
WHERE THE JOBS ARE
Most direct marketing opportunities are clustered in Chicago and New York, but opportunities exist in other parts of the country as well.
Nebraska. Omaha is telemarketing central and the toll-free capital of America, home to dozens of catalog companies, credit-card servicing centers, and hotel reservation services, not to mention Omaha Steaks, which sells more than $20 million in choice steaks, prime ribs, tenderloin tips, and other seafood and gourmet items to consumers and commercial accounts throughout the U.S. and abroad.
New England - Home to major insurance companies with direct marketing divisions, plus the grandfather of direct mail, L.L. Bean of Freeport, Maine. Also home to one of the nation's oldest mail-order houses, Orvis, which manufactures and sells $40 million in men's and women's casual clothing, as well as hunting and fishing equipment.
Mid Atlantic states - Day Timers, in Pennsylvania, markets time-management supplies to business people. They manufacture, print, and sell by mail only to people in major corporations, using a catalog and periodic solo mailings.
California - is home to the high-profile catalog companies Williams Sonoma and The Nature Company. Both have leveraged their success by opening successful retail enterprises- a trend that is penetrating many direct marketing companies.
Northwest states - Jackson & Perkins, which sells bulbs, ornamental plants, bushes, trees, and award-winning roses by mail to consumers, greenhouse owners, retail nurseries, and garden centers is located here. Their revenues are more than $61 million annually. You'll also find direct mail purveyors of salmon and fruit. Eddie Bauer is also located in this region.
Texas - This is where you'll find Neiman-Marcus and Horchow Mail Order, now part of an upscale direct marketing/retail group that sells lavish goods and fashion and the famous "His and Her" gifts by mail to upscale buyers.
For the most part, direct marketing agencies thrive in cities like New York, Chicago, Toronto, Los Angeles, San Francisco, and Boston. But there are hundreds of smaller agencies and direct marketing experts are needed at thousands of general advertising agencies across the U.S. and Canada.
In short, wherever there are marketing opportunities, there are direct marketing opportunities.
ONE PRE-REQUISITE: A HEAD FOR NUMBERS
Some of the pre-requisites for success in direct marketing- ambition, intelligence, stamina, and passion-are necessary to success, in general. Others are more specific to direct marketing. Among these, the biggest one of all is a head for numbers.
Numbers, numbers, numbers. Direct marketing may be creative, but it's also a numbers business. For decades, direct marketers have tracked every variable of every mailing to see just how much each ad or mailing earned, and have fiddled with packages, products, offers, and media to try and improve response and profitability. In fact, it was direct marketing's accountability that catapulted it to prominence. Just a few of the key mathematical concepts a direct marketer needs to know are
- Media cost or cost per thousand, obtained by dividing the number of dollars spent on media by the number of direct marketing pieces mailed.
- Response rate, generally calculated as the total number of orders or inquiries received divided by the total number of pieces mailed.
- Cost per response, which is the total promotion budget divided by the total number of orders or inquiries received.
- Customer lifetime value or how much a customer is worth to you, which determines how much you can spend to acquire him or her.
- Regency/frequency/monetary, which is another formula for determining a customer's potential.
Even those involved in the creative side of marketing need an analytical orientation in order to succeed in direct marketing. "The best copywriters and art directors have some of the keenest business minds around," notes Patrice Lyon, senior vice-president for network development at Ogilvy &Mather Direct.
Fortunately, direct marketing math is taught in college courses and professional seminars. Large employers with formal in-house training programs include it in their curricular. And most direct marketing books devote a chapter or two to describing the basics and how to apply them.
THE FUTURE OF DIRECT MARKETING
According to Jerry Reitman, executive vice president at Leo Burnett USA, Stanley Marcus of Neiman-Marcus has predicted that by the end of the 1990s, 35 cents out of every dollar will be spent on direct mail. Notes Reitman, "I think he's right. People used to either buy or not buy through mail order. Now, they see it as just another channel. They buy some things from mail order, and others from local sources."
Most marketing experts agree that the use of direct marketing can only increase. Not only will the direct marketing industry expand, but so will opportunities for people who can integrate direct marketing techniques into mainstream marketing and retailing.
In 1990, direct marketing is no longer a new field. The people who "got in on the ground floor" are already there. But those who enter it during this decade will find themselves part of an industry whose prospects and challenges are bright and exciting.
Jerry Reitman sums it up: "People often talk as if the golden days of direct mail and direct marketing were behind us. But I believe that the golden age is yet to come."
