Chapter 10 – Direct Marketing and Personal Selling
TRUE/FALSE
1. Direct marketing is an interactive system that uses one or more advertising media to effect a
measurable response at any location.
2. Due to emerging technologies, direct marketers will be able to directly engage consumers with the
brand for the first time.
3. The most common use of direct marketing is to raise brand awareness.
4. Direct marketing is convenient in that it provides consumers access to a range of products in their
homes.
5. One advantage that direct marketing holds over more conventional forms of mass marketing is that it
can identify and serve more-specific segments of the population.
6. The appeal of direct marketing to marketers is the ease with which they can measure results, most
often by calculating cost per program (CPP).
7. Direct marketers do not use mailing lists because they are expensive and outdated.
8. External mailing lists are typically bought or rented from sources outside the organization doing the
mailing.
9. A company is trying to use its marketing database to determine its best customers. An RFM analysis is
an excellent tool for this.
10. Cross-selling is the practice of contacting a competitors‘ customers and attempting to get them to try
your product.
11. Although privacy issues continue to be a hot topic in the national media, research has shown that only
about one in five consumers expresses concerns about privacy issues.
12. A problem with direct marketing is that consumers are concerned that personal information is being
gathered and exchanged between businesses.
13. All conventional media can be used to deliver direct response advertising. However, when
conventional media are used, the effort is no longer considered to be part of a direct marketing
program.
14. Telemarketing is probably the direct marketer’s most invasive tool and as such must be used with
discretion so as not to alienate customers.
15. If a company is willing to spend a lot of money per customer contact in exchange for the highest
response rate around, it should choose telemarketing.
MULTIPLE CHOICE
1. Which of the following is NOT a primary purpose of direct-marketing programs?
a.
close a sale with a customer
b.
create awareness among a variety of target market groups
c.
identify prospects for future contacts
d.
engage customers and furnish product information
2. Direct marketing pioneer, L.L. Bean has always been a relationship builder. Which keen insight did
Bean have into direct marketing from the beginning?
a.
The importance of building a good catalog.
b.
Customers are willing to pay for catalogs if given the proper incentive.
c.
Commitment to customer satisfaction need not be backed up with guarantees to replace
merchandise found lacking.
d.
Long-term relationships are based on trust
3. Which of the following societal factors is driving the growth of direct marketing today?
a.
consumers’ increasing need for convenience
b.
more liberal attitudes about the use of credit and accumulation of debt
c.
developments in technology – in telecommunication and computers
d.
all of these factors are driving the growth of direct marketing today
4. You are marketing manager for a company that packages and markets vacations to exotic locations.
You use a variety of media to promote these trips, including upscale magazines, infomercials, and
direct mail. One of your primary objectives regarding these efforts is to make sure the efforts are
integrated. This is because
a.
integrated programs work more effectively than programs that are not integrated.
b.
it’s easier to measure the results of integrated programs.
c.
integrated programs substantially reduce the cost of communicating with audiences.
d.
integrated programs reduce the need to tailor specific messages to specific audiences.
5. The best word to summarize the popularity of direct marketing with consumers is
a.
value.
c.
convenience.
b.
unobtrusiveness.
d.
technology.
6. From a consumer‘s standpoint, the growth in popularity of direct marketing is fostered by
a.
more liberal attitudes about credit
b.
need for greater convenience.
c.
computers that enable on-line shopping
d.
all of these are factors in growth of consumer direct marketing
7. An emphasis on producing measurable effects is one of the noted appeals of direct marketing, where it
is not uncommon to find cost per inquiry (CPI) calculations. What other calculation is commonly
computed by direct marketers?
a.
Cost per impression (CPI)
c.
Consumer price inquiry (CPI)
b.
Cost per order (CPO)
d.
Segment per inquiry (SPI)
8. The one characteristic that makes direct marketing different from marketing in general is that
a.
the success of direct marketing is ultimately determined by consumer response.
b.
direct marketing relies on audience segmentation.
c.
direct marketing typically has a lower cost per contact.
d.
direct marketing has an emphasis on developing a database.
9. In some cases, marketing databases are enhanced using ____-data that reveals the characteristics of the
neighborhood in which a person resides.
a.
demographic
c.
psychographic
b.
geodemographic
d.
market share
10. There are two broad categories of mailing lists that should be recognized by marketers. ____ lists are
the starting point for developing better relationships with current customers, whereas ____ lists help an
organization cultivate new business.
a.
external; internal
c.
internal; external
b.
demographic; geodemographic
d.
geodemographic; psychographic
11. A good way to isolate a firm’s best customers from a marketing database is with ____ analysis.
a.
recency, frequency, and monetary (RFM)
b.
cost per inquiry
c.
cost per order
d.
demographic, psychographic, and behavioral
12. Which of the following is a basic element of frequency marketing program?
a.
a database
c.
a communication strategy
b.
a benefit structure
d.
all of these are basic elements
13. Mailing list enhancement can be achieved by adding the following information to basic name and
address data
a.
demographic data.
b.
geodemographic data.
c.
psychographic data.
d.
all of these can be used to enhance a mailing list.
14. A business interviews customers to determine their wants and needs. This company is in the process of
developing
a.
a geodemographic data source.
c.
a marketing database.
b.
an external list.
d.
a single-source tracking study.
15. A company uses its marketing database to run an RFM analysis on its customers. The F in RFM stands
for frequency and refers to
a.
the number of times a customer was reached with any kind of advertising message from
the company.
b.
the number of times a customer was reached through a direct-marketing medium for the
company.
c.
the number of times a customer bought a product from any product category.
d.
the number of times a customer bought a product from the company.
16. Firms can use an RFM analysis to isolate their best customers. RFM stands for
a.
returns, frequency, momentum.
c.
recency, freedom, mailings.
b.
records, formats, mailings.
d.
recency, frequency, monetary.
17. A local Elks Club contacts each member that holds an Elks golf membership and inquires as to
whether the member would also like to purchase an Elks pool membership for the family. This is
known as using a marketing database for
a.
cross-selling.
c.
market exploitation.
b.
customer fragmentation.
d.
snowball sales.
18. The greatest concern about direct marketing expressed by consumers is
a.
environmental.
c.
expense of products.
b.
invasion of privacy.
d.
quality of products.
19. A person is concerned with issues of privacy and doesn‘t want his or her name being on mailing lists.
This person can call ____ and have his or her name removed.
a.
the Federal Trade Commission’s Do Not Call Registry
b.
the Direct Marketing Association’s opt-out program
c.
his or her senator or congressperson
d.
the Better Business Bureau in the person’s home state
20. There are three basic elements, each with a specific purpose, in frequency marketing programs. Which
of the following is among them?
a.
a database which is the collective memory for the program
b.
a benefit package designed to attract and retain customers
c.
a communication strategy which emphasizes regular customer dialogue
d.
all of these together constitute the basic elements of frequency marketing
21. A business is considering using a direct mail piece to reach potential customers. Management of the
company should realize that two of the negatives of doing so are a high cost per contact and
a.
bad mail addresses
c.
a limited ability to test executions.
b.
a limited number of creative options.
d.
an inability to track results.
22. The advantage of direct mail as a communication medium stems from its ____.
a.
cost per inquiry
c.
response rate
b.
cost per order
d.
selectivity
23. At present, which of the following forms of direct marketing is considered the most controversial?
a.
telemarketing
c.
advertorials
b.
direct mail
d.
bulk email
24. The direct marketing medium with the highest response rate is
a.
direct mail.
c.
telemarketing.
b.
infomercial.
d.
advertorial.
25. Infomercials were made possible by
a.
the lower cost of ad space on satellite and cable systems.
b.
increasingly gullible consumers.
c.
the advent of videotape.
d.
relaxed network standards for programming.
26. A company wants to sell a fire-resistant car wax in a 30-minute infomercial. What does experience this
medium suggest this company would be wise to do?
a.
Sell the car wax for $9.95—about 50 percent of the maximum price.
b.
Consumers don’t watch all 30 minutes, so the call to action should occur 3 times – every
10 minutes – in the half hour it runs.
c.
Spend the extra cost on a celebrity because they are necessary to gain consumer attention
d.
Understand that using the infomercial will make the brand appear cheap, so calculate the
expected sales return with that in mind.
Scenario 10-1
Coca-Cola Co., Atlanta, launched a nostalgia-filled retail concept space in Nashville, TN., in the
Cracker Barrel Old Country Store location, directly across from the Gaylord Opryland Hotel and
Convention Center. Coca-Cola® advertising and artwork is known throughout the world and frequently
displayed in museums and in the homes of nostalgic collectors. Visitors could now view holiday
artwork in Nashville and at Cracker Barrel Old Country Store® sales personnel would greet customers
and inform them about both brands. This is a natural connection for both brands. For 35 years,
Cracker Barrel has served Coca-Cola in its restaurants and the company honored Coca-Cola’s heritage
alongside its own nostalgic memorabilia. (Jim Taylor, Rare Coca-Cola® Holiday Artwork on Display
at Cracker Barrel Old Country Store®,” http://www.crackerbarrel.com, November 15, 2004.)
27. (Scenario 10-1) within the Cracker Barrel Old Country Store® site there is a big fishbowl inviting
visitors to leave a business card and announcing that once a month there will be a drawing for free
memorabilia for both brands. Those whose cards are drawn will receive their prize items by mail.
What are Cracker Barrel and Coca Cola® doing with this fishbowl activity?
a.
conducting a direct mail sales campaign
b.
collecting the names of businesses their visitors work for
c.
recycling the cardboard used in business cards
d.
developing a mailing list
28. (Scenario 10-1) One marketer of Coca Cola® collectibles offers its best customers a program in which
they are alerted to limited edition items one month before the general public. This assures key
customers that they won’t miss out on a valued collectible due to unexpectedly high demand. This is an
example of
a.
a frequency-marketing program.
c.
an effective use of external lists.
b.
a CPO program.
d.
marcom management.
29. (Scenario 10-1) If the managers of the Cracker Barrel Country Store® site were to buy a list furnishing
not only names but also demographic data and that comes with accompanying software that can match
up names and addresses to the internal list they developed by collecting business cards this would be
called:
a.
list classification
c.
listserv
b.
list enhancement
d.
list manipulation
Scenario 10-2
Folio in an e-technology company. As e-businesses move to the Web, their technology platform allows
companies to search and navigate gigabytes of data, categorize disparate content, and gain secure
access to information, regardless of where it resides – all from their Web browser. So, Folio can share
content across connected servers with partners, suppliers, customers and employees to form an e-
business Content Network. And it all happens in real time.
30. (Scenario 10-2) Because it’s difficult to get visitors to fill out long data forms, Folio only attempts to
collect only visitors’ names and addresses. A collection of this information is called
a.
a computer contact list.
c.
an external list.
b.
a mailing list.
d.
geodemographic data.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
OBJ: 10-3
31. (Scenario 10-2) Folio is considering imitating a direct marketing tactic employed by Time, Inc. Time
publishes magazines like Sunset, This Old House, and Southern Living. At the website for these
magazines, called the Virtual Garden, visitors provide tips on gardening and comments on articles
selected from the magazines. This allows Time to enhance the mailing list data collected at the site
with
a.
demographic data.
c.
psychographic data.
b.
geodemographic data.
d.
behavioral data.
32. (Scenario 10-2) When successful, gathering information at a website about households or lifestyles can
be a crucial step in building a(n)
a.
enhanced mailing list
c.
database
b.
internal list
d.
external list
33. (Scenario 10-2) A magazine publisher collects data at its website about readers of one of its health and
fitness magazines. The publisher uses direct mail to try to get these readers to subscribe to another of
its publications regarding nutrition. This practice is known as
a.
reader-response coordination.
c.
the shotgun approach.
b.
cross-selling.
d.
vector marketing.
34. (Scenario 10-2) Some visitors may be reluctant to provide personal information at a website due to
privacy concerns. Individual companies can alleviate these concerns by making sure consumers are
contacted only with meaningful messages and by
a.
calling the visitor and asking about such concerns.
b.
making the website appear to be independent of a commercial sponsoring organization.
c.
not selling visitors’ names to third parties without permission.
d.
enhancing the resulting mailing list with nothing more than demographic data.
Scenario 10-3
You have decided that, after being exposed to a bit of advertising and marketing theory and practice,
that “ad biz” thrives on abbreviations. To make life easier for the students that follow behind you, and
perhaps to make a bit of money for yourself, you are going to write and publish the Encyclopedia of
Advertising Abbreviations and Terminology (the EAT). The following questions are drawn from
information included under the entry entitled “Direct Marketing.”
35. (Scenario 10-3) A commonly used calculation for assessing the measurable effects of a direct
marketing program is
a.
CPO.
c.
CPM.
b.
PPP.
d.
MRI.
36. (Scenario 10-3) An RFM analysis is used to
a.
determine if direct marketing is a feasible promotional tool.
b.
compare the relative efficiencies of two different direct-marketing programs.
c.
assess the total cost and anticipated return of a direct mail piece.
d.
isolate the current best customers of a business.
37. (Scenario 10-3) Direct marketing is “interactive” which refers to the following marketer activity
a.
allowing spam through interference networks.
b.
introducing foreign-made products into U.S. markets.
c.
attempting to develop an ongoing dialogue with the customer.
d.
providing management feedback to Marcom Directors
Scenario 10-4
Telemarketers say they’ll honor the wildly popular but legally besieged Do-Not-Call list until the court
battles are over. Those whose telephone numbers have already been submitted to the national Do-Not-
Call registry should have noticed a substantial decrease in calls. You know it’s a good law by the sheer
volume of gnashing teeth emanating from the Direct Marketing Association and other groups
representing telemarketers, who would be required to purge their databases of registry phone numbers
at least quarterly. Though the DMA continues to pursue legal avenues to block the list, it promises to
respect consumers’ wishes. (Liz Pullman Weston, Free at last from telemarketing invasions, MSN
Online, February 15, 2005).
38. (Scenario 10-4) Just what volume of annual lost business do direct marketers fear from the Do-not-call
registry?
a.
$50
c.
$50 billion
b.
$50 million
d.
$50 trillion
39. (Scenario 10-4) Weider Publications has a file of about 75,000 names of people who have given one or
more of Weider‘s nine publications as a gift. In December, Weider undergoes an intensive one-week
effort to call former gift givers who have not yet renewed. If the list that Weider is using consists of
only the names, addresses, and phone numbers of former gift givers, it would be referred to as
a.
an internal list.
c.
a skeleton list.
b.
an external list.
d.
an enhanced list.
40. (Scenario 10-4) Most of Time magazine’s holiday gift-giving subscriptions are a result of potential gift
givers seeing a television commercial for Time, then calling an 800 number. The practice of using a
Time representative to contact a potential customer by phone is used on only about 5 to 10 percent of
gift-giving renewals. One advantage of using television over this type of telemarketing is that
a.
it has a higher response rate.
b.
it has a lower cost per contact.
c.
it’s simpler to experiment with different formats.
d.
it’s easier to target consumers.
41. (Scenario 10-4) Time of course is also a vehicle for other direct marketers. What is a popular device
many of them use Time to implement for them?
a.
a half page ad
c.
back page contests and giveaways
b.
a bind-in insert card
d.
infomercials
Scenario 10-5
Trapper’s Lake Lodge is a hotel that is situated next to a large lake in the Flat Tops Wilderness Area.
The Lodge offers guided fishing, hunting, and cross-country skiing trips throughout the year. The
Lodge is in a very remote location and is over 250 miles away from any major airport. Guests must
travel 40 miles on a rough dirt road during warm summer months or ride a special snow car for that
distance during the snow season. Trapper’s Lake Lodge management has found that guests almost
always have a wonderful experience during their stay and most swear that they will come back to visit
again. Nonetheless, a big problem for the Lodge is getting people to visit in the first place as many
travelers are put off by the difficulty in reaching it. As a result, they have decided to mount an
aggressive direct marketing campaign increase first-time guest visits as well as nurture loyal frequent
visitors.
42. (Scenario 10-5) Every time a guest stays at the Lodge they are asked to fill out a questionnaire that
includes basic demographic items and questions associated with the visitor’s recreation preferences.
This is an example of a(n) ____, which will be used to help build a marketing database for Trapper‘s
Lake Lodge
a.
demographic
c.
external list
b.
geodemographic enhancement
d.
internal list
Scenario 10-6
Jostens manufactures products for high schools and colleges that serve as memories for students and
their loved ones. These products include yearbooks, class rings, graduation announcements, and
several other related items. Traditionally, these products have been sold by Jostens sales
representatives into individual schools. Recently, the company has decided to develop a marketing
database of the names of students and parents in key school districts and at certain colleges and
universities. The databases begin with basic demographic information, including names of younger
siblings, that is sold to Jostens by school district offices and college admissions offices. With this
information, Jostens hopes to begin a direct marketing effort whereby students and their parents
receive marketing materials at their homes direct from the company.
43. (Scenario 10-6) In making the decision to engage in direct marketing efforts for its products, Jostens
compared the cost of using salespeople to the cost of using direct marketing against the number of
responses generated by each. Which of the following best describes the cost measurement tool used by
Jostens?
a.
cost per contact
c.
cost per inquiry
b.
cost per rating point
d.
cost per thousand
44. (Scenario 10-6) Jostens has determined that there is a relationship between profiles of neighborhoods
in school districts and the type of class ring purchasing behavior. Enhancing Jostens marketing
database by adding neighborhood data means the firm is adding ____ data to the database.
a.
demographic
c.
psychographic
b.
geodemographic
d.
market segment
45. (Scenario 10-6) Jostens is considering using a number of different direct marketing media applications.
Which of the following is the most potent tool available to the firm because it produces the best
response rates?
a.
telemarketing
c.
advertorials
b.
direct mail
d.
direct response
46. (Scenario 10-6) Jostens’ marketing research has found that high school student consumers are
favorably disposed to a direct marketing campaign via email for the Jostens products. Which of the
factors below must Jostens take pains to avoid?
a.
It will reach people with no interest in graduation memorabilia
b.
It will be considered “spam”
c.
It will cost more than an infomercial costs to produce and air
d.
None of these factors are problems with the email approach
ESSAY
1. What is meant by the term direct marketing? Select a company that you are familiar with and outline
the principal purposes that a direct-marketing program could serve for the company. Be specific.
2. The popularity of direct marketing has been growing among consumers and business organizations for
quite a while. Describe three factors driving this growing popularity.
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PTS: 1 DIF: Moderate REF: p. 203 OBJ: 10-2
3. You are the marketing manager for a mail-order company that ships spices from all over the world to
all over the world. Given a choice between access to a mailing list and access to a marketing database,
which would you choose? What are the advantages of your choice? Be as specific as possible.
4. What are the disadvantages associated with a telemarketing effort? How can telemarketing improve be
used successfully?