Telemarketing
Before telemarketing calls were greatly limited by government-supported
do-not-call lists, more direct-marketing dollars were spent on telemarketing
phone calls than on any other DBC medium. That’s because telemarketing is a
form of personal sales, but a lot less expensive.
An in-person sales call may cost anywhere from $50 to $1,000, after factoring in
time and transportation. In comparison, a telephone call ranges from $2 to $15
per call. That is still expensive if you compare it to the CPM of an advertisement
placed in any one of the mass media. However, the returns are much higher than
those generated by mass advertising because they are intrusive, personalized, and
interactive. The caller also can respond to buyers’ objections and make a
persuasive sales argument.
A typical telemarketing campaign usually involves hiring a telemarketing
company to make a certain number of calls using a prepared script. Callers work
in call centers, which are rooms with large banks of phones and computers. Most
calls are made from databases that contain prospects that were previously
qualified on some factor, such as an interest in a related product or a particular
profile. Occasionally cold calling is used, which means the call center staff are
calling random numbers. This practice has a much lower response rate.
There are two types of telemarketing: inbound and outbound. An inbound or
incoming telemarketing call is initiated with a customer. The consumer can be
responding to an ad, catalog, e-mail, or fax. Calls originating from the firm are
outgoing or outbound. Outbound calls generate the most consumer resistance
because they are uninvited, intrusive, and unexpected.
Telemarketing Message Design
The key point to remember about telemarketing messages is that they need to be
simple enough to be delivered over the telephone. If the product requires a visual
demonstration or a complicated explanation, then the message might be better
delivered by direct mail. The message must also be short.
Issues: Intrusion and Fraud
Telemarketing has its drawbacks. Perhaps the most universally despised
telemarketing tool is predictive dialing. Predictive dialing technology makes it
possible for telemarketing companies to call anyone, even those with unlisted
numbers. Special computerized dialing programs use random dialing.
Telemarketing’s reputation has also been tarnished by fraudulent behavior. In
response to abuses in telemarketing, the Federal Trade Commission (FTC)
enacted the Telemarketing Sales Rule (TSR) in 1995 to protect consumers.
Recently, FTC regulations have required telemarketing firms to identify
themselves on caller ID.
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The most serious restriction on telemarketing was implemented by state and
national “do-not-call” lists. Telemarketing companies responded by challenging
the legality of these lists in court, based on what they believed to be an illegal
restriction on commercial free speech. In 2004, however, the U.S. Supreme Court
let stand a lower court ruling that the industry’s free speech rights were not
violated.
The do-not-call lists do not restrict companies from calling their own customers.
They do allow nonprofits to continue calling and also allow market research firms
to continue conducting phone surveys. Telemarketers subscribe to the database
and check the list at least monthly for numbers they need to delete from their call
lists.
The Internet and New Forms of DirectResponse
Much Internet advertising is simply direct marketing in electronic form. Direct
marketers saw the Internet’s potential early. Because of its interactive dimension,
the Web is moving direct marketers much closer to one-to-one marketing, and
social media are accelerating that trend.
Online catalogs cross the line between e-commerce and direct marketing.
Consider Amazon.com. The website operates like a direct-mail catalog but its
interactivity makes it much more useful than a print version could be.
The technology of the Internet has also produced dramatic changes in the
direct-mail industry. At the most basic level, the Internet has facilitated the ease of
producing and distributing traditional direct mail by e-mail. Assistance is
available from companies such as Constant Contact, which offers a streamlined
process that allows customers to point-and-click their way to creation of mailers.
Another feature of Internet direct marketing is greater sampling opportunities.
Online music stores now have hundreds of thousands of music clips for shoppers
to listen to before making a purchase. It also sends them e-mail messages offering
special prices on items based on their past purchasing patterns.
Today, the use of extensive database information and innovative e-mail
technology, combined with creative marketing strategies, has brought the benefits
of highly personalized, inexpensive messages to far–reaching mass campaigns.
Three basic types of e-mail campaigns are used in marketing communication: (1)
addressable to current customers, (2) addressable to prospects, and (3) unsolicited
and often unwanted, or spam.
An option in the “addressable” category that is still evolving is the idea of sending
automated direct-marketing messages via GPS-enabled mobile devices, such as
iPhones.
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The most exciting advances in Internet direct response, however, are found in the
areas of mobile marketing and social media. With mobile phones, marketers are
able to meet people ‘where they are.’ Social selling, also known as network
marketing, utilizes the reach and persuasiveness of social media and its endless
and continuous conversations. Businesses are finding opportunities in this human
need to connect and share.
Issue: Spam
Although e-mail marketing has enjoyed increased success, the practice has
received intense criticism for generating too much unwanted e-mail, otherwise
known as spam. The FTC has determined that 90 percent of all spam involving
business and investment opportunities contains false or misleading information.
Retailers can be seen as spammers. The Wall Street Journal reported that in 2011,
the nation’s top 100 e-commerce retailers sent customers an average of 177
e-mails each.
Twitter has filed complaints in federal court against companies and individuals
who it claims violate the antispam provisions in its user agreement. Amazon has
filed lawsuits in U.S. and Canadian courts to stop a practice known as spoofing.
To combat the problem of spam, Facebook began offering its users a
complimentary six month subscription to McAfee’s Internet Security Suite.
Critics would like to see the government close down the bulk of e-mail
operations. There are technological problems in controlling these practices,
however, and spammers have proven creative in finding ways to get through
filters. It has become a global problemas spammers from outside of the United
States have helped to double the volume of unwanted e-mail.
Is spam cost effective? It can be, considering that the cost of getting into the
business is simply a computer and an Internet connection. A list of ways that
consumers can reduce the amount of unwanted direct mail or spam can be found
in this chapter.
Permission Marketing
Because spam is a huge problem for legitimate e-mail marketers, they are now
using an approach called permission marketing. This approach attempts to address
the spam problem by asking potential customers for permission to send them
e-mail. Optin means that all bulk mailers have to get your permission before
sending a promotion. Opt out means that e-mailers can send the first e-mail but
must give recipients the means to refuse any further e-mails from that business.
The concept at the heart of permission marketing is that every customer who opts
in to a campaign is a qualified lead.
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Principle: Opt-in and opt-out strategies make e-mail campaigns more acceptable
because customers give permission to marketers to contact them. At the heart of
permission marketing is the idea that every customer who opts into a campaign is
a qualified lead.
DATABASES: THE FOUNDATION OF DBC
Direct marketers use databases to keep track of customers and identify
prospective customers. They are also a segmentation tool to communicate relevant
offers to customers and prospects. Another benefit for companies that keep track
of their customer’s online behavior is that they are better able to personalize their
DBC messages.
Big data, a term that became popular in 2013, refers to use huge computer data
storage capabilities combined with analytic software to do highly strategic
targeting.
A database is at the heart of direct marketing and of the practice of behavioral
marketing, which means that individuals are targeted based on what they have
done in the past – products they’ve bought, shows they have watched, sites they
have visited, etc.
Data driven communication has been defined as a strategy that delivers
customer focused objectives by treating different customers differently. Through
the use of databases, a learning relationshipsevolves that stems from customer
dialogue.Carnival Cruise Lines is an example of a company that uses databases to
manage customer relationship, and Carlson Marketing is an example of a
company that uses a database to segment its customers and develop a different
marketing strategy for each segment.
Databases Create a Circular Process
A database is important at both the beginning of the direct-marketing process
where it where it captures and updates information for the next interaction. It’s a
circular process. If an important objective is to build relationship programs, then
the information gathered through customer interaction feeds back into the process
and becomes an input for the next round of communication efforts.
Principle: DBC is a continuous process beginning and ending with a database of
prospect and customer information.
DBC is possible because of innovations in computer technology that have helped
companies keep up with their customers. The purpose of the database is to
produce up-to-date information on customers and prospects as well as their
interactions with the company. According to the DMA, a marketing database has
these primary objectives:
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Record names of customers, expires (names no longer valid), and
prospects.
Store and analyze responses.
Store and analyze purchasing performance.
Continue direct communication with customers.
These objectives also set up categories of data that need to be collected, stored,
and manipulated in order to develop direct-response strategies. According to
Forrester Research, there are four categories of data being collected by
marketers. They are:
1) Individual identity datathat includes name, social security number, driver’s
license number, and IP address that identifies the user’s computer.
2) Behavioral data that includes transaction data, Internet browsing history, and
location information from mobile devices.
3) Derived data such as credit scores and personas are computed or compiled by
modeling and profiling.
4) Self identified data that consists of information provided by the user, such as
purchase intent, ‘likes’, product opinions, and personal profiles from
professional and social media.
The goal is for a marketer to know its customers better in order to direct relevant
messages and offers to them. Messages targeted on behavior are more than
twice as effective as more general advertising in convert in website visitors to
buyers.
The six stages of the database management process is illustrated in Figure 16.3 in
the text.
Lists
Customer and prospect lists that contain contact information are used by all areas
of direct marketing. Direct-mail lists that match market segments identified in the
marketing communication plan can be purchased or rented from list brokers who
maintain and sell thousands of lists tied to demographic, psychographic, and
geographic breakdowns. Lists are further classified on such characteristics as
hobbies, affiliations, and personal influence.
Marketers either own lists or rent them. There are three types of lists:
A house list is made up of the marketer’s own customers or members, its most
important target market. This is its most valuable list.
A response list is made up of people or households who have responded to
some type of direct-response offer. The more similar the product to which
they responded is to the marketer’s product, the more valuable this list.
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A compiled list is of some specific category, such as sports car owners, new
homebuyers, graduating seniors, new mothers, association members, or
subscribers to a magazine, book club, or record club.
New lists can be created by merging and purging. A company can hire database
management firms whose sole purpose is to collect, analyze, categorize, and
market an enormous variety of detail about customers. Relational databases, that
is, databases that contain information useful in profiling and segmenting as well
as contact information, can be purchased from a variety of companies.
Data Mining
The practice of sifting through and sorting information captured in a company’s
database in order to target customers and maintain a relationship with them is
called data mining. Such information includes comprehensive profiles based on
demographics, lifestyle, and behavior, as well as basic contact information.
How is data mining used? Marketers collect information about their customers in
order to better target customers who might really be interested in their offers. This
is called behavioral targeting. Data mining is also used to spot trends and patterns
and profile prospects based on key characteristics of current customers.
Issue: Privacy
One of the unexpected facts about life with social media is that your friends and
associates can share information about you on all of their online social networks. It’s a
new life in the ‘nothing’s private anymore’ universe.
Marketing and Privacy
Privacy is a huge concern for all direct marketers, not just those engaged in
e-commerce and it has generated fierce debate among consumer privacy
advocates, marketing and advertising associations and federal regulators.
Companies are increasing the amount of data they collect on their customers to do
better behavioral marketing —sometimes with their permission and knowledge,
but often without customers even being aware of the practice.
The lack of privacy on social media is an issue, particularly when it is combined
with gathering of marketing information. Larry Ellison, president of Oracle
points out that when a company launches a product, it is easy to look at a
Facebook or Twitter feed and find out what you and other users are saying about
that product. That may sound like good research being used to collect useful
insights, but privacy activists see huge problems with these practices.
The unknown tracking is the problem with cookies, little files installed on user’s
web browsers without users’ knowledge, to track their online behavior. The use
of cookies is increasing as the number of data trackers collecting information on
consumers has increased. Research shows that 100 of the most popular websites
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had 6,485 cookies. Most were installed by third party users, not the websites
themselves.
David Rittenhouse, an expert in digital marketing, observed that “a huge ad tech
industry is dependent on consumers and lawmakers not getting too excited about
data collection and privacy.” He continues, “At thismoment, in my opinion,
consumers have no idea how much data is being collected on them from their web
browsing.”
And what about marketing to kids? The original 1998 Children’s Online Privacy
Protection Act has not kept up with technology. The old rules required parents to
give permission on how data were collected from children, but it’s possible with
some iPhone games for kids to join social networks that collect data without
parental permission.
From its beginning, Facebook has promised users that their personal data would
be kept private. However, its trillion member user base is its most valuable asset,
so the company has been in a quandary trying to figure out how to make
information available to marketers without violating its covenant with its users.
Many browsers come with a ‘do not track’ option. Google got in trouble with the
FTC in 2012 when it was demonstrated that Google bypassed these privacy
settings for Apple’s Safari users and presented personalized web pages through its
DoubleClick web network. The company was fined $22.5 million.
To be fair, many customers appreciate the relevance of the brand messages they
receive through these practices. And while many customers are willing to give
permission to marketers to collect personal data, concerns arise if there is any
thought that a company is spying on them or collecting personal information
without permission. Research has found that 90% worry about their online
privacy.
Privacy is particularly an issue with data mining. At what point is efficiency of
targeting compromised by privacy concerns? What is the impact of privacy
concerns on consumer’s purchasing behavior? This issue is discussed in the A
Principled Practice feature located in this chapter.
Regulation
These concerns translate to regulation or perhaps self regulation. Although the
FTC does not have the authority to write new privacy rules, it hopes to spur the
industry to regulate itself. Action items include:
Do Not Track: Control data collection as well as data use
Mobile Tracking: Ask the mobile industry to improve privacy protections and
use disclosures.
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Data Brokers: Creating legislation to make these business and their practices
more transparent.
Self Regulation Codes: The FTC will work with the Department of
Commerce to create specific codes of conduct for different business sectors.
In terms of self regulation, the Digital Advertising Alliance, a consortium of
organizations in the advertising and marketing industries, has created the
AdChoices program, which includes a code of conduct, as well as training and
certification programs that encourage companies to commit to the code of
conduct.
In an attempt to avert regulation, the direct-marketing industry has developed an
icon to use on ads and other online messages that use behavioral marketing.
The TRUSTe organization also authorizes companies to use its privacy seal when
they are certified as following FTC guidelines and the Digital Advertising
Alliance code of conduct.
DBC TRENDS AND CHALLENGES
Direct marketing offers a great opportunity to convey the essence and personality
of a brand in a one-on-one conversation with a customer or prospect. So what
needs to be done to develop and protect this brand voice? Planning an integrated
approach is critical, and keeping the message consistent across international
borders is also important.
An important principle to remember is: Direct marketing conveys the essence and
personality of a brand in a one-on-one conversation with a customer or prospect.
Integrated Direct Marketing
Historically, direct marketing was the first area of marketing communication that
adopted an integrated marketing approach. In fact, some people refer to DBC as
integrated direct marketing (IDM).
Two reasons integration plays so well in the direct-response market is because of
its emphasis on the customer and its measurability. The coordination problem is a
challenge due to the deluge of data bombarding customers from many different
channels. The only way to manage the information is to focus it around customer
needs and interests. By using databases, companies can become more sensitive to
customer wants and needs and less likely to bother them with unwanted
commercial messages.
Linking the Channels
Instead of treating each medium separately, as some advertising agencies tend to
do, DBC companies seek to achieve precise, synchronized use of the right media
at the right time, with a measurable return on dollars spent. The principle behind
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integration is that not all people respond the same way to direct-response
messages. One person may fill out an order form while another may immediately
call an 800 number. Most people, if a DBC message grabs them, tend to put it in
the pending file that often goes in the garbage at the end of the month. But if a
phone call or e-mail follows the direct-mail piece, the marketer may get the
wavering consumer off the fence.
A common problem with IDM is that direct-marketing messages and advertising
messages often do not reinforce each other as well as they should. This is because
the two functions, advertising and direct marketing, which are often handled by
different agencies, don’t talk to one another. This will change, however, as clients
demand more coordination of their marketing communication programs.
Creating Loyalty
One of the best practices is the development of solid customer-brand
relationships. When one-on-one communication leads to a customer retention
strategy that ultimately increases brand loyalty, the customer relationship is
strengthened. Direct response is a highly targeted form of marketing
communication that lets planners focus on their best customers and inform,
encourage, or reward them for their brand loyalty.
Perhaps the most ambitious attempt to create consumer loyalty is through a
concept called lifetime customer value (LCV). LCV is an estimate of how much
purchase volume companies can expect to get over time from various target
markets. LCV is the financial contribution through sales volume of an individual
customer or customer segment during a length of time. The calculation is based
on known consumption habits plus future consumption expectations.
Consumer resistance to direct marketing must be considered in efforts to build
loyalty. Changing consumers’ attitudes about direct marketing has not been easy
because consumers resent companies that know too much about them. If a
company can demonstrate that it is acting in the customer’s best interest rather
than just trolling for dollars, it might gain consumers’ loyalty.
The most important goal, however, is supporting brand building, and some
marketers have been concerned that DBC’s emphasis on accountability and on
driving sales has made it less focused on the brand presence.
Global Considerations in DBC
The direct marketing industry is growing fast in many Far Eastern and European
countries, in some places, even faster than in the United States. The global trend is
fueled by the same technological forces driving the growth in the United States:
the increasing use of computer databases, credit cards, toll-free phone numbers,
and the Internet, along with the search for more convenient ways to shop.
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Direct marketing is particularly important in countries that have tight restrictions
on advertising and other forms of marketing communication. Privacy issues are
even more intense in some other countries than they are in the United States. In
some countries, lists are not available or they may be of poor quality.
Some countries have instituted outright bans on direct marketing, although these
restrictions seem to be loosening up. Governmental regulation of the U.S. Postal
Service may also place limitations on the use of direct mail. For example,
language and characters can be a problem. Computers and typesetting systems
have to accommodate these differences. Presorted mail in a wrong format may
result in charges to the end user that significantly raises the cost of mailing.
END-OF-CHAPTER SUPPORT
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