978-0134129945 Chapter 14 Lecture Note Part 2

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SPECIAL FORMS OF MARKETING COMMUNICATIONS: DIRECT MARKETING,

SUPPORT MEDIA, EVENT SPONSORSHIP, AND PRODUCT PLACEMENT

(Learning Objective #3)

The Direct Marketing Association defines direct marketing as any communication with a

consumer or business recipient that is designed to generate a response in the form of an order, a

request for further information, and/or a visit to a store or other place of business.

Companies use direct mail, telemarketing, television, print, and other media to generate

responses and build databases filled with purchase histories and other information about

customers.

By contrast, mass marketing communications are typically aimed at broad segments of

consumers (see Table 14-2).

Don Peppers and Martha Rogers advocate an approach known as one-to-one marketing. One-

to-one marketing calls for treating different customers differently based on their previous

purchase history or past interactions with the company.

Peppers and Rogers describe the four steps in one-to-one marketing as follows:

1. Identify customers and accumulate detailed information about them.

2. Differentiate customers and rank them in terms of their value to the company.

3. Interact with customers to develop more cost efficient and cost-effective forms of

interaction

4. Customize the product or service offered to the customer.

Worldwide, the popularity of direct marketing has been steadily increasing in recent years. One

reason is the availability of credit cards. Another reason is societal: dual-income families have

money to spend but less time to shop; technological advances have made it easier for companies

to reach customers directly.

Direct marketing programs can be readily made to conform to the “think global, act local”

philosophy.

Rainer Hengst of Deutsche Post offers the following guidelines for U.S.-based direct marketers

that wish to go global:

The world is full of people who are not Americans. Be sure not to treat them like they are.

Like politics, all marketing is local.

Although there is an EU, there is no such thing as a “European.”

Pick your target, focus on one country, and do your homework.

Customers need to be able to return products locally.

Direct Mail

Direct mail uses the postal service as a vehicle for delivering a personally addressed offer to a

prospect targeted by the marketer.

Direct mail is popular with banks, insurance companies, and other financial services providers.

The United States is home to a well-developed mailing list industry.

The availability of good lists and the sheer size of the market are important factors in explaining

why Americans receive more direct mail than anyone else.

Compared with the United States, list availability in Europe and Japan is much more limited.

Catalogs

A catalog is a magazine-style publication that features photographs, illustrations, and extensive

information about a company’s products.

Catalogs have a long and illustrious history as a direct marketing tool in both Europe and the

United States.

U.S.-based catalog marketers include JC Penney, Lands’ End, L.L. Bean, and Victoria’s Secret.

Historically, catalogers in the United States benefited from the ability to ship goods from one

coast to the other, crossing multiple state boundaries with relatively few regulatory hurdles.

Prior to the advent of the single market, catalog sales in Europe were hindered by the fact that

mail order products passing through customs at national borders were subject to value-added

taxes (VAT).

Today, the single market means that mail order goods can move freely throughout the EU

without incurring VAT charges.

In Japan, the domestic catalog industry is well developed.

Even as they continue to develop the Japanese market, Western catalogers are now turning their

attention to other Asian countries. In Hong Kong and Singapore, efficient postal services, highly

educated populations, wide use of credit cards, and high per capita income are attracting the

attention of catalog marketers.

Infomercials, Teleshopping, and Interactive Television

An infomercial is a form of paid television programming in which a particular product is

demonstrated, explained, and offered for sale to viewers who call a toll-free number shown on

the screen.

In Asia, infomercials generate several hundred million dollars in annual sales. Infomercials are

also playing a part in the development of China’s market sector.

With teleshopping, home-shopping channels such as QVC and the Home Shopping Network

(HSN) take the infomercial concept one step further; the round-the-clock programming is

exclusively dedicated to product demonstration and selling. (Exhibit 14-7)

Industry observers expect the popularity of home shopping will increase during the next few

years as interactive television (ITV or t-commerce) technology is introduced into more

households.

ITV allows television viewers to interact with the programming content that they are viewing.

Support Media

Traditional support media include transit and billboard advertising (see Table 14-3).

Outdoor advertising is growing at a faster rate than the overall advertising market.

As countries add mass transportation systems and build and improve their highway

infrastructures, advertisers are utilizing more indoor and outdoor posters and billboards to reach

the buying public.

Worldwide spending on outdoor advertising amounts to about 6 percent of total ad spending in

Europe, 6.4 percent is allocated to outdoor, compared with 4 percent in the United States

EMERGING MARKETS BRIEFING BOOK

Billboards Banned in Brazil!

Score one for environmental activists: On January 1, 2007, Lei Cidade Limpa (“Clean City

Law”) went into effect in São Paulo, Brazil. The main effect of the law, which was championed

by Mayor Gilberto Kassab, is to ban various forms of outdoor advertising in the city of 11

million people.

What’s left is a mish-mash of skeleton frames devoid of posters (see Exhibit 14-8). In addition,

transit ads on buses and taxis are no longer allowed. Store signs are still permitted, but the

maximum size of a given sign is determined by a formula based on the dimensions of the store’s

facade.

Some advertisers even acknowledge that, in Brazil, traditional outdoor advertising may not be

the best communication channel. Denied access to traditional outdoor advertising for now,

companies have devised a number of alternative ways to communicate with prospective

customers. Innovative indoor approaches such as placing ads in elevators and bathrooms are

also being adopted. Brazilians have embraced social media, so online channels are a natural fit.

Sponsorship

Sponsorship is an increasingly popular form of marketing communications whereby a company

pays a fee to have its name associated with a particular event, team or athletic association, or

sports facility.

Sponsorship combines elements of public relations and sales promotion.

Sponsorship can be used in countries where regulations limit the extent to which a

company can use advertising or other forms of marketing communication.

Product Placement: Motion Pictures, Television Shows, and Public Figures

Companies can achieve a unique kind of exposure by using product placement: arranging for a

company’s products and brand names to appear in popular television programs, movies, and

other types of performances.

Marketers can also lend or donate products to celebrities or other public figures; the products get

publicity when the celebrity appears in public using the product. (Exhibit 14-11)

This tactic is especially popular with auto manufacturers and fashion designers and is often used

in conjunction with the Academy Awards and Grammys.

Worldwide audience figures for a blockbuster movie hit can equal tens of millions of people. In

many instances, product placements generate considerable media interest and result in additional

publicity.

Placements can be arranged in several different ways. Sometimes companies pay a fee for the

placement; alternatively, a show’s producers will write the product into the script in exchange for

marketing and promotion support of the new production. A brand’s owner can also strike a

barter agreement.

In the case of television placement, the blurring of advertising and programming content comes

as companies increasingly question the effectiveness of traditional advertising. In fact, some

evidence suggests that a prominent product placement in a television program leads to better

recall than a traditional advertisement.

Sometimes called branded entertainment, the effective integration of products and brands with

entertainment can be seen on the monster TV hit “American Idol.”

As the cost of marketing major films increase, studios are increasingly looking for partnerships

to share the cost and attract the broadest possible viewing audience.

Product placement raises an interesting issue for global marketers: once footage of a scene is

shot and incorporated into a movie or television, the image of the product is “frozen” and will be

seen without adaptation everywhere in the world.

When advertising appears in conventional forms most consumers are aware of the fact that they

are being expose to an ad. This is not necessarily the case with product placement; in effect,

viewers are being marketed to subliminally without their consent.

THE CULTURAL CONTEXT

Products Star in Bond Films

The James Bond films are known for integrating well-known brand names into the action. The

22 films featuring the suave British agent have grossed nearly $5 billion in worldwide ticket

sales.

The series’ popularity, plus the high cost of making the films, makes Bond a perfect vehicle for

showcasing products and brands. Many companies are eager to be associated with a high-profile

project like a Bond film.

Tomorrow Never Dies, the follow-up to GoldenEye, featured global brand promotional tie-ins

worth an estimated $100 million. Ericsson, Heineken, Omega, Brioni, and Visa International all

placed products in the film. Bond star Pierce Brosnan also appeared as Agent 007 in specially

filmed television commercials. When Die Another Day, the 20th installment in the series, was

released at the end of 2002, BMW took a backseat to Ford. The U.S. automaker persuaded the

producers to bring back the Aston Martin (the nameplate was owned by Ford at the time);

Jaguars and the new Thunderbird were also prominent in the film. The 21st Bond film, Casino

Royale, featured actor Daniel Craig in the role of 007.

To avoid a backlash from fans and marketing executives, the film’s producers deliberately

limited the number of official global partners in the film to six: Sony Electronics, Sony Ericsson,

Omega, Heineken, Ford, and Smirnoff. As Myles Romero, Ford’s global brand entertainment

director, noted.

For the next installment, 2008’s Quantum of Solace, several companies hitched their brands to

Bond for the first time. These included Coke Zero and Avon. Speaking of Coke Zero, Derk

Hendriksen explained, “We’re in more than 100 markets. We thought the tie-in would be very

appropriate for two irreverent and global personalities.” For its part, Avon coordinated the launch

of Bond Girl 007 Fragrance with the film’s release. Tracy Haffner, global vice president for

marketing, called the film “a great platform to develop a beautiful fragrance and connect with

women worldwide.”

As the Bond franchise celebrated its 50th anniversary, 2012’s Skyfall continued the product

placement tradition. Heineken spent tens of millions of dollars on a product placement for its

flagship beer.

TEACHING TOOLS AND EXERCISES

Additional Cases:

“Doosan Infracore International: Portable Power Brand Transformation (B)” by Marting roth and

Dominique Turpin, HBS, IMD, Sept. 2010, IMD430-PDF-ENG.

“Haier: Taking a Chinese Company Global in 2011″ by Tarum Khanna, Krishna G. Plaepu, and

Phillip Andrews, HBS, Aug. 2011, 23p. 713408-PDF-ENG.

” Herborist” A Chinese Personal Care Brand Goes Abroad”, by Kevin Zhow and Grace Loo,

HBS, University of Hong Kong, June 2011, 24 p. HKU927-PDF-ENG

“We Marketing Group: Building a Global Marketing and Communications Company in China “.

Ali Farhoomand; Kineta Hung; Grace Loo. HBS HKU734.

Activity: Students should be preparing or presenting their Cultural-Economic Analysis and

Marketing Plan for their country and product as outlined in Chapter 1.

Out-of-Class Reading: Taylor, Charles R., George R. Franke, and Michael L. Maynard.

“Attitudes toward Direct Marketing and Its Regulation: A Comparison of the United States and

Japan.” Journal of Public Policy & Marketing 19, no. 2 (Fall 2000), pp. 228-37.

Internet Exercise: Ethics and the Internet. Do you want regulation of the Internet? Explain your

answer? If you favor regulation, what type of regulation of the Internet do you favor? What do

you think is the most unethical practice currently on the Internet (if any)? Go to a business ethics

resource website to explore issues in business ethics and marketing ethics (http://www.business-

ethics.com/).

Guest Speaker: Invite a manager from a local department, specialty, or discount store to speak

to the class about the use of sampling, coupons, special events, and other sales promotion tools.