Marketing Chapter 4 Action And Interaction Direct Response And Promotions Action And Interaction

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Chapter 4: Action and Interaction: Direct Response and Promotions

Chapter 4

Action and Interaction: Direct Response and Promotions

CHAPTER CONTENT

KEY OBJECTIVES

2. Explain the importance of promotion.

4. Discuss databases and their importance to consumer and brand interaction.

CHAPTER OVERVIEW

The first part of this chapter discusses the practice and process of direct-response

communication (DRC), its key players, the tools and media of direct response, and the

principles of integrating direct marketing into the total brand communication effort. The

second half of this chapter explores the creative ways in which promotions can spur

CHAPTER OUTLINE

FUNCTIONS AND ELEMENTS OF DIRECT-RESPONSE COMMUNICATION

 Direct-response communication (DRC) makes personal interaction between an

organization and its customers or members possible. It makes it easy to tell quickly if

messages are meeting their objectives. Unlike mass media advertising and public

relations, the effects of DRC are more immediate and more measurable.

 The common thread that runs through all types of direct response is that of action.

Another important function of DRC is to open opportunities for interactivity.

Interactivity, or two-way communication, is considered to be the most persuasive

form of communication. It drives the ability to create engaging, relationship-building

contacts that can lead to brand loyalty and repeated action.

Chapter 4: Action and Interaction: Direct Response and Promotions

 Some marketers see direct response as more limiting than brand or image advertising

because it does not reach as many people or, if it does, the cost of reaching each

individual is higher per impression. Proponents justify the higher costs by noting that

action is a highly desired goal and probably the hardest to achieve, particularly in

comparison to building awareness.

Who Are the Key Players?

 The four main players in direct-response marketing communication are: (1)

businesses or NGOs who use direct response to sell products or services or solicit

participation; (2) agencies that produce direct-response communication; and (3)

phone, mail, or internet media that deliver messages. Of course, people who are the

recipients of the information and sometimes the initiators of the contact are also

partners.

 The four types of firms in direct-response advertising are:

 Advertising Agencies: Most major agencies whose main business is mass media

advertising either have a department that specializes in direct response or own a

separate direct-response company.

 Service Firms: Service firms specialize in supplying printing, mailing, list

brokering, and data management.

 There are thousands of telemarketing and web marketing firms that handle contact

with consumers, as well as a variety of other more traditional media companies. One

of the most active direct-mail media organizations is the U.S. Post Office.

Chapter 4: Action and Interaction: Direct Response and Promotions

Key Elements of DRC

 Like in a conversation, there are two sides to direct response. First, DRC involves

communication sent in some form directly to the prospect. Second, the response

comes directly back to the organization.

 As noted in Figure 4.1, direct response uses market research to guide strategy and

databases to better identify prospects. A variety of media are available to deliver

messages to and from a prospect. Because it’s interactive, DRC also helps marcom

planners listen to what people are saying as they respond.

 All direct-marketing messages contain an offer, typically consisting of a description

of the proposition (terms of sale, delivery, warranty information, membership,

 To maximize the response, the DRC message must make it as easy as possible for

customers to respond. One way to do that is to offer a variety of ways to respond.

Similar to the steps in the sales process, the DRC message must move the reader from

generating interest to creating conviction and inducing a sale. As the Showcase story

illustrates, a well-designed envelope (or opening screen shot online) is critical in

grabbing the attention of readers and viewers to persuade them to open the piece.

 The secret behind effective direct response lies in testing, both pretesting and post

testing. By employing such measurement tools as tracking printed codes on responses

that identify different offers, the organization can clearly identify those offers that are

most attractive to different prospects.

What are the Primary Tools of DRC?

In this section, we will review a number of the tools and media used in DRC, starting

with the most involving and persuasive tool, which is personal sales.

Chapter 4: Action and Interaction: Direct Response and Promotions

Personal Sales

 Personal selling is the earliest and most effective, and also most expensive form of

direct marketing. Companies that have used personal selling very successfully include

Mary Kay, Tupperware, Fuller Brush, Avon, and Amway.

Direct Mail

 Direct-mail is communication for a product, service, or nonprofit organization that is

addressable, meaning that it can be delivered by mail or electronically to a specific

person or business.

 Most direct mail is sent using a third-class bulk mail permit, which requires

200 identical pieces. The response rate for direct mail can vary from .01 to 50

percent, but it’s typically in the 2 to 3 percent range. Because of the high level

 Inside the envelope, the design of the direct-mail piece is important in getting the

information read. Ideas about the creative use of direct mail are offered in the Inside

Story by designer Michael Dattolico.

 The technology of the internet also has produced dramatic changes in the direct-mail

industry. Much internet advertising is simply direct marketing in electronic form,

 Another critical element in direct mail is the mailing list. 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.

Chapter 4: Action and Interaction: Direct Response and Promotions

Issues and Ethics: Trees, Water, and Waste

 Critics of direct mail cite its environmental impact. Production of direct mail is

estimated to use 100 million trees and 28 billion gallons of water annually. And

untold millions of dollars are spent for disposal and recycling.

 Is there a need for an aggressive ban on direct mail? Does the waste and irritation

factor of “junk mail” justify a ban on this form of marketing communication? On the

other side of the debate, might banning direct mail infringe on the right to commercial

free speech? What’s fair, what’s right, and what is the responsible thing for marketers

to do?

Catalogs

 A catalog is a multipage direct-mail (in print) publication that shows a variety of

merchandise. Following the explosion of digital media, however, catalogs also

evolved into easy-to-use online publications with immense offerings.

Direct-Response Advertising

 Direct-response advertising uses a variety of print, broadcast, and online media to

deliver its offers. A classic example of the power of direct-response advertising is the

“97-Pound Weakling” ads for the Charles Atlas body building mail-order courses,

which created a multi-million-dollar business.

 A direct-response commercial on radio or TV can provide the necessary information

for the consumer to contact the organization. Radio’s big advantage is its highly

targeted audience. As more national marketers move into the medium of television,

Chapter 4: Action and Interaction: Direct Response and Promotions

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 DRC medium. That’s because telemarketing is a form of personal sales, but

a lot less expensive.

 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

 Perhaps the most universally despised telemarketing tool is predictive dialing, which

makes it possible for telemarketing companies to call anyone by using random

dialing, even those with unlisted numbers.

 There are two types of telemarketing: inbound and outbound. An inbound

or incoming telemarketing call is initiated by a customer. The consumer can

 Telemarketing messages need to be simple enough to be delivered over the telephone

and short. If the product requires a visual demonstration or a complicated explanation,

then the message might be better delivered by direct mail or online.

Issues and Ethics: Intrusion and Fraud

 Telemarketing’s reputation has also been tarnished by fraudulent behavior. In

response to abuses in telemarketing, the Federal Trade Commission (FTC) enacted a

regulation to protect consumers by imposing strict informational disclosure

requirements.

 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

Chapter 4: Action and Interaction: Direct Response and Promotions

Internet Direct Response

 The most exciting advances in internet direct response 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

Issues and Ethics: Spam

 Although email marketing has enjoyed increased success, the practice has received

intense criticism for generating too much unwanted email, otherwise known as spam.

The FTC has determined that 90 percent of all spam involving business and

investment opportunities contains false or misleading information.

 Is spam cost effective? It can be, considering that the cost of getting into the business

is simply a computer and an internet connection.

 Because spam is a huge problem for legitimate email 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 email. Opt in

means that all bulk mailers have to get your permission before sending a promotion.

THE IMPORTANCE OF PROMOTION

 Promotion is about the fun, creative, and attention-getting ideas that the promotion

industry uses to spur action and build strong brand relationships. Similar to direct-

response communication, promotions engage customers and prospects on a personal

level and encourage action. An organization can increase the value of its brand by

offering something special, such as an engaging sale or an extra incentive to purchase

or affiliate with the organization.

Chapter 4: Action and Interaction: Direct Response and Promotions

 Sales promotion is defined as the set of activities and communication programs that

build excitement in the market for a limited period of time to stimulate trial, increase

consumer demand, or improve product availability.

Marketplace Changes

 Before the 1980s, advertising was the dominant player in the marketing

communications arena. However, during the 1980s, more marketers found themselves

driving immediate bottom-line responses through the use of sales promotion.

Promotional Big Ideas

 Promotional planning and design is a highly creative area, often a Big Idea is just as

important for sales promotion as it is for advertising. In many cases, the promotion is

part of a bigger integrated marketing communication plan, and therefore one of the

requirements is that the promotion’s Big Idea must support the campaign’s creative

idea.

The Functions of Promotion

 As part of any integrated program, sales promotion has different functions than other

marcom tools. Over time, advertising builds brand equity by establishing a consistent

image or feeling. In contrast, sales promotions are more immediate, involving a finite

time period. In return for taking action, sales promotions offer consumers something

more tangible.

Chapter 4: Action and Interaction: Direct Response and Promotions

 The most common sales promotion strategies are designed to motivate action

among three audiences: consumer, trade, and sales force. The first two – customer

sales and trade support – have direct implications for advertising and marketing

communication. The third category – sales force promotions – is also important in

building trade support.

 Two types of promotional activities are directed at a firm’s sales force. The first set of

activities includes programs that better prepare salespeople to do their jobs, such as

sales manuals, training programs, sales presentations, and supportive materials. The

Consumer Promotions

 Although trade promotion claims the greatest percentage of the promotion budget,

most people are more familiar with consumer promotions. Consumer sales

promotions are directed at the ultimate user of a good or service. They are intended to

provide an incentive so that when consumers go into a store they will look for a

particular brand. The primary strengths of consumer sales promotions are their variety

and flexibility, as well as their accountability. Following is a summary of common

types of consumer promotions:

Price Deals

A price deal is a temporary price reduction, a sale price, or even a giveaway. There are

four common price deals:

1. A cents-off deal is a reduction in the normal price charged for a good or service

(for example, “was $1,000, now $500,” or “50 % off”) announced at the point of

sale or through mass or direct advertising.

2. Prize-pack deals provide the consumer with something extra through the package

itself—a prize in a cereal box, for instance.

Chapter 4: Action and Interaction: Direct Response and Promotions

Refunds and rebates

 A refund or rebate is a marketer’s offer to return a certain amount of money to the

consumer who purchases the product. Sometimes the refund is a check for a certain

amount of money, while at other times it may be a coupon to encourage repeat use.

Sampling

 Allowing the consumer to try the product or service is called sampling. Advertisers

can distribute samples to consumers in numerous ways, such as sampling tables for

food products in stores. Small samples of products can be distributed in newspapers,

on house doorknobs, in doctors’ and dentists’ offices, and, most commonly, through

the mail.

Premiums

 A premium is a tangible reward for a desired behavior, such as trying a new product.

The two general types of premiums are direct and mail. Direct premiums award the

incentive immediately at the time of purchase. Mail premiums require the customer to

take some action before receiving the premium.

Coupons

Contests and sweepstakes

 Contest and sweepstake promotions create excitement by promising “something for

nothing” and offering impressive prizes. Contests require participants to compete for

a prize or prizes based on some sort of skill or ability. Sweepstakes require only that

participants submit their names to be included in a drawing or other chance selection.

Sweepstakes are now offered via mobile marketing. A game is a type of sweepstakes

that establishes continuity by requiring customers to return several times to acquire

additional pieces to improve their chances of winning.

Specialties

 Consumer sales promotions can be delivered in various media, including print,

broadcast, and online. In-store promotions using posters, shelf talkers, displays, and

other types of signage are particularly effective at reaching people who are making a

purchase decision. Many advertising campaigns include a campaign-dedicated

website designed as a tie-in.

Chapter 4: Action and Interaction: Direct Response and Promotions

How Are Consumer Promotions Used?

Awareness

 The first challenge is to create awareness of the brand, which is a real strength of

advertising and the first step in consumer decision making. However, sometimes

awareness can be increased when advertising is combined with an appropriate

promotion to call attention to the brand name in order to get people to try the product.

Trial

 Creating awareness will only take the product so far, however. Consumers must also

perceive the brand as offering some clear benefit compared to the competition. Trial

is one of the most important objectives of sales promotions, but it is essential to get

the right people, the target audience, involved with the product.

Market Share

 In addition to encouraging trial of a new product, another purpose of price deals is to

convince prospective users to switch from an established competing brand. Price

deals are particularly effective in those situations where price is an important factor in

brand choice or if consumers are not brand loyal.

Brand Reminder and Loyalty

Trade Promotions

 Consumer awareness and desire mean nothing unless the product is available in

places that the consumer expects to see it. The trade must be convinced that the

product will move off the shelves. In such programs, trade refers to all the people

involved in the channel of distribution, including buyers, brokers, distributors,

wholesalers, dealers, franchisees, and retailers. Trade promotions are sometimes

referred to as channel marketing.

Chapter 4: Action and Interaction: Direct Response and Promotions

 Here are the most common types of trade promotions:

 Retailer (dealer) kits. Materials that support retailers’ selling efforts or that help

representatives make sales calls on prospective retailing customers are often

designed as sales kits. The kits contain supporting information, such as detailed

product specifications, how-to display information, and ad slicks—print ads that

are ready to be sent to the local print media as soon as the retailer or dealer adds

identification, location, promotion price, or other information.

 Trade incentives and deals. Similar to consumer price deals, a manufacturer may

reward a reseller financially for purchase of a certain level of a product or support

of a promotion.

 Trade shows and exhibits. A trade show is a place where companies within the

same industry gather to present and sell their merchandise, as well as to

demonstrate their products. Exhibits are the spaces that are designed to showcase

the product.

How Are Trade Promotions Used?

 The ultimate gauge of a successful trade promotion is whether sales increase. There

are two primary roles for a trade promotion: 1) Trade support, that is, to stimulate

in-store merchandising or other trade support, and 2) Excitement, that is, to create a

high level of excitement about the product among those responsible for its sale.

Chapter 4: Action and Interaction: Direct Response and Promotions

Demand: Push and Pull Strategies

 To understand the role of trade promotion, consider how sales promotions interact

through complementing push and pull strategies. If consumers really want to try a

product, based on what they have heard in advertising and publicity stories, they will

ask their local retailers for it, which is called a pull strategy; that is, by asking for it

they will pull the product through the distribution channel.

 A push strategy pushes the product through the channel by convincing (motivating

or rewarding) members of the distribution network to carry a product. Some of the

most common types of incentives and trade deals used with retailers as part of a push

strategy are monetary bonuses to salespeople, dealer loader premiums that reward

retailers, advertising allowances or co-op advertising, and display allowances.

 In addition to affecting demand through push and pull strategies, trade promotions are

also designed to get attention, motivate trade members, and provide information.

 Attention: Point-of-purchase displays are used to get the attention of shoppers

when they are in the store and to stimulate impulse purchases. They are used by

retailers, but provided by manufacturers.

MULTIPLATFORM PROMOTIONS

This section focuses on sponsorships, event marketing, loyalty programs, and co-marketing

or partnership promotions. Many of these promotional techniques, such as sponsorships

and event marketing, cross over to other areas of marketing and blur the line between

promotions, advertising, and public relations.

Sponsorships

Chapter 4: Action and Interaction: Direct Response and Promotions

 Sponsorships include sports, entertainment tours and attractions, festivals, fairs, and

other annual events, and cause marketing, including promotions that support the arts.

Cause marketing sponsorship is a growth area and has been found by a research firm

to be growing faster than sports sponsorships.

Event Marketing

 Event marketing describes the marketing practice of linking a brand to an event,

either by sponsorship or by owning the event. Planners use related promotional

events, such as a tour or appearance of the product or its spokesperson at a mall or

sporting event, to gain the attention and participation of people in the target audience

who attend the event. To be successful, the event must match the brand to the target

market’s lifestyle.

Event Marketing and Special Events

 Event marketing is an increasingly important component in IMC. In the United

States, more than $25 billion is spent annually on it. Goals of event marketing include

building brand and top-of-mind awareness, enhancing brand attitudes, and in some

instances, generating sales. In public relations, the term special events may be used

instead of event marketing.

 Business-to-business promotions also use events to reach trade audiences, which can

include sales staff, distributors, retailers, and franchisees. These stakeholders are

invited to participate in the event as a reward for their support.

Loyalty Programs

 Another type of program that crosses the line between advertising, public relations,

direct response, and promotion is a loyalty program. A loyalty program, also called a

continuity or frequency program, has a goal of increasing repeat business and

customer retention.