- The art of direct marketing (1) – What should a small business consider before deploying direct marketing strategies and initiatives?
- The art of direct marketing (2) – What are the strategies and tactics to maximize the financial returns for a SME‘s direct marketing investments?
Direct marketing is an effective marketing tool that SMEs should deploy as part of their everyday marketing activity. It is one of the most effective ways a small business can acquire new customers, retain existing customers and or increase the revenue potential of an existing base of customers
Direct marketing media that I will exclude in this discussion
A lot has been written on direct marketing. Most of what you will find in the web is on email based direct marketing or digital marketing. For purposes of brevity and not boring the reader, I will skip discussions on this aspect of direct marketing. Additionally, since there are a lot of real and self proclaimed experts on digital marketing, I will spare you my dear readers, of a boring discourse on digital marketing, email marketing, social media marketing and all that good buzz words, often used and written without much thought or consideration on the adverse impacts of a wrong or miscalculated execution can have on a small business. .
For the rare uninformed small business owner or SME marketer and or investor, digital marketing includes the activities of marketing in social media sites like Twitter, Face book, Linked In, Google Buzz and others.
I will also exclude discussion on email, mobile text and web based direct marketing in this blog post. The small business owner or investor should know that most of these so called pundits shared their opinions during the early days of mobile penetration; internet deployment as well as right after Web 2.0 took off.
Don’t get me wrong here. I do believe that digital marketing is important for any small business because of its productivity efficiency and cost effectiveness. However since expert opinion is so rampant on this subject, I will not discuss it in this blog post.
Food for thought – I am assuming most of you probably use your anti spam or junk filter more than any other features in your mobile, web based or POP based emails. Enough said on that for now! J
What is the definition of direct marketing?
First let me try and define what direct marketing is and what it is not. This is one of those terms that have the potential to confuse any one. It is so, because most marketers feel that any marketing activity, promotions or communications will invoke a direct response from the customer. (Not really!)
There are multiple versions of the definition from many authoritative sources.
For me, what it means is that, direct marketing is “ where the marketing communications of a “for profit” company, where direct contact is made, initiated or invited between a seller of propositions and services, and its current and potential customers.
From my perspective, it is important that the results of a direct marketing activity could be directly measured to assess the intended or the actual financial return on a direct marketing investment.
In other words, a small business owner or an SME marketer should be able to exploit a relationship between a small business or SME and their prospect or customer as individuals.
One better way to understand the difference in simplistic terms is to see the difference in mass advertising versus direct marketing.
Key differences between mass advertising vs. direct marketing
- Breadth of coverage versus a depth of relationship building potential
- Communicated to the mass versus a targeted audience
- Attention of all including competitors versus a targeted selective attention of intended customers
- Elicits recall or remembrance versus direct response
- Generates a customer’s functional or emotional impression versus leading to or making a decision
- In mass advertising you pay for the universe of potential customers versus paying for a targeted and segmented cluster of customers
What are the tactics to execute direct marketing activities?
- Direct mail
- Direct response advertising (including infomercials and teleshopping)
- Personal selling
Before I go into the details of each of these direct marketing tactics, it is important for the small business owner or SME marketer to know the advantages and disadvantages of direct marketing.
What are the advantages of direct marketing?
- First and foremost, direct marketing has the capability for small business owners and SME marketers to give customers a better experience than mass marketing.
Deeper customer relationships
- Direct marketing has the capability for small business owners and SME marketers to build deep relationships and segregate their customers as individuals.
- Direct marketing has the potential to build continuing relationship with an existing customer. This is possible because the small business owner or SME marketer would be able to maintain and manage a customer database capturing all relevant information of a customer (For comparison, try to imagine the information or rather the lack of it on “walk in” customers in a retail environment).
Test marketing capability
- Direct marketing enables the small business owner and SME marketer to test market and measure as to what works and what does not work.
Flexibility and predictability
- Direct marketing enables small business owners and SME marketers’ better flexibility to manage and control their costs.
- Direct marketing offers an opportunity for small business owners and SME marketers’ better ability to predict the outcomes of a campaign.
Higher customer motivation to respond
- Direct marketing has a higher preponderance for customers to be motivated to respond
Enables customer segmentation
- Direct marketing enables the small business owner or SME marketer to better segment or cluster their customers.
What are the disadvantages of direct marketing?
Small business owners and SME marketers should be aware that if their direct marketing strategies are wrongly or poorly executed, then it could have tremendous negative consequences for the small business.
Bad or poor image
- Junk mail, annoying telemarketers and intrusive direct sales folks have given direct marketing tactics a bad image. (Just like the annoying call I received from 2 banks whilst writing this post, offering me credit cards and cash backs!)
- Having the wrong mailing lists that not only becomes a financial disaster for the small business but can increase the annoyance factor of their potential customers (like the mail catalogue I personally received at home in San Francisco for women’s underwear. My wife Carol was certainly not amused. Neither was I!)
Emotional stimuli (or rather lack of it)
- Direct marketing is too direct and does not have the potential to create the stimuli to invoke an emotional response from a potential buyer.
When do you use direct marketing?
Direct marketing is used when:
- a small business has a narrowly defined target.
- a SME need to explain the proposition in detail.
- a SME needs to elicit a direct response from a potential or existing customer
What are the critical success factors for any direct marketing initiative?
There are two critical success factors that any small business owner or SME marketer should know before embarking or executing any direct marketing campaigns.
1. Target selection
SME marketers should keep in mind that it is paramount that when they select a target, it has to be based on the potential interest or the pre-existing levels of interest of a selected target.
2. What is the proposition offer itself?
The other critical success factor that small business owners and SME marketers should consider seriously is the offer itself. They have to consider seriously as to what it takes to provoke or elicit a response.
As I conclude this first part of my two part series on direct marketing, small business owners and SME marketers should understand and internalize the following facts
- The more we need our potential customers to react, the less willing they are to do so.
- The more the level of resistance from our potential and existing customer base, the more expensive it will be to buy the cost of sales time (i.e. the direct marketing costs).
- There is an inverse proportionality to the cost of persuasion and a pre existing interest within a pool of potential targets. What this means is that, if the customer or a potential customer is unaware or lacks an interest, or if the direct marketing list is not targeted correctly, it will cost a lot of money to persuade a customer in this universe to bite the bait!
- The life time value of the customer matters. There is a direct relationship to the lifetime value of the customer and the acquisition costs. Therefore the more it costs to acquire a customer, the life time value of the customer decreases