Direct Marketing

In India, direct marketing is fast catching up as an instrument for promoting goods and services. What is direct marketing (DM)? What are its different forms? Why is it becoming so popular? To know more, read the following article.

When Shoppers’ Stop sends you a mailer detailing its latest season stock, what it is indulging in is direct marketing. In simpler terms, direct marketing means, sending a promotional message directly to consumers, rather than via a mass medium. Instead of putting up an advertisement on television, when a mailer is sent directly, a direct communication has been established with the customer.

Forms of Direct Marketing
Direct response advertising may be communicated in many forms: email, snail mail, telephone, print, computer or any other interactive medium.

Impact
Direct marketing may lead to any one of the following three responses from the customer:-

  • Inquiry (A credit card company calls you up and you make an inquiry about the interest rate)
  • Order (You place a order after reading a mailer sent by Shopper’s Stop)
  • Contribution (The local politician sent you an appeal requesting you to vote for him and you did so)

Need for Direct Marketing
With the rapidly escalating advertising spends, be it on television or radio by the various companies; customers have almost reached their saturation limits with respect to this traditional form of advertising. Many of them have also started distrusting the claims made by companies.

Popularity Scales
Direct marketing has become extremely popular due to the cost advantage. The typical spend on television by high power brands like Lux or Ariel is in the range of Rs. 50-100 crores every year. There is no way to objectively evaluate the return on investment. Every time an advertisement is aired, marketers are not able to quantify, how much of the spend actually gets noticed and propels the customer to make the purchase. Viewers are in the entertainment mode when they watch television and given the high profile advertising these days, it is not clear which advertisements actually register in the minds of viewers. An excess of 20 channels further accentuates this dilemma as marketers have to grapple with the tough task of deciding the channel on which to air their advertisement.

In such a scenario, the concept of direct marketing is an extremely lucrative option. When a credit card company say ICICI sends you a mailer, the cost to the company is less than Rs. 1/-. If the conversion rate is even 1 in every 100 which is a very pessimistic figure, the company has spent less than Rs. 100/- on getting the mindspace of that one customer. Given a budget of 50 crores, ICICI can actually send more than 50 crore mailers and can hope to get more than 50 lakh prospective customers to buy the product.

Thus, direct marketing is a very cost effective means of reaching the target audience.

In a developed country like the US, direct marketing has another advantage. Let us assume that a company thinks of a new product offering. In India, the company would have to advertise on television and this allows the competition to immediately catch up. However, when the new product mix is offered to customers through mail, it takes some time for the competition to learn of it and react.

But then the obvious question is why do companies not switch exclusively to direct marketing?
One of the reasons for companies not switching to direct marketing is the non-availability of data. In developed countries like the US, every citizen has a social security number through which they can be recognised. Databases are also available which contain the records of all US citizens with their contact numbers and addresses. This kind of information is not available in India and hence companies find it hard to contact the targeted group of customers in entirety.

To secure access to such data, companies sponsor events, wherein besides informing target customers about their products, they also get the database of all visitors to the fair from the organisers to further their direct marketing initiatives.
The size and geography of our country prevents companies from getting thorough information about the customers. In a country such as ours, where a majority of people reside in the rural areas, getting this information is quite a struggle.

Direct Marketing Media:

Direct marketing operates through the following media:-

  • The telephone
    This is probably one of the best media for direct marketing. Instead of depending upon a mailer or a television advertisement to convince the prospective customer, the company representative directly interacts with them and tries to clarify all doubts and apprehensions that they may have.
  • Kiosks
    Kiosks are not very popular in India but work very well in the western world. When you make a call at a ZIP Phone Booth or an ICICI ATM machine, you are faced with a little more than just advertisements of different companies. Any further information you require is available on clicking a few buttons.
  • Emails
    Most email users are faced with the ubiquitous junk mail. But when direct marketing companies send you junk mail, its effectiveness is questionable, but it is definitely cost effective. An issue that is raised is the customer irritation at unsolicited mail and the consequent negative publicity it may generate.
  • Mailers
    This means of direct advertising is very regularly used. Banks, shopping malls and other similar businesses send mailers informing you of their latest product offerings.

Potential in India
The potential for direct marketing in a country such as ours is huge. The only concern remains getting information about the various customers in order to contact them.
Companies need to make substantial investments in getting databases of target customers and once the data is in, they must cash on it by contacting the customers, offering them current products, taking feedback on the products and making necessary changes to meet their expectations.

Likely Sectors
In India most sectors dealing with consumer goods are likely to take to DM, the nature of using direct marketing will also vary with the image the company wants to portray. For instance a company like Mercedes would not use direct marketing to advertise its cars on kiosks the way Hyundai does. Hyundai uses kiosks since their cars have the potential to be the first cars, which people would buy and hence their target audience is a huge subset of the Indian population.

The top three industries likely to reap maximum benefits from direct marketing: –

  • Retail industry: Direct marketing is an ideal medium for the retail industry. The reason being the need of the retail industry to keep the customers informed of the latest offerings, which they have to make. For this, the database can be generated through loyalty programs, in which they procure the contact details of their regular customers and keep in touch with them through telephone or mailers.
  • Financial services: With the increasing awareness of financial service products, companies may want to take first mover advantage by using direct marketing and then hooking on to the customers by offering them different products.
  • Banks: In India, since the disposable income of the people is constantly on the rise, a number of banks offer credit cards and other loans. These services are very competitive and have different offerings at different times of the year. Hence, these banking services can also greatly exploit the advantages of direct marketing.

Media Spend Strategies:
Direct marketing does not make other forms of marketing void. If a new bank; say, Bank X has to enter India and sell credit cards; we cannot expect the bank to initially adopt direct marketing. The customers only seriously look at your offering if your brand name exists in the market. However, for you to build that trust among customers, television is the starting point. Television advertisements portray the seriousness with which the company is looking at the Indian market. If the customer sees Bank X’s credit cards advertisements on television, then he will think that the company is big and hence will then seriously look at the direct marketing claims made by the company.

Thus, direct marketing must supplement the other marketing initiatives taken by the company.

Impact
While several economic advantages have been sighted, several direct marketing efforts tend to fail because: –

  • People get customers through direct marketing but do not know how to retain them, and hence lose them blaming it on direct marketing
  • Marketers are not serious about direct marketing. Some marketers who are not convinced of this method, do not put in the required effort thus leading to poor results
  • This method though cheaper, will get only individuals convinced. Hence, for a company / industry which is looking at getting thousands of customers in the first month, this means of marketing is not suitable. You would rather switch to television marketing which though more expensive is much faster in reaching the audience
  • Direct marketing requires constant maintenance of communication with the customer because it sets an expectation in the customer’s mind that he will always be informed of any new offer

To sum up, we see that the advantages of direct marketing are enormous and very cost effective, provided the company believes in it and takes this marketing initiative very seriously. To sum it all, whether any company takes it seriously or not, direct marketing is here to stay.