Free «Direct Marketing» Essay Sample

Executive Summary

Direct marketing is a sales method where advertisers just concentrate on potential customers with their products. We opt for this method because, due to our next year’s pro-forma, we intend to increase our sales as well as product awareness, but current advertisement methods, seem not to reach our target customers. Our prospective customer group includes individual customers as well as other businesses. In this industry, competition arises due to rivalry, availability of substitutes, very strong buyer’s bargaining power as well as threats of new entrants.

Our product deals with hair loss prevention, by enhancing effective blood circulations hence nutrient circulations to hair follicles. Our offer planning will include campaign objectives, definition of audience, creation of offers, budgeting as well as setting up measurements for the purpose of evaluation the campaign strategy while the components will be the prospects, the offer, special event, vehicle, internal communications as well as methods of tracking results. We intend to introduce this offer during recession period as we think will work in our favor. The source of our customer list will be internal sources as well as external sources; then develop our own list, which will be segmented depending on geographic demographic social factors psychopathological factors and behavioral factors.

During our offer, we intend to use direct mailing, telemarketing and internet, where all the fulfillment process services will be outsourced from fulfillment companies. During the exercise, we will carry out customized research and post-testing or tracking studies.

Introduction

Direct marketing is a sales method where advertisers look for potential customers directly with either products or services. Such methods may include telephone sales, either solicited or unsolicited emails, leaflets, brochures as we as coupons among others. For it to be successful, direct marketing involves maintenance and compiling a very large database of personal information of customers and clients who are perceived as being potential. Such database are either sold or shared among other companies dealing with marketing.

Traditional forms of marketing like use of Radios is not good for our promotional budgets as there is no guarantee that four customer targets will be listening to particular station we have advertised through, at that particular time. As a result money spent on advertisements might not reach out target customers. This makes direct marketing very essential to our company.

Next Year’s Pro- Forma

By next year, our profitability objectivity will be attaining about 20% return on our capital employed from the current position which stands at 13%. Concerning the issue of market share objectivity, we intend to gain about 15% of the market for the entire population using our products. In addition, our promotional target as increasing awareness of our major products. Another objective will include survival objectives, which will help us, survive this double dip recession that the world has been experiencing since 2008, to ensure that we are not taken out of the market by our competitors and competitive strategies. Another objective deals with growth goals, where we want to increase our operations from $200,000 that we are experiencing now, to $400,000. we also wish to decrease or remove any potential customers’ resistivity to buying our foods, to ensure that we attain a 30 percent increase in sales that are closed in seven months or even less. Last but not least, our strategic goal includes capturing a leading position in an upcoming holiday resort markets in Turkey.

Analysis of marketplace

Prospective customer group

There are two types of customer groups that we intend to capitalize on; they include individual customers as well as other businesses. “Individual consumers are some what more difficult to target because they are diverse and unpredictable, they typically have small individual budgets, and their buying preferences may change as they age. Businesses as a target market tend to be fairly stable over time and have large budgets to spend on various products and services,” (Peter & Piirto, 1995), as it makes some sense for our company. This will require as making some modifications on our products to ensure that we effectively follow this route. Our main target group will be corporate customers like saloons, but we will be using individual customers as secondary revenue sources. For corporate customers, we will be offering limited product line but bulky products to meet their tastes, and we will probably charge a lower price to ensure higher sales turn over. However, we will be offering quantity and trade discounts to our corporate customers for us to get large orders.   On the other hand, individual customers will be offered diversified quantities and tastes, though prices will be higher as compared to corporate customers.

Competition

Rivalry: Competition among rivalry firms is high in this industry; we will be striving for a competitive advantage. Due to the fact that there is a low concentration ratio, then the industry is characterized by lots of rivals, amongst them, none holds a significant market share. Due to low Concentration ratio, the market is not concentrated. This indicates that the market is disciplined. This is due to market’s competition history, role plied by leading firms on the market and understanding of code of conduct. Explicit collusions have been illegalized and competitive moves have been constrained informally. However, Maverick firms seeking competitive advantage have the ability of displacing this disciplined market, (Porter, 1980). There are times when rivalry intensifies especially when other firms act in a manner that elicit counter-response to other firms. In gaining competitive advantage, we ought to use price changing, improving product differentiation, creative use of distribution channels and exploiting good relations with our suppliers. Intensified competition is due to large number of firms producing similar products, a slow rate of market growth hence firms fight for market share, low switching costs, low product differentiation levels, high exit barriers, industrial shakeouts, as well as rival diversity.

Availability of Substitutes: our products demand is highly affected by substitutes due to their changes. The presence of close substitutes to our products affects the chances of us raising the prices of our products. This form of competition originates from outside the industry. Though substitute threat brings price competition, there are other concerns in substitute threat analysis due to changing technology.

The bargaining power of buyers: due to the fact that buyer’s power is very strong in the field, they “possess a credible backward integration threat - can threaten to buy producing firm or rival, apart from purchasing a significant proportion of output - distribution of purchases or if the product is standardized”, (Porter,1980).

New entrant’s threat: there are possibilities that new firms might enter this industry. This is based on the fact that, there are no existing barriers top this industry. Due to the fact that it is a disciplined industry, many firms may wish to enter the industry. This freedom of entries is due to government policies to control monopoly, no asset specificity to inhibit entrance. In summary, the industry is easy to enter due to common technology, little brand franchise, open distribution channels along with low scale threshold.

Product Distribution

Our product deals with hair loss prevention for both men and women; though there are many hair loss prevention products out there, but not all are effective as they are seen. Our product is among a few hair loss prevention products that dilate blood vessels in scalps for the purpose of improving blood circulation hence carry nutrients to hair follicles. It has been marketed for long since it was discovered that it has the ability of growing hair in patients prescribed with it to lower blood pressure. For men, the product “has an excellent blend of nourishing nutrients that also block the DHT in the body. The formula prevents hair loss and promotes re-growth of hair follicles. It supplies nutrients for growth of healthy thick hair. Strong, healthy hair begins with the proper nutritional building blocks,” (orderprovillus.com 2011), on the other hand, for women, it has the ability of promoting hair follicle growth hence encouraging hair re-growth. It has the capability of keeping hair much health and full-bodied by encouraging enough nutrients supply.

The Offer

What to Offer

During the marketing, we will be offering free samples gifts, offers, as well as explanation on how our hair loss prevention product works, and how to effectively use it. We will offer free samples and offers to attract more customers, as it will allow consumers to have a chance of testing our products that we will be selling. Though there are costs that are with this strategy but money has to be spending to get some returns. This will not give us the room of introducing our products to our market segments, but we will also have a chance of satisfying our segment. In addition, this service offers a great chance of re-attracting customers who are on the fence. In using this strategy, we are sure that such customers will ever remember this act; hence there will be higher chances of visiting our stores and websites regularly.

Planning Of the Offer

Just like many marketing strategies, planning direct marketing is very essential for its success. Planning for direct marketing involves coming up with campaign objectives, definition of audience, creation of offers, budgeting as well as setting up measurements for the purpose of evaluation the campaign strategy. In the process of executing the plan, the firm has to undertake a market research with the aim of establishing a market, segment it and quantify available markets. It will be also good to define available markets and come up with a realistic market. The second step involves preparing for the task, which involves soliciting designs, selection of vendors and as well as designs. It also involves incorporation of promotions and incentives, as well as preparing response. The third step is launching the campaign; which involves selecting initial vertical markets and releasing industry press of industry. The last but not least involves analyzing the response; which encompasses classifying customers into cold, warm and hot.

Components of the Offer

The Prospect: direct marketing targets people who have higher chances of responding. The best place to start with is the current customers, as they have higher chances of responding as compared to anybody else, as the business is already known and liked by them. In addition, customer list helps in identifying main traits of ones clients.

The Offer: the process will only be successful if the offer involves something that audience want or are in need of. Offers are to be segmented with the aim of matching every customer’s value, urgency or customer value. Time limit of any offer is very important, as it should not be too long. It is good to consider customers’ purchase frequency to help in making decisions.

Special Event: the process of “honoring special events is a great way to pull in business and reflect your personal service. Build your marketing database to include your contacts’ birthdays and ‘first-purchase’ anniversaries. Then, send personalized greeting cards, emails or postcards congratulating them and thanking them for their business, with a special offer to drive future business” (Suetos 2011).

The Vehicle: this entails the form through which one delivers the massage. It should be cost effective as well as grabbing audience attention and creation of more impactful communications. It should be possible to use all data collected ensue one meets their needs and habits of purchasing. Effective communication vehicle will increase response rates.

Internal Communication: it is good to get firm’s employees on-board when developing databases. It is essential to ensure that employees know the gains records so that they can serve better. Tracking Results: it is good to track results of any marketing efforts; as apart from tracking costs, one has to track profits. So that one can identify which efforts work better, and which does not.

Market Research

This tool is much significant in the process of discovering what clients want need or even what they belief in as well as how they act. The completion of this market research helps decision makers on how to market their products, make offers and distribution channels. In addition, it is important in the determination of national, regional, international and global competitors. It might also help in overcoming market entrance barriers. Both questionnaires and focus groups kinds of survey are much important in the process.

When To the Offer

The best time to make our offer is during recession time, where this strategy will be used for our own advantage. This is because, customer will be unwilling to spend as much they usually do, hence welcome any free product hence a perfect opportunity of introducing our products; as they will have a chance of testing our product.

Customer List

We will be using both internal sources as well external sources. We will first consider internal documents that our business has created, some of these documents include customer records, customer correspondence, sales prospect files, and business information library among others. The second source will be external sources; where we will intend to go beyond information that we can glean from our internal sources. There exist lots of wealth contacts from customers’ websites, database and information from the internet as well as membership directories among others.

This list will be segmented depending on geographical, demographical, social, psychopathological, and behavioral factors. This is based on the fact that, direct marketing works well when directed to a particular audience, as every group has its own purchasing needs or spending levels. The more the customer list is segmented, the more precise we will communicate to our specific group.

We intent to develop our own consumer by listing names, title of jobs, their addresses, as well as telephone numbers. However, this information might not be enough, so in making the list more effective, apart from ensuring that we are reaching not only the right customers, but also prospective clients, we intend to refine our list through addition of extra information concerning patterns of buying, their different lifestyles, their social structure, geographical factors along width other factors that might help us get a more comprehensive image of the people we ought to reach.

Maintaining and Securing Consumer List

We will ensure that it is simple as we will only record important information concerning the customer. There is no need of knowing the customer’s spouse or any other irrelevant information. We will ensure all details like clients name, work title, email addresses among other important details are right and correct, as we will ensure there are no spelling mistakes. It is also good to stick to the standard data format requited in developing customer list. We intend to avoid duplication. Sending multiple communication concerning similar products to our customers imply that we don’t know that, so we intend to avoid this. We will be striving for completeness as “Once you’ve decided that a specific piece of information is important enough to be stored in your customer database, it should be recorded for every entry – blank fields are unacceptable.”

We intend to resist clutters that are unnecessary, as the main objective of this database is to effectively communicate with our clients, so, no useless clusters. Not everyone we meet will be our client, but us intent to follow them up and find who they are. We will neither competitor nor suppliers’ names to our database. We also intend to impose modification or alteration restrictions, as this might render it useless. “To protect the integrity of this strategic asset, the authority to add to- or modify the customer database should be restricted via a password-protected user interface. Even commonly-used applications such as Microsoft Excel provide such protection measures,” We will also introduce a systematic process of updating every contact’s details once every year. We will also hire professionals to do the job for us.

Estimation of Lifetime Value

In the process of estimating lifetime value of our customers on the list, we intend to use customer retention model. This will involve determination of Churn rate, which will define customers ending their relations with us in a given period of time. Subtracting this rate from one will give us retention rate. In case we estimate using churn rate alone, we will assume that the rate is constant throughout across customer relations life. We also need discount rate in the estimation; which will describe capital employed in discounting future revenue from a client. Another thing we will use is contribution margins, customer retention costs as well as the period at which we will divide customer relation for its analysis, which will be 4 years.

Creative Strategy

We intend to use print media as it has loyal leadership which favors advertisements as compared to internet. Since our target is only people in need of hair loss problems, print media can do so with ease. This media will also provide us with chances of choosing advertisement space. Most of them like magazines are always in the public eye.  Some of them have very loyal fans; hence we will take advantage of that. On the other hand, the cost incurred can be very high, limited shelf life, and range reached might not be as wide as compared to other forms of media.

Telemarketing

This is where marketers will have to contact their clients through phones. This process will have negative impacts on our offer as it will make it be associated with scams like pyramids along with overpriced goods. In most cases, fraudulent telemarketing organizations have been referred to as ‘telemarketing boiler rooms’. The method has been perceived as being unethical due “to the perception of high-pressure sales techniques during unsolicited calls.

Telemarketers marketing telephone companies may participate in telephone slamming, the practice of switching a customer's telephone service without their knowledge or authorization”, (Rainer, 2009) the offer will be considered as annoyance particularly during odd hours like dinner. This process through which clients does not expect a call, or has no invitation to calls related to sales, has made some countries like U.S to come up with no-call lists, as well as legislations including heavy fines.   

Internet Marketing

Internet marketing entails promoting products or services over the internet. It has been considered as being very wide in scope, as it does not only entail marketing on the internet, but also marketing done through emails as well as wireless media. The method ties together all creative as well as technical aspects of the internet like designs, developments, sales and developments.

This method will make our offer inexpensive when comparing ratio of costs to number of audience reached. It will increase the sales volume as it allows lots of customers to purchase our product conveniently. in addition, it will eases the process of tracing, measuring and testing the offer, as it provides lots of methods like pay per impression to be used. However, it denies customers the opportunity of testing, smelling, to try on and touching before purchasing, hence might affect the offer negatively. In addition, consumers may hesitate purchasing our products due to personal privacy.

Regulations With Respect To Telephone Direct-Mail and Internet

There exist different regulations governing the use of Telephones, Direct-Emails and Internet in direct marketing. All of them deal with personal privacy, confidentiality and security. All of them have been permitted when one has been notified by the sender, and he consents that such like communication is being sent by the sender. This means that we can’t call, or send an email to any client on our customer list, and one can’t rent out our customer list. The second case that allows calls and e-mails involves the existence of business relationship, which has been a restrictively defined business relation. In addition, such methods have to be “in respect of "that person's similar products and services only…" No third party ride-alongs. No e-mailing for third parties. No ‘other customers like you who bought X also bought A, B, and C," unless A, B, and C are "similar’”, another important thing is that, the recipient has a right of informing the sender to stop the calling or e-mailing him or her.

Order Fulfillment

During order fulfillment, we will outsource the fulfillment company who will then process the credit cards, picks packs and then ships the product to our customer. Sometimes we will be processing credit cards before passing it on to the fulfillment company. Just to say, our fulfillment company will be related to administration, as it will be entitled to invoicing, processing of orders, order entries and providing customer services.

Types of Testing and Marketing Research

We will carry out both customized research with the aim of analyzing specific client’s needs and clients, as only specific clients have the needed information. Testing required include post-testing or tracking studies which provides periodical or continuous in-market brands performance, (Dibb & Simkin, 1997).

Ethical and legal Considerations

Though we will face some constraints on what we can ethically make money, but we will avoid fraud and deception as they are wrong and inhibits efficient economy functioning. in addition, there are behaviors though not illegalized in any jurisdiction, cant be undertaken with good conscience, for instance, though enormous profits are not illegal, but we will try as much as we could to avoid them, we will not be charging our customer higher prices than normal.

Regulations have been placed to protect the privacy and how consumers can influence] retained data. The basic premise that exist legislations as well as regulations on personal data use requires us to use it properly and in a careful manner. Both laws and regulations places obligations on us as data users to be open about data usage and follow correct information handling practices. In addition, regulations have also stated clearly that we have to provide every person with access to information that we have.