Your competitive analysis

A good competitive analysis varies according to what industry you’re in and your specific marketing plan and situation. A comprehensive competitive analysis does have some common themes.

Begin by explaining the general nature of competition in your type of business, and how customers seem to choose one provider over another. What might make customers decide? Price or billing rates, reputation, or image and visibility? Are brand names important? How influential is word of mouth in providing long-term satisfied customers?

For example, competition in the restaurant business might depend on reputation and trends in one part of the market and on location and parking in another. For the Internet and Internet service providers, busy signals for dial-up customers might be important. A purchase decision for an automobile may be based on style, or speed, or reputation for reliability.

For many professional service practices, the nature of competition depends on word of mouth because advertising is not completely accepted and therefore not as influential. Is there price competition between accountants, doctors, and lawyers?

How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why would a customer choose Starbucks, a national brand, over the local coffee house? Why select a Dell computer instead of one from H-P or Gateway? What factors make the most difference for your business? Why? This type of information is invaluable in understanding the nature of competition.

Compare your product or service in the light of those factors of competition. How do you stack up against the others? For example:

• As a travel agent, your agency might offer better airline ticketing than others, or perhaps it is located next to a major university and caters to student traffic. Other travel agents might offer better service, better selection, or better connections.
• The computer you sell is faster and better, or perhaps comes in fruity colors. Other computers offer better price or service.
• Your graphic design business might be mid-range in price, but well known for proficiency in creative technical skills.
• Your automobile is safer, or faster, or more economical.
• Your management consulting business is a one-person home office business, but enjoys excellent relationships with major personal computer manufacturers who call on you for work in a vertical market in which you specialize.

In other words, you should know how you are positioned in the market. Why do people buy your product or services instead of the others offered in the same general categories? What benefits do you offer at what price, to whom, and how does your mix compare to others? Think about specific kinds of benefits, features, and market groups, comparing where you think you can show the difference.

Describe each of your major competitors in terms of those same factors. This may include their size, the market share they command, their comparative product quality, their growth, available capital and resources, image, marketing strategy, target markets, or whatever else you consider important.

Make sure you specifically describe the strengths and weaknesses of each competitor, and compare them to your own. Consider their service, pricing, reputation, management, financial position, brand awareness, business development, technology, or other factors that you feel are important. In what segments of the market do they operate? What seems to be their strategy? How much do they impact your business, and what threats and opportunities do they represent?

Finding information on competitors

You can find an amazing wealth of market data on the Internet. The hard part, of course, is sorting through it and knowing what to stress.

Your access to competitive information will vary, depending on where you are and who the competition is. Competitors that are publicly traded may have a significant amount of information available, as regular financial reporting is a requirement of every serious stock market in the world. Wherever your target is listed for public trading, it has to report data.

Competitive information may be limited in situations where your competitors are privately held. If possible, you may want to take on the task of playing the role of a potential customer and gain information from that perspective.

Industry associations, industry publications, media coverage, information from the financial community, and their own marketing materials and websites may be good resources to identify these factors and “rate” the performance and position of each competitor.

One of the biggest and most widespread fallacies of the late 20th century Internet boom in the United States was the idea that a website would or could create business on its own. This outrageous idea was populated by messages such as the television commercial, watched by millions in the late 1990s, showing two women who invented an improvement on sunglasses while on the beach, and in a subsequent scene they were still happily on the beach but at that point living off of their website.

In truth it just doesn’t happen like that. Here are some basic truths to offset common myths:

1. Websites without traffic offer no business or organizational purpose: Sad but true, this is just pure myth. If you build a beautiful website and nobody comes, no matter how useful or artistic the website, it is useless. Think of a website as a new version of the toll free telephone number; just like a toll free number is useless if nobody calls it, so too a website is useless if nobody visits it.
2. Websites don’t get traffic by themselves: If you build it, and do nothing else, they will come. That’s also a myth. Websites don’t generate traffic anymore just because they are good, or useful.
3. Traffic takes marketing: It takes marketing to generate traffic on a website. Successful websites generate traffic by new applications of old-fashioned marketing, including advertising, public relations, and word of mouth. They also generate traffic through new Internet marketing, highlighted by careful management of searcher strategies.
4. The Internet gold rush is over: Times have changed for the Internet, investors are no longer going to invest in traffic alone. These days plans have to be complete, from marketing to revenues and expenses, with business sense.

Your competitive edge

What is your website’s competitive edge? How are you different from all others? In what way does it stand out? Is there sustainable value that you can maintain and develop over time?

The most classic of the competitive edges are those based on proprietary technology and protected by patents. A patent, an algorithm, even deeply entrenched know-how, can be a solid competitive edge. In services, however, the edge can be as simple as having the phone number 1 (800) Flowers, which is an actual case. A successful company was built around that phone number.

Sometimes market share and brand acceptance are just as important. Know-how does not have to be protected by patent to offer a competitive edge. For example, some of these values might lead to competitive edge:

• Quick loading pages–2 seconds vs. 12 seconds, 8 seconds being the average. For example, Buy.com’s average load time is 2-4 seconds. This has certainly been the case with Yahoo!, it consistently loads in a very small amount of time.
• Fresh content. e.g., major news sites. This is less of a concern to readers of theonion.com or e-zine sites, where the expectation is that content will be updated on a weekly, monthly, or quarterly basis.
• Marketing leverage. For example, zoom.com is owned by NBCi, a subsidiary of NBC the major national television network. NBC directs traffic in NBCi’s direction. The National Football League site at NFL.com generates traffic by linking to football broadcasts with live interaction.
• Trust. A community where people feel free to post their thoughts and concerns will have a competitive advantage based on trust. New posts and new ideas bring them back to your site. Fool.com, for example, has mastered the art of building a network of users. They have dozens of custom email newsletters, some of which feature the most popular message board posts for that day.

The competitive edge might be different for any given company, even between one company and another in the same industry. You don’t have to have a competitive edge to run a successful business–hard work, integrity, and customer satisfaction can substitute for it–but any edge will certainly give you a head start if you need to bring in new investment. Maybe it’s your customer base, as in the case with Hewlett-Packard’s traditional relationship with engineers and technicians, or maybe it’s image and awareness, such as with Dell. Maybe your competitive edge is quality control and consistency, like that of IBM.

Features and benefits statements

A good website strategy first identifies a market need, which indicates a target market, and then fills that need. Now that the Internet boom of the late 20th century is over, your strategy usually has to add an element of basic business revenue, considering who will pay how much to have that need filled.

Features and benefits statements are classics of standard marketing. For every product and every service you sell, develop your features and benefits statements. Follow this logic for your website:

First, understand the difference between features and benefits. Take a look at the example below, describing features and benefits of Bplans.com:

Now consider the distinctions. Features are characteristics of the site, while benefits are positive values to the person who uses the site. The features serve as a means to offer the intended customer benefit. Usually people buy benefits more than features. The site’s ability to give people reassurance that their plan is okay, answers to questions, resolve doubts, and specific how-to steps is why it’s successful. Site designers create features, but people buy benefits.

Good marketers understand features, but emphasize benefits. They use features to explain and develop benefits. There are exceptions to the general rule. Some websites, some markets, and even some industries are feature-driven. For some buyers, computers and personal electronics have this tendency. Sometimes the features and benefits merge together.

When communicating features and benefits, always emphasize benefits. Generally the benefits sell your site, not the features. Engineers and product development teams love features, as do gadget-oriented buyers, but benefits sell, while features really just deliver benefits.

Among online trading websites, for example, advertising often sells benefits related to reliability and expertise, more than specific website features. As you look at the online brokers marketing, think about this as background. Most of these ads push benefits, but some push price alone, and some push features. Think about ads you know and how they suggest benefits and specifically inform about features.

This reminds me, brilliantly, of how important it is to understand . . .

1. You need customers. The first thing you need to start a business, maybe even the only thing you really need, is customers. It all starts with at least one customer.
2. Who is your target customer. In detail. Not just generalities and demographics, not even just psychographics, but who is this person, what drives her, what does she really want from you, what does she like to read, eat, watch? Where does he live, and with whom? What does he drive?
3. Who isn’t your customer. Sometimes the secret to success is who isn’t your customer.

I was in a panel presentation not long ago alongside an expert in customer service. At one point, after she’d dizzied us with stories of Nordstrom retail clerks changing customers’ tires and taking as returns products that Nordstrom had never carried, somebody asked, with just a hint of exasperation, “But how does a company stay in business like that? How do they make money? Who pays for all that?”

At which point, after a beautifully-timed pause, the expert said: “Yes, that is the question, isn’t it . . . and pay attention, because this is the most important thing I’ll say all night . . . you have to understand that not everybody is a customer.”

John Jantsch, in Duct Tape Marketing, recommends that you start by profiling your ideal customer. Focus for a while on one person, whether he or she is your customer directly or the decision-maker for a business customer. Give that person age, gender, income level, likes, dislikes, favorite movies, songs, magazines, restaurants. Know that person.

If you’ve been in business, you can think of that customer fairly easily. Maybe it’s a composite of several real customers.

A clear example of knowing who is and who isn’t your customer can be found in the automobile industry. In theory, everyone who is over 16 years old and has a valid driver’s license could be considered the target customer. But, if you take time to appreciate the ads for different vehicles you’ll see that the marketing efforts are precisely pitched to narrow target markets.

For instance, the rich, deep, saturated colors, focus on high-quality features and refined accessories, the calm and quiet voice, and the sense of genteel conviviality of the Lincoln Town Car speaks directly to the well-heeled buyer. On the other hand, the spinning tires, clouds of smoke, screaming engine and 150 images a minute visual stimulation of an 800 horsepower, street-legal hot-rod TV spot is crafted especially for the hyper-active, quadruple-shot-enhanced-caffeine-energy-drink-quaffing youth.

Other industries segment their target markets. Some restaurants appeal to people in a hurry, or people on a budget, or people looking for a romantic rendezvous, or people who appreciate and seek out the taste treats presented by culinary masters. Every successful restaurant has carefully decided who their target customers are, and who they are not, and then manage their marketing efforts accordingly.

Whole Foods Market and PC Market of Choice are both grocery stores which specialize in organic prepared foods and locally grown organic fruits and vegetables. Their target market customers choose to spend more when buying groceries to get the benefits from healthier foods. Safeway or Kroger or Publix stores on the other hand focus on selling national brands, and target a different, often budget conscious, segment of the population.

Consider the Trunk Club, Joanna Van Vleck’s interesting startup described in “Startup Success Story: The Trunk Club” in Up and Running at upandrunning.entrepreneur.com. How important is it that she understands who isn’t her customer? She told me this herself:

• I realized that although I thought my target was women, women are normally closer to style. In general. So they aren’t as likely to pay money for style consulting.
• Men have less ego invested. Some, in fact, pride themselves on not knowing style. In general.
• The metrosexual man is not my customer. He loves his own style and spends his own time and effort finding it.
• The man whose partner in a relationship likes to shop for his clothes is not my customer. She wants to do it. She doesn’t want me to.
• The younger men on a budget aren’t my customer. They can’t afford me.

Notice how the “isn’t my customer” routine helps define and position your marketing better.

A fast-food restaurant knows that the relatively well-to-do baby boomer empty nesters aren’t their customers. On average. The sushi restaurant knows that the construction worker driving a pickup truck who eats at the Texas barbecue drive-through isn’t its customer.

Consider Jolt cola. All the sugar and twice the caffeine. How important is understanding who isn’t the customer.

Your blog, if you’re doing a blog as a business, needs a focus. People don’t care about your inner angst, but there are specialty niche areas all over the place. Old Volkswagen maintenance. Arranging dry flowers. The narrower you cut it the better. Sure there are some general blogs that work, but they started years before you did. Nowadays you need to focus.

It is imperative that you know your customers, and do adequate market research.

Ask yourself: Who is my customer? Who isn’t my customer? Then focus your marketing efforts to reach your target customers most effectively.

–Includes, excerpts from upandrunning.entrepreneur.com, and Plan-As-You-Go Business Planning.

Market forecast
Analyze your market by segments and project market growth for five years.

Sales forecast
Forecast your sales by product or service. The mathematics are simple, but important. You can’t do a marketing plan without a sales forecast.

Expense budget
The budget is another absolute essential. How much are you going to spend? On what? How does your spending relate to strategy?

Milestones
This is perhaps the most important table in the whole plan: concrete milestones to make it real, with managers, deadlines, and budgets.

Sample tables from Marketing Plan Pro.

• Situation Analysis: Normally this will include a market analysis, a SWOT analysis (strengths, weaknesses, opportunities, and threats), and a competitive analysis. The market analysis will include a market forecast, segmentation, customer information, and market needs analysis.
• Marketing Strategy: This should include at least a mission statement, objectives, and focused strategy including market segment focus and product positioning.
• Sales Forecast: This would include enough detail to track sales month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales by product, by region or market segment, by channels, by manager responsibilities, and other elements. The forecast alone is a bare minimum.
• Expense Budget: This ought to include enough detail to track expenses month by month and follow up on plan-vs.-actual analysis. Normally a plan will also include specific sales tactics, programs, management responsibilities, promotion, and other elements. The expense budget is a bare minimum.

Are They Enough?
These minimum requirements above are not the ideal, just the minimum. In most cases you’ll begin a marketing plan with an Executive Summary, and you’ll also follow those essentials just described with a review of organizational impact, risks and contingencies, and pending issues.

Include a Specific Action Plan
You should also remember that planning is about the results, not the plan itself. A marketing plan must be measured by the results it produces. The implementation of your plan is much more important than its brilliant ideas or massive market research. You can influence implementation by building a plan full of specific, measurable and concrete plans that can be tracked and followed up. Plan-vs.-actual analysis is critical to the eventual results, and you should build it into your plan.

Market Forecast – Example

The AMT computer store has a simple market forecast. The plan defines two target market segments, and the forecast projects how many potential customers in each of those segments by years, for five years.

In the market forecast, the numbers indicate that there are 25,000 home offices included in the market, and that number is growing at an estimated five percent per year. There are also 10,000 small businesses in the area, and that number is also growing at five percent per year.

These numbers are estimates. Nobody really knows, but we all make educated guesses. AMT’s owners researched the market as well as they could, then estimated populations of target users in their area and the annual growth rates for each.

The chart below offers a visual representation of the AMT market forecast.

The table below shows the market forecast described for AMT.

Market Value

Normally you would also look at market value, not just market size. For example, even though AMT’s high-end home segment is 2.5 times larger than its small business segment as measured by number of customers, the small business customer spends almost four times as much as the home office customer. Therefore the small business market is a more important market in terms of dollar value. The table below shows AMT’s method for tracking market value.

The important numbers in this table are the average purchase per customer and the market value:

Average purchase per customer is an educated guess based on AMT’s experience. Sales managers got together to make the estimate. Although AMT would have liked some external source of information to use for this, there was none available. Notice that the home office customer tends to purchase much less overall than the small business customer.

The market value is simple mathematics. Multiply the number of potential customers in the market by the average purchase per customer. In this case they took the average number of customers in each segment over the five-year forecast period and multiplied that by the average purchase per customer, to calculate the market value.

The other items in this market analysis table are subjective qualities that help with marketing. AMT assigns these points to people charged with preparing marketing materials.

Reality Checks

A market forecast should always be subject to a reality check. When you think you have a forecast, you need to find a way to check it for reality. In AMT’s case, if the total market is worth some estimate they could estimate sales of all the competitors and see if the two numbers relate to each other. In an international market, you might check production and import and export figures to see whether your estimates for annual shipments appear to be in the same general range as published figures. You might check with vendors who sold products to this market in some given year to see whether their results check with your forecast. You might look for macroeconomic data to confirm the relative size of this market compared to other markets with similar characteristics.

Review Target Focus

The market analysis should lead to developing strategic market focus. That means selecting the key target markets. This is the critical foundation of strategy. We talk about it as segmentation and positioning.

Under normal circumstances, no company will attempt to address all the segments in a market. As you select target segments, think about the inherent market differences, keys to success, competitive advantage, and strengths and weaknesses of your company. You want to focus on the best market, but the best one is not necessarily the largest one or the one with the highest growth. It might be the one that matches your own company profile.

Lot size

How many “units” does the end user want per transaction? A household may purchase one personal computer per transaction. The customer service department of Eddie Bauer may purchase 20 personal computers at a time. Channel members may have systems designed to address the needs of both.

Waiting time

The speed of providing faster service may be magnified through the systems that channel members offer.

Location

Getting the product in the right place and time is important. Arranging for “authorized dealerships” throughout a wide geographic area allows products to be conveniently and affordably accessible to customers.

Product variety

The ability to purchase other products from a retail store may enhance the sales and/or margins of all products offered by attracting customers who appreciate the variety of products.

Service support

Channel members may be better equipped to offer add-on services. This may include advertising, credit, delivery, installation, and repair to enhance the overall value provided to the customer.

The first step is to select intermediaries that complement the product or service. These channel members should have the goal of offering attractive attributes to the end user. Channel members also need to be motivated to continue to provide value. Motivation typically exists in the form of profitability through stimulating sales. The overall goal is to build long-term and supportive relationships among channel members that are successful for all involved.

Channel Conflict

Marketing channels inherently have the potential for conflict. However, with proper planning it can be minimized or avoided.
Of all the factors, the most common source of channel conflict relates to pricing. It is important that the producer creates the foundation for a pricing structure where each member is able to make a profit from the value they bring to the marketing channel process. Each member’s price must reflect his or her role within the channel. For example, if a retailer is able to purchase directly from the producer at a cost equal to or less than what they buy from their distributor, channel conflict will occur.

Other sources of channel conflict may result from goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent relationships. All of these factors must be taken into consideration, addressed when necessary, and “managed” whenever possible.

The member that has the greatest control–and that may not be the producer–is in the best position to influence the channel.

Roles and Functions

Channel marketing has its own set of terminology regarding each of the players. It often varies by industry. Here is a list of some of the most common terms:

Extending Your Reach

Many producers of products and services do not sell directly to their end users. They use a marketing channel. In its most simplistic form, a marketing channel performs the work of moving goods from producers to consumers.

A marketing channel includes one or more marketing intermediaries who perform a variety of functions. Each channel member:

• Provides value
• Performs a function
• Expects an economic return

Channel marketing most often relates to the sale of products. However, it is not limited to the distribution of physical goods. Providers of services and ideas also benefit from channel marketing. For example, banks and credit unions depend on a network of ATMs to offer their services. Health and medical organizations depend on a network of providers to offer their services. Financial management and insurance organizations disseminate information through systems provided by other vendors. In the cases above, channel marketing offers better services at costs lower than offerings without the assistance of channel members.

Organizations can achieve differentiation through their distribution channels. Each of these channels may offer different coverage, expertise, and performance. They may also realize economies of scale that channels of distribution often offer.

Marketing channel decisions are among the most critical decisions facing an organization. The chosen channels intimately affect all other marketing decisions. The organization’s pricing depends on whether it uses mass merchandisers or high-quality boutiques. The firm’s sales force and advertising decisions depend on how much training and motivation the dealers need.

Channel Members Provide Value

Channel marketing intermediaries exist because they offer value in making goods and services more available and accessible to the targeted markets.

Channel intermediaries offer contacts, experience, specialization, and economies of scale to organizations that cannot offer these attributes on their own. Marketing channels allow producers to realize the benefits that only larger organizations may be able to support.

Each channel intermediary provides value in the form of:

Information: Collect and disseminate marketing information about potential and current customers, competitors, and other aspects of the marketing process.

Promotion: Develop and share marketing communications designed to inform and attract customers.

Negotiation: Reach final agreement on the price and other terms of the transaction.

Funding: Acquire access to funds to finance inventories at different levels of the marketing channel.

Risk taking: Take on risks associated with performing the functions of the channel. Obsolete or damaged inventory, bad debt, and slow payment are a few examples of this risk.

Physical possession: Store and move products from raw materials to the final customers.

Payment options: The buyers’ payment of their bills to the sellers through banks and other financial institutions.

Title: Transfer title of ownership from one organization or person to another.

In a functional sense, these are some examples of the types of resources that marketing channels offer. Each adds value to the promotion, the transaction, or the services associated with the purchase:

• Accounting services
• Advertising planning assistance
• Catalog service
• Co-op advertising programs
• Consumer advertising
• Data processing programs and systems
• Dealer shows and events
• Drop-ship programs
• Employee training
• Financing
• Forms and printing assistance
• Inventory control systems
• Insurance programs
• Management consultation services
• Merchandising assistance
• Ordering and processing systems
• Point-of-sale identification
• Private-label merchandise
• Store planning and layout

Through their acquired expertise and economies of scale, channel members offer these activities more efficiently than organizations, particularly smaller ones, could provide on their own. The marketing channel allows the producer and the channel members to do what they each do best in higher volumes.

About Direct Marketing

As we discussed in Direct Marketing Fudamentals, direct marketing includes various approaches in which the producer of goods or services directly contacts the end-user. Direct marketing encompasses face-to-face selling, direct mail, catalogs, kiosks, telemarketing, and more. Regardless of the form you choose, there are some critical considerations.

Targeted Campaigns

The criteria for direct marketing begins with a reliable customer database. Other factors include offering greater customer value through a more customized and personalized approach for product and service offerings, distribution processes tailored to meet the needs of customers, and the opportunity to build customer loyalty.

One of the first criteria for direct marketing is to have a consistent customer profile available which describes the dominant target markets. This information must have sufficient detail to support a customer database.

A customer database quantitatively captures the key characteristics of prospects and customers who are most ready, willing, and able to purchase your product or service. It may offer demographic information about their age, income, education, gender, and previous mail order purchases. In concert with this information, this customer database identifies customers who possess these characteristics:

• Have purchased most frequently
• Purchased recently
• Spend the most at each transaction

This database is used to accomplish the following.

• Identify prospects
• Decide when a customer needs a specific offer.
• Enhance customer loyalty
• Stimulate repeat purchases

Access to a customer database is the first step. The next set of criteria includes enhancing customer value through one or more of the following factors:

• Customized product and service solutions
• Personalized interaction before or during the actual transaction
• The development of expertise within an industry or based on specific issues
• Individualized distribution processes accompanied by customized marketing offerings

When these criteria are met, the organization may be able to leverage areas of expertise, economies of scale, and have the potential to build customer loyalty. An organization may be able to achieve greater target market precision through direct marketing than it can experience through a mass marketing or channel marketing approach.

Before You Begin, Decide How to Measure

Successful direct marketing campaigns plan their efforts, determine their objectives, target their markets, determine the offers’ key elements, test those elements, and establish measurements to assess the campaign’s success. Measuring your success is key.

Begin by gathering information about your fixed costs relating to overhead expenses and the variable costs relating to how many pieces are going to be sent. Then prepare to track revenues generated. Each of these areas offers valuable information to assess the results of the direct marketing campaign.

Conducting a simple break-even analysis can be a valuable tool in this process. For example:

Dental Data Co. is an organization that offers specialized patient management software to dentists. They would like to determine what their break-even point would be if they mailed CD-ROM demos with printed materials to 2,000 selected dentists. Their estimated expenses for the direct mail campaign follow.

This information will help determine what Dental Data’s response rate needs to be to break even on the campaign. The 43 units to break-even equates to a 2.15% response rate. This response rate is determined by dividing the 43 units at break-even by 2,000, the total number mailed.

Therefore, if Dental Data does not have a response rate higher than 2.15% over the time period they have determined, they will not realize profit from this direct marketing effort.

You can test the anticipated response rate, based on establishing a break-even sales point, to better understand the possible combinations of potential results. Information regarding general direct mail response rates, industry standards, or your past direct marketing experiences may be used to predict reasonable response rates.

Analyzing your direct marketing campaign can allow you to steadily improve direct marketing performance. If multiple direct mail pieces are used, analyze the response rates from each.

This measurement may consider the results that occur after the conclusion of the campaign. Some direct marketing campaigns produce results months or years after the campaign has been assessed. Initial “failure” may change into a successful campaign if results are tracked and measured over time.

Ethical Considerations and Responsibilities

Not all marketing is good marketing. It is important to recognize that some direct marketing techniques contain negative attributes that impact the targeted group. This may include invasion of privacy, deception, or fraud.

Invasion of privacy issues are often associated with telemarketing. How many long distance provider calls have you received in the middle of dinner? “Spam” email messages sent to numerous computer mail addresses clutter inboxes. How many are you receiving each day? These activities can create negative impact on a potential customer, and cost money that could be more effectively spent elsewhere.

Direct marketing can also involve using communication vehicles that exaggerate information and mislead buyers through deceptive claims about a product size, performance, or price. Products that fail to meet the claim, and nonprofit organizations that use funds for other purposes, are guilty of inaccurate or misleading direct mail promotion tactics. In addition to creating a negative image, this kind of marketing can be legally risky.

Consider the potential ramifications a direct marketing campaign may have on your product, service, and organization when selecting, designing, and implementing the campaign.

Direct marketing applies to product and service-oriented businesses, and to nonprofit organizations. In all situations, there is no intermediary involved. Direct marketing describes this interactive communication with the end user.

Direct marketing is not synonymous with mass marketing. The most effective direct marketing takes place when there is a clear connection to reach the target market.

Organizations may use several ways to leverage direct marketing as they communicate with and deliver products to their customers. This may include using a direct sales force, catalogs, websites, email, direct mail, telemarketing, seminars, trade shows, and other “one-to-one” techniques to communicate and sell to their customers and clients.

Some of these direct marketing methods have grown dramatically, especially with the growth of marketing over the Internet. There is evidence that other direct marketing approaches have diminished, such as reports that the response to direct mail is often below one percent compared to the five percent+ response rate numbers more commonly experienced in the past.

Companies may choose to leverage direct marketing exclusively:

• Lands’ End
• Mary Kay Cosmetics
• Prepaid Legal Services

Many local nonprofit organizations also use direct marketing exclusively.

• Nonprofit.net

Other businesses use direct marketing in concert with other marketing channels:

• Dell Computers
• NordicTrack
• Neiman Marcus

Types of Direct Marketing

The most common forms of direct marketing are:

• Internet marketing
• Face-to-face selling
• Direct mail
• Catalogs
• Telemarketing
• Direct-response advertising
• Kiosk marketing

Let’s look at these in more detail.

Internet Marketing

The Internet has revolutionized direct marketing for promoting the sale of products and services to targeted audiences. Access to the Internet provides users with services in four basic areas:

• Information
• Entertainment
• Shopping
• Individual and group communication

Online channels can eliminate geographic considerations. With this capability people around the world have the same access as the person across the street. Many businesses that can sell their products and services through downloading, or who can economically ship those products, have discovered an entirely new way to market.

The Internet makes direct marketing easier, more targeted, more flexible, more responsive, more affordable, and potentially more profitable than ever. Virtually every business should seriously consider the Internet as a part of their marketing mix and determine if it is a viable fit for their direct marketing efforts.

Face-to-Face Selling

The most traditional direct marketing involves the in-house sales force personally contacting potential and established consumers. Examples of organizations that use face-to-face selling include:

• Mary Kay
• Avon
• Amway

Direct Mail

Direct mail is described as sending information about a special offer, product or sale announcement, service reminder, or some other type of communication to a person at a particular street or electronic address. Historically direct mail has existed in the form of printed materials, but CDs, audio tapes, video tapes, fax mail, email, and voice mail are also used in direct mail campaigns. For example, America Online experienced a highly successful campaign through mailing out CD-ROMs to prospective customers. Direct mail permits high target-market selectivity; it can be personalized, it is flexible, and it allows early testing and response measurement to take place. A highly selective and accurate mailing list often determines the success of direct mail efforts to enhance response rates and control costs.

Catalogs

Product catalogs are another version of direct mail where the catalogs are the communication tool. The most common use of this approach involves featuring a variety of products that target the needs of a specific audience who have shown a propensity to order from catalogs. An increasing number of business-to-business marketers are sending catalogs on CD-ROM to prospects and customers. The average U.S. household receives more than 50 catalogs each year, ranging from general merchandise to specialty goods.

Examples of general merchandise catalogs are:

• Spiegel
• J.C. Penny

Examples of specialty goods catalogs are:

• Pottery Barn
• PC Connection

Telemarketing

The process of contacting people on a qualified list to sell services over the phone has grown in popularity to the point that the average household receives 19 telemarketing calls each year. Successful telemarketing campaigns depend on a good calling list, an effective script and contact structure, and well-trained people that are compensated and rewarded for making calls that result in sales.

The telecommunications industry, for example, has used telemarketing extensively to attempt to increase their market share.

This includes:

• AT&T
• MCI WorldCom
• Sprint

Direct-Response Advertising

Direct-response advertising is communicating with potential buyers through television, radio, magazines, and newspapers. The prospective consumer watches, hears, or reads about the product or service and initiates a call to a toll-free number to place their order. Television, for example, offers a wide range of exposure, from a 30-second commercial to a 60-minute infomercial.

Kiosk Marketing

Customer order machines, versus vending machines that actually provide products, are another form of direct marketing. Examples are:

• Eddie Bauer: Stores place computer terminals to order from the entire line of products not available in the retail store.
• Florsheim Shoe Company

Your bank’s automatic teller machines (ATMs) placed in convenient and high traffic areas are another example of kiosk marketing. A combination of these direct marketing techniques may offer the optimal revenue generating solution.