DIRECT

MARKETING
- Nitesh Aggarwal

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.

hen 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:w
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
e s c a l a t i n g
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

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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
Advanc'edge MBA December 2004

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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:Advanc'edge MBA December 2004

4 The telephone
This is probably
one of the best
media for direct
marketing. Instead
of depending upon
a mailer or a
t e l e v i s i o n
advertisement to
convince
the
prospective
customer,
the
c o m p a n y
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

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to reap maximum benefits from
direct marketing: 4 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.
4 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.
4 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
Advanc'edge MBA December 2004

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: w
People get customers through
direct marketing but do not
know how to retain them, and
hence lose them blaming it on
direct marketing
w
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
w
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.

The author is a PGP second year

student at IIM A.