Principles of Direct and Database Marketing - Essay Example

? “Modern marketing now juggles two competing philosophies. The first is the transaction approach epitomised by the ‘Four Ps’ of marketing: product, price, place and promotion. The second approach is known as relationship marketing, which emphasises building relationships with customers over time…” (Tapp, A. (2005), Principles of Direct and Database Marketing, 3rd Ed, Prentice Hall, p9) Discuss this statement. The traditional and conventional approach to marketing has been epitomised and framed in the concept of the ‘Four Ps’ of marketing for decades (Gronroos, 1994), which are product, price, place and promotion but the foundations of a dynamically changing modern marketing environment require that the concept of marketing must now evolve and break free from its economics based roots to cater to the demands of the contemporary consumer, whose primary focus is not embedded exclusively within the exchange of tangible goods but also the purchase of intangible services (Vargo & Lusch, 2004). Gronroos (1994) has criticized the tenets of the Four Ps of marketing which according to him is a weak perspective altogether that has several negative implications on various critical aspects of marketing such as research and application, the limitations of traditional marketing approaches such as the Four Ps of marketing have also been recognized by Bitner (1991) who like Vargo & Lusch (2004) believes that conventional marketing concepts such as the Four Ps of marketing have contributed towards limiting the scope of marketing by asserting that decisions related to a product can be described in merely four dimensions. Owing to the limitations of traditional marketing concepts as identified by Gronroos (1994), Hutton (1996) presents a need to include public relations and politics in as relatively newer dimensions of the Four Ps. Several researches and literature conducted since the 1990s and even earlier, indicate that marketers must incorporate modern perspectives with traditional views to cater to the consumer of today. This view is greatly highlights the benefits of moving towards contemporary approaches and logics to marketing, the most important of which is the concept of relationship marketing (Gronroos, 1994; Vargo & Lusch, 2004). According to Berry (1995), relationship marketing aims to focus more on the approach of retaining existing customers rather than utilizing a majority of the organization’s resources in the pursuit of attracting new customers. The importance of customer retention is so vital to the progress of an organization that a study conducted by Reichbheld & Sasser (1990) concluded that even if an organization is able to increase its customer retention rates by 5 percent; such a move reflects enhanced customer loyalty which directly correlates to an increase in profits between 25 to 125 percent. Hennig-Thurau et al. (2002) noted that aspects such as customer satisfaction, customer loyalty and commitment are integral factors contributing successfully to the concept of relationship marketing. Gronross (1990) supports this view by suggesting that as a discipline marketing concerns itself with the management of relationships, a tenet which is needed more importantly in the service sector, and the commentator postulates that in a context where tangibility of products and goods is non-existent, traditional concepts of marketing cannot effectively deal with the issues related to service-related businesses. An intriguing view of modern marketing has been presented by Edgett & Parkinson (1993) who claim that traditionalist marketing approaches maybe equally effective in service sector marketing, where customer-orientation and customer relationship management is the primary focus. Krueger et al. (2003) on the contrary argue that technological advancements and the wide-spread popularity of the Internet across the globe, has contributed towards changing business dynamics an example of which is the availability of legal online music. It is argued that with regards to the marketing of goods, an application of the Four Cs of marketing rather than the Four Ps of marketing would produce better results for businesses. Sheth & Parvatiyar (1995) note that the association between direct marketing and relationship marketing is such that direct marketing leads to the establishment of a customer-centred approach towards marketing which is so prominently observed in the philosophy behind relationship marketing. This notion is also advocated by Harridge-March (2008) who claims that relationship marketing and direct marketing are complementary approaches, unlike, Sheth and Parvatiyar (1995) however, Harridge-March (2008) concludes that aspects related to direct marketing are dependent upon theories concerning relationship marketing. It should however be stated that extensive research supports the importance and significance of relationship marketing based concepts such as customer relationship management, customer loyalty and customer lifetime value in their application to modern marketing (Dwyer & Tanner, 2006; Harridge-March, 2008). Meadows-Klue (2008) implies that the modern or in his terms the ‘Facebook generation’ is marketing literate, this view suggests that customers yearn for creativity and authenticity in the deliverance of advertisements or in application of mediums used by marketers to communicate directly with their target audience. It is suggested that relationship marketing in itself has the capacity to revamp the whole marketing mix only if the demands, needs and wants of the customer of the digital-age are accurately comprehended (Meadows-Klue, 2008). For Shani & Chalasani (1992) relationship marketing strategies encompass a great degree of overall applicability, this belief postulates that marketers need to adopt an individual-based approach to marketing by making use of customer database systems to allow for the implementation and application of an amalgamated relationship marketing system. Yudelson (1999) proposed that the Four Ps of marketing developed in 1960 are in fact an enduring concept with vast applicability and potential for adaptation in the modern times, it is argued that each and every tenet of marketing can indeed be explained, analyzed and understood while resting on the approach of product, price, promotion and place once the aforementioned core ideas are further developed to suit the distinctive and varying needs or requirements of marketers. Brodie, Pels & Saren (2006) argue that modern marketing paradigms are increasing in their relevance to services rather than goods, which is a perspective that is also supported by Vargo & Lusch (2004) this concept suggests that unlike conventional and traditionalistic approaches, modern marketing is pluralistic (Gundlach, 2007) and thereby, requires the adoption of both transactional and relationship marketing practices to effectively and successfully achieve the aims and objectives of marketing. According to Armstrong (2012), the evolution of direct marketing stems from the idea of establishing long-lasting relationships with customers by adopting a direct approach to marketing which did exist in previously but was not as well established as it has become in its application to the modern businesses. The New Direct Marketing Model, implies the development of a fresh and up-to-date approach to direct marketing and the creation of relationship with customers which previously was only limited to the use of mediums such as telephone and direct mail. The wide-spread accessibility of the internet means that marketers today can base entire businesses on the tenet of direct marketing, which is true for internet giants such as Amazon.com and eBay (Armstrong, 2012). In comparison with the traditional marketing principle of the Four P’s, online businesses of today need the audacity and freshness of direct marketing, by not only incorporating direct marketing and relationship marketing as secondary or supplementary components of a company’s distribution channel as practiced by early direct marketers but by basing the entire approach to business on the foundation of building a ‘connection’ with the customers. Direct Marketing is an invasion of people’s privacy. Discuss this statement. According to Mullin (2002) the definition of direct marketing is rather simple, for the concept of direct marketing like its name, refers to any medium or source of direct communication between the two fundamental entities in the discipline of marketing – the buyer and the seller, such that no third-party is involved in the marketing process. Egan (2007) describes the approach as a system which operates to meet the objective of encouraging each and every individual customer of a product to take action in terms of purchasing the product by eliciting a significant response. Kitchen (1999) however, asserts that the concept of direct marketing entails a certain degree of subjectivity which is why it is quite impossible to produce a definition of direct marketing which is generally accepted and agreed upon. Evans et al. (1995) reports that aspects of direct marketing encompass the employment of several mediums that are used by sellers to directly communicate with individual customers, these mediums can range from direct mail, home shopping and samples to direct response advertising. O’Malley, Patterson and Evans (1997) suggest that the growing importance of the relationship marketing paradigm means that marketers are constantly focusing on establishing and developing tools, techniques and approaches that can bring them closer to the buyers of their products. In a fast-paced and technologically advanced macro environment, marketers can now use electronic databases and several means of direct communication to establish ‘intimacy’ with their customers (O’Malley, Patterson & Evans, 1997). It should be noted that in defining the extent to which individual customers prefer and allow the intervention of marketing related literature in their daily lives, buyers and sellers appear to be in conflict when determining this limitation. The outcomes of six UK based exploratory group dialogues concluded that a majority of consumers regarded certain types of direct marketing tactics as intrusion of privacy, while, marketers positively called the employment of such intrusive marketing strategies as a way of developing intimacy between the business and each of its individual customers (O’Malley, Patterson & Evans, 1997), a fairly recent assessment of the differences between customer and marketer privacy expectations also concluded that there is a discrepancy between the boundaries that have been set by customers regarding their privacy and what marketing professionals believe about the existence of such boundaries (Milne & Bahl, 2010). Henceforth, researchers were able to uncover that modern marketing and direct marketing methods in specific lack the inculcation of meaningful factors and components that can diminish this sense of reticence that many consumers experience when faced with several marketing paraphernalia. Another study based on the attitudes of consumers to direct mail aimed to classify how numerous consumer groups felt regarding the medium of direct mail as a means of direct marketing in the context of intrusion of privacy. The research concluded that various groups of consumers, specifically those who belonged to younger age brackets were highly concerned about privacy related issues with regards to direct mail; these issues were primarily concerned with the use of customer names and the transmittal of several unsolicited direct mails that were received by customers (Milne & Gordon, 1994). Evans, O’Malley and Patterson (1996) discovered that consumers in the United Kingdom were highly concerned about several aspects related to the bulk of direct mail with which they were targeted; the researchers concluded that primary concerns of consumers included the volume of direct mail as well as ethics of direct mail, all of which presented a privacy threat to customers. Clarke (1998) concluded that consumers were losing trust in direct marketing’s ability to safeguard their rights as a majority of marketing practices were observed to have gravely breached the privacy of customers. Rising privacy concerns were noted for almost all mediums of direct communication that can be broadly categorized into conventional and electronic channels. For example, excessive communications received by fax were noted to have been highly disruptive for users due to blocked lines and paper outage, on the electronic front spam mail proved to be a menace for e-mail users who reported instances of receiving several ‘junk mail’ in one day (Clarke, 1998). Takemura and Ebara (2008) found that the scale of Spam mail’s negative implications is not limited to individuals but it in fact has detrimental effects on the overall economy, a production function model based analysis suggested that Spam mail led to a reduction in Gross Domestic Product (GDP) of Japan and adversely impacted worker productivity in Japanese organizations. Roberts and Berger (1999) present an optimistic view of direct marketing by noting that recent technological advancements have positively impacted every field including the arena of direct marketing, as the introduction and implementation of database-driven marketing means that marketing offers can now exclusively cater to the needs, wants and demands of each individual customer this reduces the prevalence of spam mail, junk mail and unsolicited mails to a great extent. Mulhern (2010) agrees with the capabilities of internal databases in facilitating the receptiveness of customers to direct communications, this view postulates that database-marketing helps improve the precision of marketing activities thereby, aiding in the overall enhancement of direct marketing which also includes a reduction in customer apprehensions regarding the matter of privacy. Perhaps, the most widely-known real world example of privacy concerns posed by direct and database marketing is that of Lotus’ MarketPlace: Households product that included psychographic and demographic information of households in USA as a disk based database program. Several members of the community felt that the creation and development of such a program violated the citizens’ right to privacy and this view was represented in numerous House committee discussions. Consequently, more than 30,000 people insisted that their information be removed from the system and upon the persist campaigning of privacy rights supporters; Lotus ultimately withdrew the product at the expense of a huge loss (Belanger & Crossler, 2011). According to Jones and Fox (2009) the online presence of people belonging to the 12 – 24 age bracket has risen by approximately half of what it was in 2005. This discovery has several important implications specifically for marketers engaging in direct marketing, as it allows researchers to predict the number of children and teenagers who could be targeted by marketers via electronic channels of direct marketing. Walrave and Heirman (2012) put forward an interesting argument when they suggest that of the several factors that may discourage children and teenagers from disclosing information online in response to emails and social media pages, privacy concern is a primary factor which could discourage such behaviour what is surprising to note is that an awareness of privacy concerns relating to direct marketing approaches employed by marketers is a better predictor of child and teenager reluctance to disclose information online in comparison with parental regulation. Provost et al. (2009) report that owing to concerns posed by all facets of society with reference to the privacy concerns regarding direct marketing, developers have worked extensively to introduce privacy-friendly online tools that can aid marketers to conduct and execute their strategies while, abiding by the regulations set by individual customers on the concept of privacy. While, the premise of direct marketing has been marred with loopholes concerning the invasion of people’s privacy while, breaching the regulations that individual customers set and wish to maintain with regards to marketing communications, it should be noted that recent developments in direct marketing techniques specially those of which that can be found online (e.g. direct email, Spam and Junk mail regulation, internal database, quasi-social networking) in the context of respecting customer privacy have been significant. Evidently, there is a need to ensure that marketers respect and abide by privacy boundaries that have been set by customers and not cross them in the name of intimacy (O'Malley, Patterson & Evans, 1997). Moreover, online regulation of social networking websites must also be exercised (Provost et al. 2009) to ensure that information which is displayed on the internet is not utilized by third-parties and marketing agencies in establishing new tools and techniques for direct marketing. Pavlou (2011) recommends that an active participation and integration of information systems must be brought about effectively (Belanger & Crossler, 2011). Implementation of such a model would most likely work towards enhancing the transparency and legitimacy of direct marketing and relationship marketing tools and techniques to successfully achieve the overall marketing objectives of an organization. Armstrong (2012) argues that the threat of invasion of privacy posed by the employment of various direct marketing tactics by marketers is in fact an issue of public policy. Critics fear that the abundance of information tools such as use of databases at a certain point breaches the ethics and conducts related to the information which should be available to marketers in comparison with what they are able to gain by accessing the electronic databases. Another concern related to the issue of privacy arises specifically in the context of online marketing which has now grown to become the premium direct marketing method which is now employed by marketers. Armstrong (2012) notes that every time a user logs in on a website and is expected to reveal personal information to gain maximum benefits from accessing the website, the user unknowingly transmits a plethora of information to the existing database of the website. Lack of consumer awareness regarding privacy issues and a tendency to skip information regarding privacy concerns when signing up for a website play an integral role in harming the online privacy status of a customer, thereby, putting the available information at risk for theft and exploitation. Furthermore, the interdependence of businesses in today’s competitive environment means that organizations and companies are constantly striving hard to win the technological race. Microsoft, in an attempt which was similar to that of Lotus when it sought to launch the MarketPlace: Households database, aimed to create the ultimate database whose software breached security and privacy concerns to unrightfully access personal information on the buyer’s computers, this allowed the company to retrieve data regarding the software and utilities which were running on the customer’s machine. Microsoft’s database however, met with the same fate as that of Lotus and was pulled out of the market amidst protests from consumers and consumer rights groups (Armstrong, 2012). The extent of the privacy issues and concerns presented by direct marketing imply that marketers, governments and consumers have to come together to curb the augmentation of privacy issues that are raised by direct marketing and online marketing. For instance, the establishment of groups such as TRUSTe which is a joint effort by companies such as AT&T and Microsoft strives to inspect the privacy-related measures which are taken by companies on the Internet to ensure that a user’s experience on the Internet is made as safe as possible, TRUSTe certified companies and businesses are honoured with the mark of trust, that may also boost customer confidence in the business (Armstrong, 2012). 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