Direct Marketing in Sports Gear Incorporated - Case Study Example

Direct Marketing Sports Gear Incorporated must take extreme care when formulating and executing sales promotions and direct marketing campaign. In some markets, sales promotion efforts can raise eyebrows if companies appear to be exploiting regulatory loopholes and lack of consumer resistance to intrusion. The first important thing Sports Gear Incorporated must do is identify its customers. According to McDonald and Christopher (2003) direct marketing can be defined as: "marketing of products without using intermediaries". In order to organize direct marketing campaign Sports Gear Incorporated should gather information about its potential clients around UK. Segmentation allows Sports Gear Incorporated to divide up its market into customer groups or segments. Customers within a segment are similar to each other and dissimilar to other groups of customers in other segments (Evans, et al. 2004). Segmentation will be used to understand individual customers in the sports memorabilia market place and to group them together to form distinct segments which are identifiable, accessible and substantial. At its simplest, a consumer segmentation may be: Non-user, Competitor's customer, Low-value customer, High-value customer (Fill 1999). In business markets, segmentation is often used to make selling more cost effective by prioritising the companies that require regular face-to-face salespeople and that can be served better by telesales and direct distribution. Market segmentation involves finding out the key drivers that distinguish one group of customers from another. The key drivers of consumer market segmentation in sports memorabilia will be: 1. Geo-demographic - who they are: age, gender, class, location 2. Lifestyle - how they live: income, occupation, 3. Attitudinal - why they buy: motivation to select sports memorabilia product, e.g. price, image, application, benefit. 4. Transactional - what, how and how much they buy (Boone, Kurtz 1992). Statistical modelling techniques can be used to isolate the key drivers and to identify customer clusters or groups. Alternatively, Sports Gear Incorporated can use off-the-shelf segmentation classification systems. There are two types of data: primary and secondary data collection. Methods of primary data collection can be thought of as the means by which information is obtained from the selected subjects of an investigation (Robertson, 1992). A sampling technique will dictate which method is used and in other cases there will be a choice, depending on how much time and manpower (and inevitably money) is available. The following methods can be used by Sports Gear Incorporated in order to collect primary data: Individual interview of sport club members and fans. This method is probably the most expensive, but has the advantage of completeness and accuracy. Normally questionnaires will be used. Street (informal) interview. This method of data collection is normally used in conjunction with quota sampling, where the interviewer is often just one of a team. Some factors involved are: possible differences in interviewer approach to the respondents and the way replies are recorded, non-response is not a problem normally, since refusals are ignored and another subject selected; convenient and cheap. Telephone interview. This method is sometimes used in conjunction with a systematic sample (from the telephone book). It would generally be used within a local area and is often connected with selling a product like sports memorabilia. It has an in-built bias if private homes are being telephoned (rather than businesses), since only those people with phones can be contacted and interviewed. It can cause aggravation and the interviewer needs to be very skilled (Dillman et al. 1996). Secondary data are generally used when: the time, manpower and resources necessary for its own survey are not available (and, of course, the relevant secondary data exists in a usable form), or it already exists and provides most, if not all, of the information required (Berry 1998). The advantages of using secondary data for sports Gear Incorporated are: savings in time, manpower and resources in sampling and data collection. In other words, somebody else has done the 'spade work' already. The disadvantages of using secondary data can be formidable and careful examination of the sources of the data is essential. Problems include the following. Data quality might be questionable. For example, the samples used may have been too small, interviewers may not have been experienced or any questionnaires used may have been badly designed. The data collected might now be out-of-date. Geographical coverage of the survey may not coincide with what the company requires. Secondary data sources fall broadly into two categories: those that are internal and those external to the organisation conducting the survey. As sports Gear Incorporated is only a start up company internal secondary data cannot be used. But, this method will be very effective in the process of enlargement the Sports Gear Incorporated database over the first two years. The external secondary data sources are: the results of a survey undertaken by a credit card company, to analyse the salary and occupation of its customers (sports fans); a commercially produced sports goods survey giving popularity ratings and buying intentions, might be used by a garage chain to estimate stock levels (Hughes 2000; Parks, Quarterman 2003). The most important external secondary data sources are official statistics supplied by the Central Statistical Office and other government departments. United Kingdom National Accounts (The Blue Book) is published annually. It is the essential data source for those concerned with macro-economic policies and studies. The principal publication for national accounts statistics, it provides detailed estimates of national product, income and expenditure (Stone, Jacobs 2001). Also, Sports Gear Incorporated can use Monthly Digest of Statistics, Financial Statistics. Economic Trends to evaluate the trends and changes occurred on the market. It can be information about sport clubs, stadiums location, fan clubs etc. Geo-demographic consumer systems use individual Census data such as age and home ownership, to classify postcodes into neighbourhood types. The resulting segments are self-explanatory: for example: well off, white-collar families with older children. By providing a customer list with postcodes, Sports Gear Incorporated can classify which segment its customers belong to. Segmentation helps make sense of customers and prospects in the marketplace. It allows Sports Gear Incorporated to decide which segments to target within its campaigns. Databases are increasingly being used to store useful information on actual and potential customers which can be continually up-dated to provide a framework for changing demand patterns and customer requirements. Some of the most sophisticated databases developed to date are those of the catalogue companies who track the purchasing behaviour of their customers and therefore are able to distinguish buying patterns and lifestyle characteristics (Hansen, Hill, 1989). This means that it is easier for them to distinguish different buying groups to the extent that many companies have now differentiated their product offerings by introducing a number of smaller, specialised catalogues, deliberately designed to cater for the needs of smaller sub-segments. Database technology can cut through many of the problems created by traditional file organization. Rather than storing data in separate files for each application, data are stored physically to appear to users as being stored in only one location. A single database services multiple applications (Keen, Cummins 1994). For example, instead of a storing customers data in separate information systems and separate files for age and location corporation could create a single common human resources database. A database management system is simply the software that permits an organization to centralize data, manage them efficiently, and provide access to the stored data by application programs. The advantages of a database management are followed. Complexity of the organization's information system environment can be reduced by central management of data, access, utilization, and security. Data redundancy and inconsistency can be reduced by eliminating all isolated files in which the same data elements are repeated. Data confusion can be eliminated by providing central control of data creation and definitions. Program-data dependence can be reduced by separating the logical view of data from its physical arrangement. Program development and maintenance costs can be radically reduced. Flexibility of information systems can be greatly enhanced by permitting rapid and inexpensive ad hoc queries of very large pools of information. Access and availability of information can be increased. Given these benefits of database management, one might expect all organizations to change immediately to a database form of information management. But it is not that easy, as we will see later. Agents should attend two collections per year from which they select a range of recommendation to the company. It is an important information gathering exercise for the whole company. The accounts department may provide the production and delivered cost of the product; value of sales by segments of total customers; total cost of discounts given; value of creditors and debtors; cost of returns. This is a very useful source of information when considering which customers are essential to the survival of the company. These are database sources internal to Sports Gear Incorporated, and include the following: Information possible from the sales department includes: speed of handling orders; dispersion of current customers; total sales for each product in the range. All of this is invaluable information for understanding what is happening in the market place on a day-to-day basis (Masteralexis, Barr 1998). Continuous research may be ad hoc usually to obtain information at one point in time for making a particular marketing decision. Data obtained through continuous marketing research may be: Quantitative: this is data capable of clear objective assessment, such as the number of cars that pass a particular site for a proposed petrol station in any one week. Sports Gear Incorporated can use surveys and online questionnaires as well as Qualitative methods which help to assess people's attitudes or motivations. Overlayed will help Sports Gear Incorporated to compare surveys data type with the qualitative date to improve the overall quality of database. In direct marketing databases will enhance the quality of the organization's relationship with its customers (Pagell, Halprin 1998). It will enable: the personalization of communications; marketing managers to be alerted to needs automatically; and comprehensive customer records to be available 'at the touch of a button'. In addition, databases can allow for micro segmentation based on criteria such as buying patterns, customer-initiated communications, fine-tuned demographics and other, normally difficult to discern characteristics, control customer investments, foresee business goals, calculate Life Time Value and Recency, Frequency and Value. The development of database within Sports memorabilia is expensive, because it is impossible to buy ready- made database of the similar industry or collect enough secondary data material in order to receive a clear picture of the market segmentation. According to theoretical approach (Stock 1999; Keegan, Green 2000; Shank 2001) on the first stage of database collection the direct mail response is about 3%. It means that if Sports Gear Incorporated sends 1,000,000 name mailing the response will be approximately 30 000. Each mail costs $1.00, so the company will need to spend $1,000,000 only on the direct mail campaign. The best way to save many is on-line questionnaires (Chaffy et al. 2000). They help to pre-meet planning by identifying issues of concern. The secondary data collection is not so expensive as the primary data collection, nevertheless it takes from $20,000 to $30,000 to collect and analyze this information in accordance with the needs of Sports Gear Incorporated. The second stage of data collection, which takes place during the next years, is less expensive, because it is based on the previously gathered and classified material. So, for direct mail this response will be 4,25%. Sports Gear Incorporated will have a list of potential customers, for instance 50, 000 clients around the country, and can send an e-mail or brochures with the products directly to the potential clients. So, the second stage of data collection will cost approximately $90,000-100,000 per year. For attracting customers and promotion of sports memorabilia in UK, Sports Gear Incorporated will be oriented on the male group from 18 to 60. This group will be divided on: students, blue collars, white collars, and pensioners groups. As for the income the high side of low income individuals and to all in the middle income bracket are admitted, and the blue-collar worker, and young professionals. As for the educational background, mostly sports graduates and sports fans. Pensioners and students, with high income can be potential clients of Sports Gear Incorporated. There are main motive is to have a really unique singed spots gear spending less time and paying less. On the first stage Sports Gear Incorporated could orient on the particular geographic area, for instance south of the country. Increasingly market researchers are turning to lifestyle analysis as a means of generating a clearer picture of their customers' behaviour and thus their tendency to purchase different types of product. Analysing residential neighbourhoods on the assumption that purchasing power and usage behaviour is strongly related to the type of neighbourhood in which they live help Sports Gear to save money and implement the most successful techniques in other areas. Geodemographic analysis, unlike other traditional means of classifying groups (usually along class dimensions) offers a richer picture of individual behaviour. It thus allows Sports Gear Incorporated to more closely tailor their marketing efforts to different groups (Crawford, 2003). Therefore, this kind of approach, like data-basing marketing, is likely to yield greater opportunities in the UK context for focusing on the needs of smaller target audiences. The main strength of the recommendations listed above is accuracy of the market research and big size of the database. The proposed techniques allow gather enough information to find potential clients and overcome difficulties caused by fraudulent dealings. Sports Gears Incorporated will be able to identify its own customers and classify them in accordance with their needs and preferences. The weaknesses include high cost of direct mailing and low response on the first stage of data collection. The limitation is that sports memorabilia market is one of the fast growing markets in the world, and Sports Gear Incorporated will need continuous data collection to be aware of all the changes. Marketing budgets need to be wisely spent, and it may be preferable to consider marketing more as an information gathering and review function than a promotions exercise. On the database results drive and plan communication are based. It identifies key customer groups, and gives overview of what constitutes customer value among each of these groups, and how the value can be create, delivered and leveraged in a way that is perceived to be superior to competitive offerings. Database marketing will allow Sports Gear Incorporated to take a long-term perspective of their relationship with customers. By continually up-dating information the identification of key trends is easier to see and thus creative business solutions easier to develop. The only problem with database marketing is customer suspicion and resistance. Therefore, the use of information gathered needs to be treated with great sensitivity and considered in the light of cultural norms and acceptance. References 1. Berry, M. 1998. The New Integrated Direct Marketing, Gower. 2. Bly R.W. 1998. Business To Business Direct Marketing, MCGraw-Hill; 2 edition. 3. Boone, L.E., Kurtz, D.L., 1992. Management, 2nd Edition, McGraw-Hill, New York. 4. Boussafiane, S. 1996. 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