The Privacy Dilemma For Relationship Marketing In Consumer Markets - Coursework Example

Need for Innovation & Creativity in Managing the Direct Marketing Encounters In the past, most companies engaged in mass marketing with highly standardised products, supported by mass marketing and mass media techniques. Today, facilitated by highly developed Information Systems and wide spread use of internet bringing consumers around the globe closer to suppliers, the trends are shifting to the other end of the continuum with a focus on customisation. Such trends coupled with increased competition fueled by greater free trade and globalisation process, the need for innovation in promoting products is uncontested. Today, most companies are at a dilemma as to how to increase their brand equity, operating within a business environment where most companies are focused on brand building and thus, strong brands are not necessarily a competitive advantage anymore. With the increased advertising clutter and shifting market demographics with highly fragmented consumer needs, the traditional dominance of mass media in todays, promotional strategy is declining. This essay aims to analyse the growth of Direct Marketing in today’s communicational mix and to identify both desired and unintended effects of direct marketing activities. The essay will further focus on the challenges in designing and deploying effective direct marketing campaigns, which are creative and exciting enough to compete with the overall advertising clutter competing for consumer attention. When considering the communication mix options available for marketers today, the highly developed communication industry coupled with the wide spread use of Internet has provided new means of interactive marketing such as web sites, online stores, and a host of other innovative and informative means such as CD Rom catalogues and Video screens in supermarkets, altering the traditional mix of promotional tools drastically. These wide choices have not only increased the reach of the communication mix but also reduced the cost per reach significantly. The biggest advantage of these new modes of communicational tools lies in being able to be highly focused and directed to the desired segment of consumers. Within these changes in promotional strategies, a notable development is the increased importance placed on direct marketing. Environmental forces such as political, economic, social and technological factors driving such growth of Direct Marketing is worth analysing in order to understand why direct marketing is becoming an increasingly popular mode of communicating with the consumers. More and more companies are embracing the paradigm shift of relationship marketing in place of mass marketing. “Market demassification has resulted in ever increasing number of market niches with distinct preferences” (Armstrong & Kotler 2000) and these niches cannot be targeted with traditional mass marketing mediums effectively. With the changing environmental conditions, population increases and changing social trends fuelling urbanisation, travelling is becoming an increasingly time consuming and less enjoyable activity. Traffic and congestion makes personal shopping more of a chore than an enjoyable experience. Development of fast delivery modes such as curiour services, electronic means (e-books for example) as well as highly developed credit card and other e-currency options have further facilitated the growth of direct marketing. Although the concept of relationship marketing was more relevant to industrial and service marketing, today, it is now being adopted in consumer marketing as well (Grönroos 1997). Thus, with the development of information and communication systems, direct and database marketing, which was previously used predominantly in industrial and business-to business sectors have evolved to cope with large consumer markets as well. Direct marketing, therefore has become a key element in the communicational mix in consumer goods marketing and its importance has greatly increased with the segmentation, customisation and niche marketing strategies being widely adopted. Another reason for the increased importance placed on direct marketing may be the attributed to companies reaching a plateau in establishing differentiation in their core product features and returns on branding efforts have diminished over the years. Companies such as Dell have proven that direct marketing can be used as a driving force in establishing competitiveness where Dell’s overall business model itself is firmly hinged on its customisation aided through direct marketing (Armstrong & Kotler 2000). Direct marketing is defined as “any direct communications to a consumer or business recipient that is designed to generate a response in the form of a direct order placement, or request for more information - lead generation or visit to stores or other place of business to purchase the product – traffic generation” (Economic Impact 1998). Direct marketing can be in the form of direct response advertising, face-to-face direct sales, telemarketing, kiosk marketing, direct mail shots, online and email campaigns (Shultz & Barnes 2001). Direct marketing has the distinct characteristics of being nonpublic, immediate and customized and being interactive (Armstrong & Kotler 2001). Contrasting with mass marketing, direct marketing involve individual customers of whom the profiles are available to marketers and targeted with customised products, and market offers and individualised messages, distribution and incentives. Contrasting with mass marketing efforts of attracting customers, direct marketing effort is focused on retaining customers and deriving maximum lifetime value out of a customer base with whom the firm aims to establish a high level of “customer intimacy” (O’Malley et.al. 1997). Highly developed customer profiling within Customer Relationship Management systems (CRM) such as Hilton Honours of Hilton Hotels manages and make use of over 4 million customer profiles and 14 million customer data records in developing their focused promotions combined with direct marketing efforts (Big Look at a Big Company 2005). The intended benefits and effects of direct marketing include the convenience, immediacy, privacy and customised nature of the shopping experience. Direct marketing through online mode brings in added benefits of facilitating wide array of information and comparative search options so that buying decisions are well informed. The interactive nature of this promotional tool also allows for a high level of interaction where consumers can have pre and post transaction contacts with the supplier, reducing possible cases of consumer dissonance, which may have negative effects on brand perceptions. While most consumers who have too little time and too much work, tend to appreciates the greater informativeness of direct marketing campaigns and the convenience of reviewing these information from their homes, as well as purchasing the desired items, some may perceive this form of “customer intimacy” as an intrusion in to their privacy (O’Malley et.al. 1997). Thus, marketers need to manage their direct marketing efforts in a manner, which place them in the correct side of the thin line, which separates customer intimacy from intrusion. Some of the unintended effects induced by direct marketing efforts include “consumer irritation, feeling of unfairness or having been deceived and actual cases of fraud” (Armstrong & Kotler 2001). Direct-response TV commercials can sometimes present a hard sell which annoy the consumers while some susceptible buyers may get scammed in to purchasing items, which does not necessarily deliver the promised results. Weight loss programs and exercise equipments promising 10 days weight loss promises are examples of such direct marketing practices, which deceive many consumers who are sensitive of their weight problems and willing to try out quick remedies. In a society where regular crime rates are high, consumers do not appreciate invasion of private space and private time by strangers. Thus, direct marketing personnel practicing house-to house calls may encounter annoyed customers who are cautious and unwilling to become a prospective customer. Thus it is a challenging task for the marketers to design and deploy effective direct marketing campaigns, which are innovative and creative enough to stand out from the blitz of direct mailers and other forms of direct marketing, which clutters the consumer’s attention. A far bigger challenge is to ensure that such direct marketing practices which requires the use of personal data profiles of the target consumers to establish customer intimacy is carried out without being perceived as intrusive. In designing and deploying innovative direct marketing campaigns, companies need to realise the impact different customer groups will have on decisions pertaining to suitable mediums, amount of information to be provided as well as level of persuasion required. Innovation and creativity can be applied in to all modes of direct marketing, though in differing degree. Direct Mailers, which represent one of the most popular mode of direct marketing represents a US$ 46.5 billion expense in year 2001 in USA. While the traditional direct mailers were paper based printed material, recent trends include emails, fax mails and voice mails (Armstrong & Kotler 2001). With the developments in digital technologies, more and more companies are also using short message services (SMS) in mobile and CDMA phones to carry out direct mailing activities. Innovation in direct mail mode can be illustrated with Nintendo’s mailing of 2 million copies of a 13 minute VHS tape promoting a new game being launched which helped them sell over 6.1 million units of the game within the first 45 days of launching the product (Armstrong & Kotler 2001). At Staples Inc., one of the largest stationary chain stores in UK, customers encounter innovation in direct marketing in the form of their in store kiosks. These kiosks located in over 1,100 Staples outlets allow customers to log in and select items from a wide array of over 50,000 merchandise in addition to the in-store merchandise. The kiosk also allows customers to design and configure their PCs and process the order online (O’Brien 2004). While success stories are plenty in the market place, companies must ensure that common pitfalls are avoided in modes such as Telemarketing and Direct –Response Television Marketing which includes intrusion to private space and private time, creating a perception of hard sell through pushy direct response advertisement and appearing to be fraudulent. Among the options of direct marketing tools, online marketing offers significant opportunities for innovation and creativity. Online shops such as Barnes & Nobles allow for some of their books to be downloaded as e-books within minutes of completing transactions, facilitating the consumer with downloading and installing of required software to read the e-book in-case the consumer is not in possession of the required software. Such innovations, facilitating immediacy and ease of access will lead the way in the growth of direct marketing across the globe in the coming decades. Markets must also realise the ethical issues associated with utilising personal information of customers and the need for acting with a high level of respect for the privacy of the target consumers. It is important to establish and maintain a high level of trust and commitment as well as ensure that there is a mutual interest between the company and the target consumer in participating in the direct marketing effort (O’Malley et.al. 1997). For example, when direct mail is being used, the option to refuse and not receive further communications should be made available to the target consumer and if the consumer is unwilling to establish a relationship, such wishes should be respected. Customer club programs and Frequency Buyer programs are an effective means of establishing customer intimacy while creating long lasting relationships with customers. The sense of belonging created through these club programs will surmount the feeling of privacy invasion when direct marketing is being targeted at the membership. The fact that the membership was established with mutual interest in being involved in such a customer – company relationship clears the path for future direct marketing activities with the membership without appearing as intrusive. Companies such as Harley Davidson, Pampers and Nestle have successfully implemented such customer club programs, establishing customer intimacy with large groups of consumers who can be targeted with highly segmented direct marketing activities. Nestle launched it’s Casa Butoni Club in UK in year 1992 with the aim of becoming a helpful authority on Italian food. Within two years since its inception, the club had amassed over 200,000 members and membership has steadily grown since. Membership benefits include quarterly newsletters carrying recipes and other Italian life style information; a toll free calling facility to inquire and get advice on pasta preparations and a host of other exciting integrated marketing communication activities such as promotions and sweep stakes (Joachimsthaler & Aaker 1997). Such success stories reiterate the power of direct marketing as an effective tool in long-term brand building efforts of companies, provided that they are designed and implemented with creativity and sensitivity to consumer privacy. Companies stand to increase the effectiveness of their efforts by taking an integrated approach to direct marketing. Instead of relaying on a single tool of direct marketing, a company can effectively combine various modes of direct marketing to add value and creative innovative and exciting direct marketing campaigns. Figure 1 below illustrates such integrated direct marketing at work. Figure 1 – Integrated Direct Marketing Campaign Source : Armstrong, G. & Kotler, P. 2000, Marketing: An Introduction, 5th ed, Person Education Inc, Singapore For optimum results, direct marketing campaigns should be designed and executed within the companies overall Integrated Marketing Communication effort. The concept of integrated marketing communication (IMC) recognize the need for carefully planning, coordinating and executing all marketing and promotional mix elements to communicate the desired massage through various channels. The aim of such coordinated and integrated communication activities is to achieve a synergy through the unified massage delivered by synthesizing the “bundle of massages” the customer receives (Belch & Belch 2004). By including inbound telemarketing numbers on all forms of marketing communications as well as combining sales promotions and direct marketing are examples of how direct marketing can be integrated with the overall IMC strategy of the company. Such integrated efforts will allow for greater innovation and creativity in designing the direct marketing campaigns and will perform better in terms of not only the short term objectives of the campaign but also enhancing overall brand equity. In conclusion, it can be noted how powerful a tool direct marketing can be, within a company’s Integrated Marketing Communications strategy if designed and implemented with creativity and with due respect for the privacy of the targeted audience. With the environmental forces such as development in communications and information technologies as well as shifting social trends such as urbanisation and overly busy lifestyles coupled with shifting paradigms of marketing from mass markets to “demassified” mini markets, growth of direct marketing will continue through the coming decades. Explosion of online marketing facilitated by the rapid advent of the Internet will drive the future expansions and growth of the Direct Marketing and marketers should ensure that they do not get caught up in the technological miracle of how close and transparent their customers become when processed by highly developed information systems in to sophisticated customer profiles. It is the ethical obligation of marketers to ensure that such customer intimacy is used in developing long-lasting relationships, which are mutually beneficial and not utilised intrusively or in exploitive manner to meet short-term objectives. References Armstrong, G. & Kotler, P. (2000) Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. A Big Look at a Big Company. (2005) [online] Hilton Group Plc. Annual Report 2004. Available from Belch, G. E. & Belch, M. A. (2004) Advertising & Promotion: An Integrated Marketing communication perspective. Illinois: Irwin McGraw-Hill Inc. Coulson-Thomas, C. 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(2004) “The Three Faces Of Consumer Promotions.” California Management Review. Vol.46 (4). pp. 23-42. Schultz, D. E. and Barnes, B. E. (2001) Strategic Brand Communication Campaigns, 5th ed, Illinois: NTC Business Books. Read More