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The DM sector is experiencing a very strong growth. Even companies traditionally spending their entire budgets to the classic media (such as FMCG) make considerable investments for DM. The techniques and expertise become increasingly more powerful, and new media are added. Whoever does not use DM, risks to drop out... You may hear: ´all marketing is direct marketing´, and indeed, there is room for some DM techniques and solutions in every marketing application. In recent years, we have seen a large expansion of DM applications, also in sectors where direct marketing was not used in the past.
´1 to 1´ relationship marketing
Only mass communication existed in the past, and the manufacturer controlled everything. Some time ago, the focus shifted towards the distributor defining the offer and also partially the communication with the consumer. Recently, direct communication with the consumer is increasingly stressed considering fundamentals, such as purchase behaviour, preferences, residence, yearly income, etc. All these data are carefully collected and added to databases. The information is asked from the customer, or registered at the time and place of the purchase, or enhanced by using other databases. Good ´1 to 1 communication´ requires perfect processing and timely use of all information. It is very useful to offer a consumer only things that interest him or her. However, the information used must be 100 % correct, to avoid a bad impression and a poor reaction.
INDIVIDUAL APPROACH
The evolution of databases and the sophisticated personalising techniques make it possible to perfectly and individually approach any existing or prospective customer, and to address only issues which are interesting for the customer. The more personal your message is, the better it is. This is the golden rule: address someone with an interesting issue, and the person will listen to you.
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Perfect target group segmentation and selectivity
DM techniques enable perfect target group segmentation for a large number of products.
Selected examples are:
- You may use various media, such as television commercials, billboards, national and general door-to-door distribution, if you want to reach all Belgian families with children in the age categories of 10 to 14 years, and having a higher than average yearly income... However, you are also perfectly able to select these addresses, and to send addressed mailings only to qualifying families. You are able to address them personally, or to further fragment the segments, and you are completing your action without any ´waste´.
- Suppose that you want to send a mailing to all French speaking female dentists; no problem, it is perfectly possible! Selecting the accurate target group is not always that easy. The criteria, which suit you most, may be unavailable. If this is the case, you may try a detour: suppose that you are looking for people with a garden, because you are trying to sell lawn mowers. Selection is not simple for this case. However, you may select all one-family houses in neighbourhoods with a high percentage of gardens.
LTV (life-time value)
This notion shows you the long-term value of a customer. We calculate the lifetime value for each application, sometimes by using highly complex formulas. The key is to define the customer´s ´total value´.
Selected examples are:
The 20-year old young man entering a car dealer´s showroom, does not only represent the relatively small amount of money he wants to spend for his first car, but also the (on average) 8 new cars he will buy over the rest of his life, all parts, maintenance service and accessories. If you account for all that, you have a potential for a huge value with an enormous margin. So, you should give him the most attention.
Recruiting a new newspaper subscriber costs € 280 average, which is more than an average annual subscription. If the subscriber keeps the subscription for 15 years, you do not have a problem. However, if the subscriber cancels the subscription after two years, you are making a considerable loss.
Many products do not have an actual growth market: cars, newspapers, diapers, etc. The market is stable, and the only possible way to increase the market share is by snooping customers from competitors. However, the competitors think exactly alike. You may also try to sell more to your existing customers. You already built a relationship with a good customer, and it is therefore easy to approach this customer with a new proposal. It is basically much easier to sell something to customers who you already know, than to strangers.
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