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by building a data base

Cultivate customer tastes
by building a data base

Randall Rothenberg, in a front-page story in the New York Times on Oct. 3, 1989, concluded, “After five years of stagnation, the American advertising industry is facing a profound change: the splintering of the mass market into hundreds of smaller markets, and the development of new ways of communicating with them.”
Tom Peters, co-author of “In Search of Excellence,” during this period concurred and said, “Mass marketing is out, data bases are in.”
History has proved them both right.
The fact is that the power of image- building, product-positioning and product-awareness advertising is still important. But building a relationship with individual customers has become crucial to the success of any marketer regardless of whether they are manufacturers selling products nationally or retailers selling their products or services locally.
What has changed marketing in the ’90s and made it possible for marketers to develop a relationship with individual consumers is the computer and its ability to build and store a data base. Computers can store millions of prospect/customer records–not only names and addresses, but sex, age, marital status, buying habits and psychographic profiles. As a result, marketers do not have to send the same message to non-prospects, lukewarm prospects and hot prospects alike.
Further evidence of the recognition and importance of direct marketing in today’s mix of marketing communications is its growth.
Direct-marketing advertising expenditures in 1995 totaled $134 billion, a number expected to grow at an annual rate of 8 percent over the next five years.
So, what is direct marketing in the ’90s? Perhaps it is easier to start with what it isn’t. It certainly isn’t mass marketing. Its distribution is limited. The audiences are specific. It isn’t mail order. Mail order is a part of direct marketing, but it’s more the roots than the vine.
It isn’t cheap. Direct marketing can be expensive if you have a low-margin, low-ticket, low-involvement product like bathroom tissue. But it isn’t expensive if a customer’s name has value for you and you wish to build a lifetime relationship with that customer.
Emily Soell, former chief creative officer of Rapp Collins Worldwide in New York City, feels that direct marketing is a dialogue, a two-way communication. Direct marketing asks the prospective customer to respond, buy, join, donate or give information. Therefore, Soell says, it must have the characteristics of personal communication and it “needs to sound like a human voice.”
When should you use direct marketing? It would be hard to find a category or marketing effort for any product or service that couldn’t be enhanced by the use of direct marketing. Here are a few examples as related by Stan Rapp and Tom Collins in their book, “The Great Marketing Turnaround.”
Liquor companies, struggling with a decline in consumption of hard liquor, are turning to data base use to steal customers from their competitors and deepen the loyalty of their existing customers.
The Seagram Co. Ltd. was one of the first liquor companies to build a user data base. The company uses this data base to promote such brands as Crown Royal, Chivas Regal and Glenlivet with marvelously creative direct-mail pieces.
One effective promotional piece tested an offer of free old-fashioned glasses, a calculator or a $5 rebate as a reward for trying Glenlivet scotch. But instead of a mass offering in magazines, the promotion was mailed only to 500,000 people known to drink competing brands of scotch.
The result was more than 10,000 new Glenlivet customers. Glenlivet is now sending mailings direct from Scotland.
Retailers are a natural for individual and relationship direct marketing. Ukrop’s Super Markets Inc. in Richmond, Va., with 18 stores and a 25 percent market share, faced increasingly tough competition.
Ukrop’s sent out a 5,000-piece test mailing and signed up 7,500 customers– a 150 percent response rate–to households near its test store. These households were invited to become Ukrop’s “valued customers” and enjoy automated savings without clipping coupons.
Members received a bar-coded card to be presented and scanned each time they made purchases (similar to Wegmans’ shoppers card). And they got a monthly statement listing the electronic coupons and rebates automatically credited to their account based on their purchases of brands offering special deals at the time. Every three months, members received a voucher for credits earned, which could be used like cash at Ukrop’s. Overall sales volume rose 10 percent, and two-thirds of the sales came from “valued customers.”
Detroit represents another product category that has learned the importance of building a well-formed data base of previous buyers and prime prospects. Almost every auto manufacturer in the United States has customer-satisfaction and customer-retention programs targeted to identified owners.
When Ford Motor Co. was unable to sell the imported Merkur with brand- image advertising, it turned to direct- response advertising to identify the real prospects. Ford’s four-page insert with a big, bold reply form and call-in number –along with 60-second direct-response TV commercials–generated 30,000 leads and 3,000 sales.
If you’re wondering if you should consider direct-response TV, here’s the answer from “Direct Response Television, the Authoritative Guide,” by Frank Brady, creative director of Catalyst Direct Inc. in Rochester: yes, no or maybe. He uses these examples to support his reasoning:
–A new ethnic newspaper tested a combination of direct mail and direct TV. While the mail was better targeted to the audience, the TV was seen as a way to generate awareness, establish credibility and acquire subscribers. The agency recommended an inexpensive, hard-hitting commercial that mirrored the paper’s editorial policy.
–A stainless-flatware company built a successful business by enclosing inserts in the billing statements that department stores send to their customers. The inserts were inexpensive, and the postage was “free.” So it would have been virtually impossible for a commercial to be as cost-effective. Also, to show flatware at its best, the commercial would have had to be expensive. In this case, direct TV was not the way to go.
–A book publisher advertised its mass-market books on television and its niche-market titles with direct mail or in specialized media. With one of its collections, certain books worked better on television, while others worked better in print. The publisher split the media buy, capitalizing on both print and television. Multimedia worked in this situation.
If you’re still not sure if direct marketing’s right for you, here’s Emily Soell’s formula for deciding whether or not to use direct marketing in your marketing- communications mix:
–Is there a reason for you to know the names of your customers–a marketing reason for you to address them personally?
–Is there a way or place to gather these names and addresses? And if not, can you manufacture one or get them to self-identify?
–What is the potential lifetime value of a customer? What is the average lifetime value? Is it significant enough to spend a given amount on getting, keeping, developing that lifetime customer? How much?
–Is there a promising niche or special market that your ads won’t reach, and/or your message won’t move?
Perhaps, in the final analysis, the best reason to consider direct marketing is that if you don’t, your competitor will.
(Jack Kraushaar was a BBDO senior vice president in New York City and from 1983 to 1991 was chairman of Blair/BBDO in Rochester. He now is president of the consulting firm JFK Communications in East Rochester.)

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