EXAMINING DIRECT & INTERACTIVE MARKETING APPLICATIONS IN A VARIETY OF SECTORS

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1 1 CHAPTER 14-2E EXAMINING DIRECT & INTERACTIVE MARKETING APPLICATIONS IN A VARIETY OF SECTORS Summary The applications of direct and interactive marketing are almost endless. This chapter has explored just a few of the many different sectors using direct and interactive marketing strategies and tactics. Direct and interactive marketing is effectively used by both business-to-consumer (B2C) and business-to-business (B2B) marketers. Business-tobusiness (B2B) direct marketing is the process of providing goods and services to industrial market intermediaries, as opposed to ultimate consumers. Business-to-business direct marketers have become quite adept at utilizing databases to generate leads for personal sales follow-up, to encourage browsing of their informative Web sites, and to consummate direct sales. Nonprofit organizations have also embraced direct marketing methods because of their unique cost-effective and personalized format. Direct marketing is highly effective in enabling nonprofit organizations to establish stronger relationships with their donors. This, in turn, means greater support for the nonprofit cause. However, to be effective, the nonprofit organization must understand its donor s giving behavior. This requires an understanding of the donor s media preferences and knowledge of basic fundraising principles. Direct response fundraising appeals must be specific and follow certain guidelines as presented in this chapter. The fundraising appeal should be targeted, provide suggested donation amounts, carefully create and test the copy of the message, keep the format or presentation simple, and select the premium or free gift cautiously based on the results of tests. Similar to nonprofit direct marketing, understanding the dynamics of voter behavior prior and during elections is critical for political organizations employing direct marketing methods. Many political organizations now employ political micro-targeting to effectively deliver specific messages to select voters. Political marketers use direct response advertising to generate both support for their political party and votes for their candidates. A wide variety of governmental organizations apply direct marketing methods to generate a specific response from targeted individuals or businesses for a number of different purposes. We examined the direct and interactive marketing applications of the U.S.P.S., Internal Revenue Service, U.S. Mint, U.S. Military, and state and local Convention and Visitor Bureaus. Finally, we explored how sports organizations apply direct and interactive marketing to generate game attendance, obtain season-ticket holders, secure sponsorships, or promote special events. Sports organizations face unique, uncontrollable challenges in their marketing efforts based on the performance of their team. Direct and interactive

2 2 marketing is effectively used to strengthen relationships with season-ticket holders to promote team spirit and fan loyalty. In conclusion, direct marketing is regularly used by sports organizations in their marketing efforts. Learning Objectives After completing this chapter, students should: understand the distinction between consumer and industrial markets and the implications for marketing in each know the characteristics that distinguish industrial demand and those that identify industrial goods address the perceived differences between consumer and industrial markets identify and relate to uses and users of B2B direct marketing know the techniques of industrial market segmentation understand the special importance of database in B2B direct marketing understand the various applications of direct marketing for nonprofit organizations be able to explain the importance of customer relationship management for nonprofit organizations provide an overview of the elements of an effective fundraising campaign understand how political organizations and governmental agencies use direct and interactive marketing, including with such techniques as micro-targeting be able to explain how sports organizations use direct and interactive marketing, including for B2B and well as B2C be familiar with the various media strategies that are used by nonprofit organizations Key Terms Business-to-business (B2B) direct marketing- The practice of supplying goods and

3 3 services to industrial market intermediaries, instead of directly to the end user. Business clusters- Industrial markets grouped by ZIP code regions which reveal the affects of certain variables on the market in that specific area. Cause Related Marketing- A business activity through which businesses and charities or causes shape a partnership with each other to promote an image, product, or service for common advantage. Customer Relationship Management (CRM) - With regards to non-profit organizations CRM refers to creating relationships with benefactors, which may ensure their support down the road. Global Positioning System A segmentation tool that associates latitude and longitude coordinates with street addresses. Industrial goods- Goods usually used as raw materials in the manufacturing of other products. Input-output analysis- Traces the delivery of goods in industrial markets from their starting point to their end, the information mainly obtained from the Census Bureau. North American Industrial Classification System (NAICS)- A classification system very different from SIC, which utilizes a six digit code, agreed upon by the U.S, Canada, and Mexico for the sharing of statistics. Political Micro-targeting- is combining groups of voters based on information about them accessible through databases and the Internet in order to target them with specific messages. Standard Industrial Classification (SIC)- A coding organization which is a means of industrial market segmentation created by the national government many years ago. Topologically Integrated Geographic Encoding Referencing (TIGER) - A system created by the Global Positioning System (GPS) and the Census Bureau, which, through use of latitude and longitude coordinates identifies geographic locations which may be important for industry in the vicinity. Review Questions 1. What are major factors contributing to the increasing use of the tools and techniques of direct marketing in business-to-business distribution? (p. 7) In comparing B2B transactions with business-to-consumer transactions, note that consumer purchases are normally consummated at the seller s location, i.e., clothing bought at a retail store whereas, in industrial buying, the seller normally comes to the buyer s location, i.e., a computer installation sold to a chain of retail stores. A major factor contributing to the increasing use of direct marketing by business and industry is the rising cost of these personal sales calls made to a buyer s location. In contrasting business buyers with consumer buyers, apparent differences between these are sometimes exaggerated. Individual buyers

4 4 within business organizations are obviously also consumers in their own rights. And, conversely, many consumers also wear different hats when they are at work as industrial buyers; Some B2B organizations, recognizing this comparison, have gone so far as to look at the demographics of buyers within organizations as the same time as they look at the demographics of organizations themselves. 2. Describe the U.S. Commerce Department s longtime system of Standard Industrial Classification (SIC). What is its key feature relative to the emerging North American Industrial Classification System (NAICS)? (p. 13) The Standard Industrial Classification (SIC) coding system is a means of industrial market segmentation developed by the federal government a good many years ago. SIC codes, which identify businesses by industry and by segment of industry and serve as a basis for statistical data about industries, are in broad use by government, trade associations, and business enterprises. With rapid growth of the service industry, high technology, and international trade, a new system has arisen, in response to the North American Free Trade Agreement (NAFTA) of 1994, to compare U.S, statistical information with that of Canada and Mexico and to ensure future compatibility with an International Standard Industrial Classification System being developed by the United Nations. All three countries have agreed on a system now called the North American Industrial Classification System (NAICS). This system has formulated a six-digit code, with the first five digits denoting the NAICS levels used by all three countries to produce compatible data. NAICS is an entirely different classification system than is SIC, focused on production activities rather than on those whom the industries serve. 3. How does direct marketing help nonprofit organizations reach their goals? (p. 20) Direct marketing can help nonprofit organizations reach their goals by providing an efficient avenue to maximize relationships with the nonprofit organization s many constituents. Nonprofit organizations recognize the efficiency of direct marketing as a means of raising funds, driving memberships and creating greater awareness for a cause. Direct marketing is also effective in helping nonprofit organizations obtain donations to support research for worthy causes. Direct marketing is used to build support for a certain cause and communicate with the community. 4. Fundraising is extremely competitive. How can nonprofit organizations convince donors that they should donate to their organization? (p. 21) Nonprofit organizations can convince donors that they should donate to their organization in many ways. Most people purchase or donate to support a cause and see it advance. People are normally driven in their donation choices by their personal/core values and donating to specific causes helps them to act in accordance with these personal values. Nonprofit organizations, especially charitable organizations must understand each donor, understand what motivates them to contribute their time, talents, and money to the organizations cause.

5 5 5. How can nonprofit organizations maximize their relationship with their customers? (p. 22) Nonprofit organization can maximize their relationships with their customers by cultivating relationships with donors, by communicating regularly with them, and by making the customer feel valued. Developing relationships with donors may ensure future donor support. 6. What is cause-related marketing? Provide some examples of how direct marketers use cause-related marketing and why? (p. 23) Cause-related marketing is a commercial activity by which businesses and charities or causes form a partnership with each other to market an image, product or service for mutual benefit. Many manufacturers exercise cause-related marketing by donating a set amount to select charitable organizations for each product or service sold. There are many community events, local marathons, walkathons, and other activities that have been supported by numerous companies to help increase funding or membership for certain causes. Nonprofit organizations have long used direct marketing activities in building donor relationships, maintaining and strengthening these relationships, and establishing corporate partnerships to advance their respective causes. 7. Why has direct marketing recently become more important to political parties? What are the objectives of political direct marketing methods? (p. 39) Direct marketing has recently become more important to political parties because it is an effective and efficient alternative to mass advertising. For instance, the Internet has allowed the parties to send customized messages to specific groups and individuals and to use on-line discussions and instant messaging in support of their candidates. Direct marketing offers several alternatives to mass advertising-like distributing a newsletter to current and prospective members. The political direct marketing activities are not always aimed at raising money. Often times these political parties are interested in gaining support for their cause and securing new members. 8. Describe the use and benefits of micro-targeting for political parties. (p. 40) Political Micro-targeting, also referred to as narrowcasting, is a technique to aggregate groups of voters based on data about them available in databases and on the Internet to target them with tailor-made messages. Political parties gather personal information about voters to deliver narrowly targeted messages calculated to influence their votes. Micro-targeting goes beyond traditional segmentation bases to gather data at the individual level. This information can include magazine subscriptions, real estate records, consumer transaction data, demographics, lifestyle data, geography, psychographics, voter history and survey response data. Micro-targeting can add great value to political marketing activities.

6 6 9. What are some of the ways governmental organizations apply direct and interactive marketing strategies? Provide some examples not mentioned in the chapter. Some of the ways governmental organizations apply direct and interactive marketing include promoting various products and services to both final and organizational consumers, recruiting volunteers for various events, recruiting potential employees and future military enrollees, announcing meeting, workshops and seminars to the public, and promoting tourist locations and community events. Some examples not mentioned in the text may include: - Local and state organizations marketing their services - The Small Business Administration promoting a seminar for local entrepreneurs - The Department of Economic Development promoting international trade missions and activities. (Note: Students should be encouraged to think out-of-the-box and include any governmental organization or entity that uses marketing activities to obtain a direct, measurable response and or transaction.) 10. Explain why sports organizations use direct and interactive marketing to target business and find consumers with their direct response advertisements? Provide some specific examples. Sports organizations use direct and interactive marketing to gain game or event attendance, secure season ticket purchases, sell the team s promotional products (such as mugs, t-shirts, sweatshirts, hats, posters, etc.) obtain corporate sponsorships, and fundraise for charitable causes. Some examples include a horn purchased at a Norfolk Admirals Hockey game to be used to create noise and excitement whenever the Admirals score a goal, or the Norfolk Tides mailing its sponsorship brochure to various local companies to obtain corporate sponsors.