Direct Marketing in Practice
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Books in the series
Creating Powerful Brands (second edition), Leslie de Chernatony
and Malcolm McDonald
Cybermarketing (second edition), Pauline Bickerton, Matthew Bickerton
and Upkar Pardesi
Cyberstrategy, Pauline Bickerton, Matthew Bickerton and Kate Simpson-Holley
Direct Marketing in Practice, Brian Thomas and Matthew Housden
Effective Promotional Practice for eBusiness, Cathy Ace
eMarketing eXcellence, P. R. Smith and Dave Chaffey
Excellence in Advertising (second edition), Leslie Butterfield
Fashion Marketing, Margaret Bruce and Tony Hines
From Brand Vision to Brand Evaluation, Leslie de Chernatony
Innovation in Marketing, Peter Doyle and Susan Bridgewater
International Marketing (third edition), Stanley J. Paliwoda and Michael J. Thomas
Integrated Marketing Communications, Tony Yeshin
Key Customers, Malcolm McDonald, Beth Rogers and Diana Woodburn
Marketing Briefs, Sally Dibb and Lyndon Simkin
Market-Led Strategic Change (third edition), Nigel F. Piercy
Marketing Logistics, Martin Christopher
Marketing Plans (fourth edition), Malcolm McDonald
Marketing Planning for Services, Malcolm McDonald and Adrian Payne
Marketing Professional Services, Michael Roe
Marketing Research for Managers (second edition), Sunny Crouch
and Matthew Housden
Marketing Strategy (second edition), Paul Fifield
Relationship Marketing for Competitive Advantage, Adrian Payne,
Martin Christopher, Moira Clark and Helen Peck
Relationship Marketing: Strategy and Implementation, Helen Peck, Adrian Payne,

Martin Christopher and Moira Clark
Strategic Marketing Management (second edition), Richard M. S. Wilson
and Colin Gilligan
Strategic Marketing: Planning and Control (second edition), Graeme Drummond
and John Ensor
Successful Marketing Communications, Cathy Ace
Tales from the Market Place, Nigel Piercy
The CIM Handbook of Export Marketing, Chris Noonan
The CIM Handbook of Strategic Marketing, Colin Egan and Michael J. Thomas
The Customer Service Planner, Martin Christopher
The Fundamentals of Corporate Communications, Richard Dolphin
The Marketing Book (fourth edition), Michael J. Baker
The Marketing Manual, Michael J. Baker
Total Relationship Marketing, Evert Gummesson
Forthcoming
Political Marketing, Phil Harris and Dominic Wring
Relationship Marketing (second edition), Martin Christopher,
Adrian Payne and David Ballantyne
Direct Marketing
in Practice
Brian Thomas FIDM
and Matthew Housden MIDM
Published in association with
The Chartered Institute of Marketing
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OXFORD AMSTERDAM BOSTON LONDON NEW YORK PARIS
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First published 2002
Copyright © 2002, Brian Thomas and Matthew Housden. All rights reserved
The right of Brian Thomas and Matthew Housden to be identified as the authors of
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British Library Cataloguing in Publication Data
Thomas, Brian, 1938–
Direct marketing in practice

1. Direct marketing
I. Title II. Chartered Institute of Marketing
658.8′4
Library of Congress Cataloguing in Publication Data
A catalogue record for this book is available from the Library of Congress
ISBN 0 7506 2428 0
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Printed and bound in Great Britain
How direct marketing works 1
INTRODUCTION 2
Education 2
How direct marketing has developed 2
What about the new terminology? 3
The World Wide Web 3
So what is direct marketing? 4
Is this not an invasion of peoples privacy? 5
Where does direct marketing fit into marketing? 6
Why is direct marketing growing? 7
Does this mean the end of broadscale or general
advertising? 8
Information - the driving force behind direct
marketing 8
Where does our information come from? 9
Market research 9
The customer database 10
The power of integration 15
Making marketing cost-efficient 16
The value of individual data 17

Customer analysis 18
Customer profiling and segmentation 18
What is junk mail? 19
How testing and measurement can make us
more efficient 19
The marketing communications plan 20
SUMMARY 20
REVIEW QUESTIONS 21
EXERCISES 22
Developing a direct marketing campaign 2
INTRODUCTION 24
Specify the objective 24
The campaign planning process 24
One stage or two? 25
Identify the target audience and where to find
them 25
Select the general communications approach 25
Decide on the best timing 26
Produce an outline creative plan 26
Book media 26
Produce the advertising material 27
Prepare to handle the response 27
Deliver the message 27
Record the details for measurement and
evaluation 27
Acquisition or retention? 28
SUMMARY 31
REVIEW QUESTIONS 32
EXERCISES 32
Taking the long-term view 3

INTRODUCTION 35
Customer retention is the key 35
Developing and managing customer
relationships 35
Back to your database 37
What makes customers loyal? 37
What do customers value in a relationship? 39
Effect of reducing customer losses on new
business requirements 40
Customer life cycles 41
Complainants may turn out to be your best
friends 41
Customer satisfaction surveys 43
Relationship marketing 43
Customer communications 44
Recovering your investment in retention
marketing 45
Classification of customers 46
Segment analysis 46
Programme streaming 46
Communications planning 46
Testing and evaluating 47
Develop dialogue 47
Make your database work for you 47
Two general rules for building loyalty 47
Welcome 48
Some basic loyalty techniques 48
Dialogue 49
Helplines 50
Newsletters 51

Gifts and rewards 52
Timing of communications 52
Questionnaires 53
Extra value proposition 53
SUMMARY 53
REVIEW QUESTIONS 55
EXERCISES 55
Collecting customer information 4
INTRODUCTION 57
Consumers 58
Lifestyle data 58
What information do you need? 58
Business-to-business information 59
Collecting information from existing customers 60
How to obtain the information 60
Gathering information through external research 63
Using the Internet for information gathering 66
Warnings about gathering information via
research 67
SUMMARY 68
REVIEW QUESTIONS 70
EXERCISES 70
Using your information 2
INTRODUCTION 72
Segmentation 72
Segmentation enables selectivity 73
Profiling factors 75
The use of profiling 75
Types and sources of external data 78
How the demographic systems work 79

Ladder of loyalty 82
Uses of the ladder of loyalty 84
SUMMARY 86
REVIEW QUESTIONS 2
EXERCISES 2
The marketing database 2
INTRODUCTION 90
Targeting and segmentation 93
Regression analysis 94
CHAID and cluster analysis 94
Neural networks 97
Doing it yourself 97
Using the data - a summary 98
Development of customer relationships 98
What data do you need? 100
Where does the data come from? 101
The continuing need for data 102
How can you capture the data? 103
How can data be kept up to date? 103
The importance of de-duplication 104
How can the data be used? 105
Microcomputer hardware 108
Chips, storage and memory 109
Summary 110
Microcomputer software 110
Building your database on a PC 111
Summary 112
Demographics 113
External data sources 113
Lifestyle data 114

Data warehousing and data mining 115
SUMMARY 116
REVIEW QUESTIONS 118
EXERCISES 119
How to reach customers and prospects
effectively 7
INTRODUCTION 121
Brand versus response - the traditional conflict 121
Brand response advertising works 122
The start of the digital age 123
Planning direct response versus brand
awareness 123
The planning process 126
Integrated media planning - bringing it all
together 126
Identifying your audience - sources of media
information 128
Press 130
Media selection 130
Magazines 133
Loose and bound-in inserts 134
Buying and evaluating press advertising 136
Third-party distribution of leaflets 138
The telephone 138
Direct mail 139
Radio 143
Costs and responses 144
What does a direct mailing cost? 146
How much response do you need? 148
Should you try to make money immediately? 149

SUMMARY 149
REVIEW QUESTIONS 151
EXERCISES 152
Direct marketing and the Internet 2
INTRODUCTION 154
European e-commerce 155
What are the opportunities for direct marketers? 155
Building relationships with customers/prospects 157
The Internet as a marketing tool 157
Public relations 158
Low-cost, immediate publishing 158
Disintermediation 159
New business models 160
Virtual retailers 161
The Internet as a selling tool 161
Selling on a smaller scale 162
Supply chain management 163
Intranets 163
Using Internet technology to improve business
processes 163
Barriers to using the Internet 164
The solutions 167
How to go about planning an Internet strategy 169
Site promotion 170
SUMMARY 174
REVIEW QUESTIONS 176
EXERCISES 177
The importance of having an offer 9
INTRODUCTION 179
What exactly is an offer? 179

The promise of a solution to a problem 179
A specific promotional device 180
Quality - the best available 181
Value - best at this price 181
Availability - ’only from ourselves’ 181
Reassurance 181
Added value 182
Better performance or technical superiority 182
Positioning 183
Promotional offers 185
Using prize draws and competitions 186
Competitions 187
Using incentives in marketing 187
Balancing response, conversion and long-term
positioning 188
The trade-off from hard sell 188
SUMMARY 189
REVIEW QUESTIONS 190
EXERCISES 190
How to increase responses through more
effective creative work 2
INTRODUCTION 192
Define your objective 192
Developing a creative outline 194
Planning your communication 197
Managing response 197
Awareness advertising 199
Direct response advertising 199
The essential elements of a direct response
advertisement 199

Targeting 200
Timing and frequency 201
Creative 201
Rules for successful direct response advertising 201
Direct mailings 204
The letter 205
Additional enclosures 214
Newspaper and magazine reprints 215
The essentials of a good response device 216
Checklist 217
Direct mail follow-ups 218
Following up by telephone 219
SUMMARY 220
REVIEW QUESTIONS 9
EXERCISES 10
The importance of testing 11
INTRODUCTION 225
Test objectives 226
Media types 227
An individual medium 227
Position 228
Timing 229
Size 229
Offers and creative 231
Response methods 231
The hierarchy of testing 231
How does testing work? 232
Testing with loose inserts 237
An important reminder 238
Direct mail testing 238

How to develop a test programme 239
Testing lists 240
Isolate the variables 240
Sample sizes 240
The statistics of testing 240
Randomization 241
Selecting samples for testing 242
Using formulae 243
Using tables rather than formulae 246
A few final comments 250
The hierarchy of testing 250
SUMMARY 251
REVIEW QUESTIONS 253
EXERCISES 253
Evaluation, measurement and budgeting 12
INTRODUCTION 255
Evaluation 255
Measurability 255
Acquisition or retention - finding the balance 255
Marketing measurement techniques 256
Evaluating campaigns 257
Two-stage selling 258
Limitations 260
Variable costs, fixed costs and overheads 263
How to calculate and deal with marketing costs 263
How to handle overheads 265
The benefits of budgeting 267
Budgeting 267
What makes for successful budgeting? 268
Creating a campaign budget 269

Customer lifetime value analysis 272
Using lifetime value modelling to evaluate
marketing strategies 277
Comparison of lifetime values with and without
the retention programme 281
Common questions 281
Predicting lifetime value by customer segment 282
How to develop lifetime value calculations 282
Lifetime value analysis - summary 283
SUMMARY 283
REVIEW QUESTIONS 11
EXERCISES 12
Choosing and briefing suppliers 13
INTRODUCTION 289
Mailing and fulfilment houses 293
Database and computer bureaux 293
Web-site consultants and designers 294
Printers 294
Direct marketing agencies 295
Using a consultant 296
Where to find specialist suppliers 297
Choosing the right supplier 297
The long list 298
The short list 298
Meet the account handlers 298
Tell them exactly what you want them to do 299
Asking for quotations 299
Expect a rapid acknowledgement 299
Take up business and credit references 299
Comparing quotations 300

Writing a clear and effective brief 300
A briefing form 302
Mailing list suppliers 289
The rental contract 290
De-duplication 291
Lifestyle database companies 291
SUMMARY 304
REVIEW QUESTIONS 305
EXERCISES 306
Where to go for more information 2
INTRODUCTION 308
Qualifications 309
Training 309
Education 310
The skills you need to succeed 310
Client-side operations 311
Career opportunities 311
Agencies 312
Direct marketing 312
Bibliography 312
Marketing 313
Database marketing 313
Marketing communications and branding 314
Relationship marketing 314
Statistics 314
Internet and e-commerce 314
Journals and periodicals 315
Useful addresses 316
Glossary 2
Index 7æ8

Acknowledgements
There are two kinds of supporters I want to acknowledge – those who helped
and advised me whilst I was learning and plying my trade, and those who
helped me in writing this book.
Firstly, although he died several years ago, I want to acknowledge the
greatest influence on my business life – Peter Donoghue. Peter taught me most
of what I know about marketing, segmentation and targeting, and generally
helped me to understand how business works.
Secondly Graeme McCorkell – years ago I was a marketing director and
Graeme was my advertising agent. Graeme filled in the gaps that Peter left
and taught me lots of other very practical things about how to make adver-
tising work.
Then there are those many people with whom I have worked running
marketing departments and agencies over the past 30 years. I could fill a page
with names but I guess the three who taught me the most were Jim Edgeley,
Drayton Bird and Stewart Pearson.
Paul Robinson of SDM wrote the draft of the database chapter and Helen
Trim of Chord9 wrote the Internet chapter for me. Many thanks to both of you.
On a personal level, I want to say a huge thank you to my wife and partner
Karen (Lee), who helped, proof read, cajoled and put up with several ruined
holidays so I could get it written.
Finally thank you to Matthew Housden who picked up both the book and
me when we were sinking and helped me finish it off in a very professional way.
Brian Thomas
I would like to acknowledge the contribution of colleagues and students at
the University of Greenwich and at the IDM.
I would also like to thank Brian Thomas for the opportunity to work with
him – one of the country’s most knowledgeable Direct Marketers.
Matthew Housden
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Introduction
– Education
– How direct marketing has developed
– What about the new terminology?

– The World Wide Web
• So what is direct marketing?
– Is this not an invasion of people’s privacy?
• Where does direct marketing fit into marketing?
• Why is direct marketing growing?
• Does this mean the end of broadscale or general advertising?
• Information – the driving force behind direct marketing
• Where does our information come from?
– Market research
– The customer database
• The power of integration
– Making marketing cost-efficient
• The value of individual data
• Customer profiling and segmentation
– Customer analysis
• What is junk mail?
• How testing and measurement can make us more efficient
• The marketing communications plan
Summary
Review questions
Exercises
Chapter 1
How direct marketing
works
As I write this, I am on my way to Hong Kong and Sydney to run the second
public pan-Pacific course for the Institute of Direct Marketing’s Diploma in
Direct Marketing. This started me thinking about how much has changed in
the last 19 years.
Education
In 1982, when direct marketing was still the province of consumer mail order

companies and three or four specialist agencies, Derek Holder had a vision.
He felt it was time that direct marketing was taken seriously and he pioneered
the Diploma in Direct Marketing. Almost single-handedly, he canvassed the
few interested clients and agency companies, and it is a tribute to his selling
skills that he managed to drum up 25 delegates for the first course.
A year or two later he conceived the Direct Marketing Centre, an organi-
zation dedicated to the sharing of knowledge and ideas amongst direct
marketers. Slowly but surely, with the help of many able people, Derek’s vision
was developed into today’s Institute of Direct Marketing, which now has more
than 5000 members around the world.
There are now more than 800 delegates each year for the Diploma ranging
from new graduates to senior managers in companies of all types. The course
is run every year in more than a dozen venues around the UK, throughout
the world by distance learning and now through public courses in Hong Kong
and Australia. The autumn of 2001 saw the launch of the new IDM Interactive
and Direct Marketing Diploma, the first professional qualification to embrace
fully the impact of new technology in marketing.
Professor Derek Holder, the direct marketing world owes you a huge debt
of gratitude for all you have done to raise the standards of direct marketing
practice.
How direct marketing has developed
My second thought was about the way direct marketing has diversified. In
the 1980s we saw the rapid growth of direct marketing in the financial services
industry, and the adoption of the discipline across the whole of business to
business. Today, we see fast-moving consumer goods (FMCG) companies,
retailers, multi-national industrial conglomerates and the successful dot com
companies, in fact every type of organization, using direct marketing to acquire
and develop customers.
2 How direct marketing works
INTRODUCTION

What about the new terminology?
Today it is not so fashionable to say ‘direct marketing’ – now we are supposed
to say ‘customer relationship marketing’. Data analysis has become ‘data
mining’ and a centralized database has become a ‘data warehouse’ – except,
of course, a database is now a ‘customer relationship marketing system’. Even
the good old ‘Ladder of Loyalty’ circa 1954 has had its name changed to the
‘Pyramid of Propensity’ – oh dear!
Happily for newcomers, and perhaps some experienced practitioners too,
whilst the terminology changes almost daily, the principles have not really
changed that much. However, the subject of my final thought is much more
far-reaching.
The World Wide Web
This is the big new factor that is going to change things forever. As the tech-
nology becomes more user-friendly, and of course more familiar as the
television set becomes the central household information system, we will see
a huge increase in online communication and commerce.
Crucially, this will mean a dramatic change in the balance of power as cus-
tomers start to select what information they are prepared to receive and in
what format. Of course, many of the early e-commerce companies will not sur-
vive; indeed we have experienced a crash in the NASDAQ and much-hyped com-
panies such as letsbuyit.com and lastminute.com are into liquidation or
struggling to justify their share prices. It would not be surprising to see up to
80% of such start-ups fail as many were launched on a wave of e-commerce
euphoria with little commercial experience behind them.
However, the Internet will not go away. It will become a central part of
any company’s communications with customers and prospects. There are many
good new business models to follow and we need look no further than Dell,
Novell, Federal Express and UPS to see examples of how the Internet can
enable major changes in business practices and economics. More of this in
Chapter 8.

Meanwhile, let’s turn to the 1990s. In the early 1990s, after record-breaking
losses, IBM had a change of management right at the top. One of the main
problems was that the managers of IBM had become too remote from their
customers. The new CEO Lou Gerstner is reported to have issued a decree
to all his marketing people around the world saying, in effect: ‘Within 3 years
at least 50% of all your marketing money must be spent on direct marketing
– or you’re out of a job.’
The direct marketing trade press subsequently carried a report stating that
in the first 3 years under Gerstner’s leadership IBM had:
How direct marketing works 3
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• reduced its sales force from 30,000 to 6000
• seen sales grow 12% faster than the industry average
• seen its direct marketing sales grow from zero to US$10 billion per annum.
No wonder that direct marketing is such a hot topic today. Everyone in
marketing is talking about it. They may call it ‘integrated marketing’, ‘one-
to-one marketing’, ‘customer relationship marketing/management’, ‘loyalty
marketing’, ‘personal marketing’, ‘database marketing’ or some other buzz

phrase, but what they are talking about is the fact that all marketers now
have to include direct marketing skills in their armoury.
Even in its current form, direct marketing has been around for a long time,
but it has really been with us since marketing began. Hundreds of years ago,
a manufacturer of, for example, clothing or fine tableware, would use one-
to-one marketing methods, seeking out selected customers, identifying their
precise needs, and developing specific products to satisfy those needs.
After the first round of one-to-one marketing, came mass production, which,
successfully it must be said, adopted the ‘this is what we make, now go and
buy it’ approach. But today, as customers have become more affluent and
more individualistic, they have also become more knowledgeable and more
discerning, and the ‘broad brush’ approach does not work so well any more.
One of the reasons for IBM’s change of fortunes in the early 1990s was
Gerstner’s abandonment of its former policy, quoted by one of their senior
executives as ‘We make, you take; we talk, you listen’. This policy would be
commercial suicide today.
Happily, today’s marketers have modern technology to help them deliver
the more focused communications and service required whilst still dealing with
a high volume of customers and prospects.
One expert recently defined direct marketing as ‘Using tomorrow’s tech-
nology to deliver yesterday’s standards of service to today’s customers’.
Direct marketing is a discipline, a subset of marketing, which permits us to
carry out certain marketing tasks more efficiently. It does this by gathering,
analysing and using information about individual customers and prospects.
This information enables us to identify which of the people on our customer
and prospect files are likely to be interested in a particular product, service
or offer.
We can then select only those who will find our message appropriate and
communicate with them alone, eliminating much of the wastage inherent in
other forms of advertising. This is a major reason why direct marketing is so

cost-effective. We can also use our customer information to develop ‘profiles’
4 How direct marketing works
Direct marketing
is a discipline,
a subset of
marketing,which
permits us to carry
out certain
marketing tasks
more efficiently.
It does this
by gathering,
analysing and using
information about
individual
customers and
prospects.This
information enables
us to identify which
of the people on
our customer and
prospect files are
likely to be
interested in a
particular product,
service or offer.
So what is direct marketing?
and use these to identify the best sources of new customers. These processes
are explained in detail in Chapter 5.
Is this not an invasion of people’s privacy?

This is an area where there is still much misunderstanding – even among prac-
titioners and those who seek to control our activities. The fact is that no
sensible marketer would wish to alienate customers and prospects by abusing
their trust. Nor would they want to waste money by writing to those who
are not interested in a product or proposition.
The main concerns arise over the use of ‘opt out’ or ‘opt in’ statements
on enquiry forms. Some supporters of a high level of data protection would
like all advertisers to use the ‘opt-in’ option at all times. In this instance, the
advertiser can only use the customer’s name, address and other data when
the customer positively opts in. To opt in a customer must tick a box agreeing
that he or she would like to receive information about other products and
services.
The majority of advertisers prefer the current minimum requirement – the
opt-out version. To opt out the customer is obliged to tick the box if he or
she does not want to receive such communications.
My personal view is that a compromise would be in order. In my experi-
ence, the majority of people who enquire about a product, or open a bank
account, would be neither surprised nor offended if they received mailings
offering similar products from the organization they approached in the first
place.
On the other hand, they would rightly be concerned to find that their data,
even minimal data such as their name and address and the fact that they
enquired about skiing holidays, were passed on to some other organization
wishing to sell them say, accident insurance.
UK data protection legislation remains in a state of flux as the Data
Protection Registrar and various large consumer organizations debate the
rights and wrongs of collecting and using customer data. There is also the
ever-present threat of EU-wide legislation that will surely be more stringent
than current UK law. All direct marketers must keep a close eye on these
actions as, whatever the fine details, we are likely to encounter more confining

rules and regulations.
I am not convinced that, in the long term, a more stringent standard would
necessarily be in the interests of the consumer – whatever the newspapers say,
many people actually like to receive offers of goods and services through the
How direct marketing works 5
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To opt in a
customer must tick
a box agreeing that
he or she would like
to receive
information about
other products and
services.
To opt out the
customer is obliged
to tick the box if he
or she does not

want to receive
such communi-
cations.
post and, increasingly even over the telephone. The eventual challenge for our
industry may well be to find a way of getting them to be bothered to tell us
this.
We know, for instance, that when we use an opt-out box we get 10–15%
of respondents ticking it. Critics say that if it were more prominent, a greater
number would tick the box, but again I am not really sure about this. People
who feel strongly about something tend to find a way of letting their feelings
be known, and I believe that the majority of people who are concerned are
either not responding to direct response advertisements and mailings at all or
ticking the opt-out box already.
Whatever the outcome of the debate, the use of individual data will continue
to be the primary weapon in the direct marketer’s armoury.
Let’s begin by defining marketing.
Marketing is the process of identifying customer needs and satisfying them
in a way which is acceptable to both parties – customers feel that their needs
have been recognized and fulfilled at a fair price; the supplier makes a fair
profit.
According to Peter Drucker, the aim of marketing is ‘to make selling super-
fluous; to know and understand the customer so well that the product or
service fits . . . and sells itself’. This statement, written in 1973, is also a fairly
accurate definition of the objective of direct marketing.
Collecting and applying customer and prospect data enables us to:
• identify customer needs and wants more precisely
• communicate our proposed solutions more cost-efficiently.
In other words, direct marketing can support all aspects of the marketing
process. It is not an alternative to marketing, but an integral part of it. If
there is a difference between the two, it is that marketing tends to focus at

the broader market level whilst direct marketing is more tightly focused at
the individual level. It achieves this by using sophisticated information manage-
ment techniques.
These techniques, in turn, require the use of computer systems and software,
and modern direct marketers allocate a high priority to the task of developing
their marketing databases. Fortunately, the constant reduction in the cost of
PCs and the more user-friendly modern software make it possible to run highly
6 How direct marketing works
Marketing is the
process of identify-
ing customer needs
and satisfying them
in a way which is
acceptable to both
parties – customers
feel that their
needs have been
recognized and
fulfilled at a fair
price; the supplier
makes a fair profit.
Where does direct marketing fit into marketing?
sophisticated databases and information systems on low-cost hardware and
software.
There is a feeling amongst many small business managers that sophisti-
cated marketing databases are only really appropriate for large companies.
This is not true; indeed it is arguable that the smaller the company the more
important it is for it to know the preferences and buying behaviour of its
customers. Without such tight focus, a business cannot gain maximum value
from a limited promotional budget. Marketing databases are discussed at

length in Chapter 6.
In the past, many people were content to buy new, untried products and
services, based only on the advice of a salesperson. Knowledgeable buyers
were few and far between. Today’s buyers are much better informed and much
more selective. There are number of reasons for this.
1 Choice – in almost every field there are more options available and more
competitive prices offered to customers.
2 More information available – this started with
Which? magazine but now
there are many magazines in both consumer and business markets, carrying
articles and features comparing the strengths and weaknesses of products
available. Few people today would choose a new PC without first buying
a couple of magazines that carry product test reports and offer skilled
advice.
3 Greater pressure on consumer budgets – although most households tend
to have more disposable income than they did 20 years ago, there is a
greater range of goods that are now considered ‘essentials’ – few people would
consider a television set and video recorder a luxury today. Business-to-busi-
ness marketers are also finding their customers are experiencing greater pres-
sure on costs than ever before, causing buyers of all types to be more selective.
The old reliable ‘unique selling proposition’ (USP) or ‘single minded propo-
sition’ is a bit out of step with this situation. The USP was designed to
persuade large numbers of people to buy, or at least change their attitudes
about a product or service – all of them for the same reason.
Nowadays, we can say with confidence that whilst large numbers of people
may buy a product, they do not all do so for the same reasons.
However, whilst buying patterns and preferences have been changing, the
major advances in technology mean that companies can now identify the real
needs and motivations of diverse groups of customers, and fulfil those needs
cost-efficiently.

How direct marketing works 7
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Why is direct marketing growing?
This means that an organization can afford to split its customers and
prospects into ‘segments’ with similar needs and develop differential commu-
nications to each segment.
Direct marketers have not abandoned the idea of the USP, we have simply
adapted it to our equipment and techniques, so that we can now develop a
whole series of selling propositions which closely match the real needs of our
specific customer segments.
This does not mean that press and broadcast advertising is on the way out.
However, it does mean that, in future, its role is more likely to be concerned
with identifying new prospects than selling to existing customers.
Once we know a customer’s name and address, there are few logical
reasons for communicating by general advertising. It will often be more cost-
effective and more powerful to use direct mail, the telephone and face-to-face
communication.
Having said that, we must recognize the power of mass media to reassure

people and thus underpin our targeted efforts. A company trying to sell a
high-ticket product to a prospect may be hugely persuasive to the office
manager, but if the financial director has never heard of the company the
order may not be forthcoming.
Marketers have always used market research and published information
sources with the intention of gaining a greater understanding of customer
needs, wants and motivations.
What is different about direct marketing is the ability to take this differ-
ence down to the level of the individual. This ability enables us to become
customer-focused in a much truer sense.
It also enables us to ‘de-select’ prospects for whom an offer would not be
appropriate. This is an aspect of direct marketing that is rarely publicized by
the data protection lobby, yet it is a key objective of any sensible direct
marketer. For example, why on earth would we want to send information
about lawnmowers to people without a garden? The only things that prevent
us from being much more targeted and selective are the shortage of data
available to us or, in some cases, the rules preventing us from using such
data.
Of course, if we are going to use individual data to plan and execute
campaigns, we have a great responsibility. We must make sure that our infor-
mation is as accurate and up-to-date as possible.
8 How direct marketing works
Does this mean the end of broadscale or general advertising?
Information – the driving force behind direct marketing
This does not mean
that press and
broadcast
advertising is on the
way out. However, it
does mean that, in

future,its role is
more likely to be
concerned with
identifying new
prospects than
selling to existing
customers.