direct marketing

allows them to closely target their advertising (important in reducing their costs and in avoiding the fallout from approaches to consumers who don't want the product/service)

can be seamlessly integrated with databases (eg to measure the effectiveness of online campaigns, tie them to offline promotional activity and underpin incentive or other schemes)

can be trialled for a national audience or particular demographic more cheaply (and more quickly) than marketing via print, radio, television or other media

can be quickly rejigged to address different demographics

is a step closer to the holy grail of one-to-one marketing, also known as the market-of-one

Performance, however, has been more problematical. Governments and consumers (as we note in the pages on this site dealing with consumers, privacy and spam) have severely criticised poor privacy practices and the proliferation of electronic junk mail. 

One response has been moves to tighten government oversight of how information is collected, processed and used. Another has been the emphasis within business on 'opting in' or 'permission marketing', popularized by Seth Godin in works such as Permission Marketing (New York: Simon & Schuster 99) and in Sandeep Krishnamurthy's 2001 paper A Comprehensive Analysis of Permission.

Many businesses have been underwhelmed by the results of their investment. Amazon.com, characterised by some as builder of the world's finest consumer profile database rather than a retailer, apparently hasn't generated major sales through the 'suggestions' and 'page you made' facility on its site. 

Information about the online direct marketing industry is problematical. The US Direct Marketing Association (DMA) claims that online advertising by direct marketers accounted for upwards of US$1.3 billion in 1999, projecting growth to US$8.6 billion in three years time.

It projects that overall direct marketing spending will grow by 9.6% pa over the 200-2005 period, compared to 7.1% growth in advertising. Supposedly, direct marketing advertising accounts for 56% of total US advertising expenditure. Direct marketing ads hit the US$19 billion mark in 2000. Business to business direct marketing sales were US$79 billion, with B2C reaching US$93 billion.

One study suggests that 2.8 billion direct marketing email messages were sent in 1998, with - hold your breath - that figure rising to 236 billion in 2005. Why? It's claimed that response rates run to between 5% and 15%. In comparison the rate offline is between 1% and 5%, while estimates of the responses to online banner ads are anywhere between 0.5% and a small fraction of that figure. (For a somewhat contrarian view of 'banner blindness' see the 2000 empirical study by Michelle Bayles on Just How 'Blind' Are We to Advertising Banners on the Web?)

We're somewhat sceptical about the projections, since it is clear that some consumers are suffering burnout and because assumptions about ever increasing growth of online markets are nonsensical. While the number of consumers in the US - and Australia - online is increasing, the rate of increase has slowed and despite the sillier projections from Jupiter and Forrester we can all only use so many computers (and so many hours online). 

Pointers to measurement of the Web and e-commerce projections (which are often ludicrously skew-whiff) are supplied in our Metrics guide.

     studies

The results of the US DMA's Electronic Media Surveys offer insights into how direct marketers in North America are exploiting the web. 

We recommend the online version of Advertising Week and Advertising Age.

Being Direct (New York: Random 1996), a richly anecdotal memoir by Lester Wunderman - the man behind the Columbia Record Club, LL Bean and American Express - might be dismissed were it not for figures suggesting that direct marketing accounts for 15% of retail sales in North America and that the idea behind Amazon.com is to build up the world's largest direct marketing database. The papers in The Rise & Fall of Mass Marketing (London: Routledge 1993) edited by Richard Tedlow & Geoffrey Jones offer perspective.

For more rigorous academic studies The Marketing Information Revolution (Boston: Harvard Business School Press 1994) edited by Robert Blattberg & Rashi Glazer is suggestive.

     codes

Locally the Australian Direct Marketing Association (ADMA) has placed its direct marketing Merchant Code of Conduct online. The New Zealand code is on the NZ DMA site.

We've examined some problems with that code and developments overseas in our page in spam in the security guide on this site.



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