TB-Ch15-7e-William

Part Five: Integration and Evaluation Chapter Fifteen: Direct Response CHAPTER FIFTEEN Direct Response GENERAL CONTENT: MULTIPLE-CHOICE QUESTIONS ___________ occurs when a seller and customers deal with each other directly rather than through an intermediary, such as a wholesaler or retailer. Integrated marketing Simplified marketing Basic marketing Direct marketing Effective marketing (d; easy; p. 423) Which of the following is a strategic tool of direct marketing? catalogs direct mail telemarketing direct-response advertising all of the above (e; easy; p. 423) What is the focus of most direct marketing communications? increasing awareness enhancing attitudes producing a sale gaining acceptance among several stakeholders encourage switching from a competitor’s product or service (c; moderate; p. 423) Why is direct marketing a growth area for marketing? effectiveness is easy to evaluate consumers are more accepting of it because response rates have increased dramatically in the past 10 years because consumers feel more confident in marketers’ concerns for their privacy all of the above (a; moderate; p. 423) Which of the following is an advantage of direct marketing over indirect marketing? flexibility in both form and timing purchase not restricted to a location marketer controls the product until delivery easier to evaluate all of the above (e; easy; p. 424) Which of the following is NOT an advantage of direct marketing over indirect marketing? reduced waste flexibility in both form and timing ability to reach everyone in the marketplace purchase not restricted to a location marketer controls the product until delivery (c; difficult; p. 424) Which of the following is a weakness of direct marketing? consumers are still reluctant to purchase a product sight unseen annoyances associated with direct marketing unable to reach everyone in the marketplace a and b a, b, and c (e; moderate; p. 424) The term or phrase that refers to the way that marketers identify prospective customers is ___________. prospecting lead generation hunting phishing customer identification (b; moderate; p. 424) ___________ is a type of marketing communication that combines the characteristics of advertising but also includes an element that allows the audience to make a direct response to the advertiser. Direct-response advertising Direct-focus advertising Integrated marketing communications Direct-marketing advertising Direct-to-consumer advertising (a; easy; p. 424) Which of the following is a contact element that can be included in a direct-response advertisement? toll-free phone number order coupon request-for-information device web site address all of the above (e; easy; p. 424) Toll-free phone numbers, an order coupon, a request-for-information device, and a web site or e-mail address are examples of ________. steps in the direct marketing process direct marketing measures of effectiveness in direct marketing contact elements that can be included in a direct-response advertisement the offer in direct marketing (d; moderate; p. 424) What is the first step in the direct marketing process? setting objectives and making strategic decisions communication of the offer response, or customer ordering fulfillment relationship building (a; easy; p. 424) What is the second step in the direct marketing process? setting objectives and making strategic decisions communication of the offer response, or customer ordering fulfillment relationship building (b; moderate; p. 425) Which of the following is the last step in the direct marketing process? setting objectives and making strategic decisions communication of the offer response, or customer ordering fulfillment relationship building (e; moderate; p. 425) Which of the following is a primary objective of direct marketing? lead generation action traffic generation a and b a, b, and c (e; moderate; p. 425) Which primary objective of direct marketing provides basic information on companies or individuals who are potential customers? lead generation traffic generation action enhancing awareness enhancing attitude (a; moderate; p. 425) Which primary objective of direct marketing attempts to motivate customers to visit an event, retail outlet, or other location? lead generation traffic generation action enhancing awareness enhancing attitude (b; moderate; p. 425) Which primary objective of direct marketing focuses on getting customers to order products and make payments or take some other action, such as visiting a dealer, returning a response card, or visiting a web site? lead generation traffic generation action enhancing awareness enhancing attitude (c; moderate; p. 425) ________ is a technique of mining the information in databases to uncover prospective buyers whose characteristics match those of users. Skimming Searching Prospecting Relationship marketing Data mining (c; moderate; p. 425) Which of the following is typically part of the offer in direct marketing? description of the product terms of sale payment information delivery information all of the above (e; easy; p. 426) Description of the product, terms of sale, and payment and delivery information are all part of the ________ in direct marketing. message media fulfillment offer all of the above (d; moderate; p. 426) Which of the following is NOT a variable that is intended to satisfy the needs of the consumer and considered part of the offer? response device price cost of shipping and handling guarantees and warranties future obligations (a; moderate; p. 426) Which of the following is a general guideline that applies to message development in direct marketing? message is often longer and contains more explanation and detail than regular advertising copy tends to be written in a personal, one-to-one conversational style message should reflect whether the offer is a one-step offer of a two-step offer a and b a, b, and c (e; easy; pp. 426–427) Which of the following is NOT a general guideline that applies to message development in direct marketing? message is often longer and contains more explanation and detail than regular advertising copy tends to be written in a personal, one-to-one conversational style message should reflect whether the offer is a one-step offer of a two-step offer message must, by law, include return policy all of the above are general guidelines that apply to message development in direct marketing (d; moderate; pp. 426–427) Which type of offer asks for a direct sales response? direct offer indirect offer one-step offer two-step offer primary offer (c; moderate; p. 427) Which type of offer is designed to gather leads, answer consumer questions, visit a store, or set up appointments? direct offer indirect offer one-step offer two-step offer primary offer (d; moderate; p. 427) How do traditional mass media and controlled media differ? Direct marketers cannot use mass media. Controlled media has the ability to target the consumers and deliver more complete information. Mass media is not effective for direct marketing efforts. Controlled media is not as effective as mass media for direct marketing efforts. Controlled media, and the messages sent through them, is more closely monitored by the federal government than is mass media. (b; difficult; p. 427) Which type of media employed in direct marketing is either owned by the direct marketer or contracted for a company to deliver the message? traditional mass media controlled media commissioned media private media secondary media (b; moderate; p. 427) In direct marketing, getting the product to the customer who ordered it is known as ________. logistics distribution back-end activity fulfillment consummation (d; moderate; p. 427) What do direct marketers use to keep track of customers, to identify prospective customers, and as a segmentation tool for communicating offers to customers and prospects? databases fulfillment one-step offers two-step offers consultants (a; moderate; p. 428) ________ is a practice that uses databases to predict trends and monitor consumers to more effectively implement direct-marketing strategies. Integrated marketing Direct marketing Database marketing Behavior-based marketing Response marketing (c; easy; p. 428) Which of the following is an objective of a marketing database? to record names of customers, expires, and prospects to provide a vehicle for storing and then measuring results of direct-response advertising to provide a vehicle for storing and then measuring purchasing information to provide a vehicle for continuing direct communication by mail or phone all of the above (e; easy; p. 428) Which of the following is NOT an objective of a marketing database? to record names of customers, expires, and prospects to provide a vehicle for storing and then measuring results of direct-response advertising to provide a vehicle for storing and then measuring purchasing information to provide a vehicle for continuing direct communication by mail or phone to monitor the performance of employees, such as those taking orders from customers calling in (e; moderate; p. 428) In a marketing database, expires means ________. the customer is dead the marketer no longer has permission to communicate with this customer names no longer valid the customer has not purchased from the marketer for more than 18 months the direct marketer can no longer communicate to this prospect because of the list agreement (c; difficult; p. 428) Where does the database marketing process begin? data entry data clustering information collection point data assessment data sharing (c; moderate; p. 428) In which stage of the database marketing process is data entered into the computer to merge it with other information already in the file or added at the same time? first second fourth fifth seventh (b; difficult; p. 428) In which stage of the database marketing process can the direct marketer create clusters of characteristics and behaviors representing valuable consumer segments or target markets? first third fourth fifth seventh (c; difficult; p. 429) Which type of databases contain information useful in segmenting as well as contact information? compiled databases relational databases customer databases response databases clustered databases (b; difficult; p. 429) Direct marketers purchase or rent lists from ________. list brokers list managers list owners list retailers list distributors (a; moderate; p. 429) Combining lists is known as ________. purging merging database marketing sourcing consolidating (b; moderate; p. 429) Deleting the repeated names on lists that have been combined is known as ________. purging merging elimination parsing consolidating (a; moderate; p. 429) Combining lists is called ________, and deleting the repeated names is called ________. consolidating; elimination purging; merging elimination; consolidating merging; purging compiling; parsing (d; moderate; p. 429) Which of the following is a type of list used in direct marketing? house list compiled list response list a and b a, b, and c (e; moderate; p. 430) Which of the following is NOT a type of list? data list house list compiled list response list All of the above are types of lists. (a; difficult; p. 430) Which type of list consists of the marketer’s own customers or members? data list house list compiled list response list prospect list (b; moderate; p. 430) Which type of list is the most valuable list to a marketer? data list house list compiled list response list prospect list (b; moderate; p. 430) Which type of list is derived from people who respond to something such as a direct-mail offer or solicitation? data list house list compiled list response list prospect list (d; moderate; p. 430) Which type of list is rented from a direct-mail list broker and is usually a list of some specific category, such as sports car owners, new homebuyers, graduating seniors, or subscribers to a magazine? data list house list compiled list response list prospect list (c; moderate; p. 430) What is a concern regarding data-driven communications? lack of hardware to take advantage of its benefits lack of software to take advantage of its benefits lack of processes to take advantage of its benefits consumer privacy cost (d; moderate; p. 430) Which process identifies and analyzes patterns in customer behavior to maximize the profitability of each relationship? integrated marketing communications customer relationship management database direct marketing direct marketing contact marketing (b; moderate; p. 432) What does CRM stand for? customer retention marketing customer relationship management customer retention management continuity, retention, and monetary value, which are measures of direct marketing success customer relationship marketing (b; moderate; p. 432) Which of the following is a main player in direct-response marketing? advertisers who use direct response to sell products or services agencies that specialize in direct-response advertising media that deliver messages by phone, mail, or the web consumers, who are the recipients of the information and sometimes initiators of the contract all of the above (e; easy; p. 432) Which of the following is NOT a main player in direct-response marketing? advertisers who use direct response to sell products or services agencies that specialize in direct-response advertising media that deliver messages by phone, mail, or the web consumers, who are the recipients of the information and sometimes initiators of the contract federal and state governments, which monitor who is contacted and how personal information is safeguarded (e; moderate; p. 432) Which of the following is NOT a type of agency involved in direct marketing? advertising agencies independent direct marketing agencies service firms U.S. Postal Service fulfillment houses (d; difficult; p. 433) Service firms in direct marketing specialize in ________. printing mailing list brokering a and b a, b, and c (e; moderate; p. 433) Which type of agency is responsible for making sure consumers receive whatever they request in a timely manner, be it a catalog, additional information, or the product itself? advertising agencies independent agencies service firms fulfillment houses U.S. Postal Service (d; moderate; p. 433) Which of the following is an advantage of direct mail? positive perceptions low cost per thousand reaches the unreachable high response rates all of the above (c; moderate; p. 435) Which of the following is NOT an advantage of direct mail? tells a story builds in feedback personalizes the message reaches the unreachable low cost per thousand (e; moderate; p. 435) Which of the following is a disadvantage of direct mail? negative perceptions cannot reach audiences who are inaccessible by other media cannot personalize the message consumer avoidance must sell the product in the first two lines because most audiences will not read beyond that point (a; moderate; p. 435) A ________ is a multipage direct-mail publication that shows a variety of merchandise. letter brochure broadsheet self-mailer catalog (e; easy; p. 437) Delivering ads through phone calls is known as ________. phone marketing telemarketing one-to-one marketing predictive marketing inbound telemarketing (b; easy; p. 438) Rooms with large banks of phones and computers where workers send and receive calls are known as ________. call centers telephone pits phone centers call floors call pits (a; moderate; p. 438) Which of the following are the two types of telemarketing? opt-in and opt-out toll and toll-free internal and external business and consumer inbound and outbound (e; moderate; p. 438) In which type of telemarketing does the call originate with the customer? opt-in opt-out external inbound outbound (d; moderate; p. 438) In which type of telemarketing does the call originate with the marketer? opt-in opt-out external inbound outbound (e; moderate; p. 438) Which of the following is an advantage of catalogs? high response rates low cost per thousand targeted positive perceptions all of the above (c; moderate; p. 439) What type of response cards are attached to the magazine after it is printed by special machinery that puffs open the pages? bind-ins puff-ins blow-ins tie-ins supplements (c; moderate; p. 440) A direct-response ad on television that is typically 30 or 60 minutes long and tends to be played during non–prime time periods is known as a(n) ________. infomercial direct-response program promotional program direct-response spot home shopping network (a; easy; p. 441) Fraudulently using a company’s identity to send out spam is known as ________. copy-cat advertising vampire advertising zipping zapping spoofing (e; moderate; p. 443) The financial contribution through sales volume of an individual customer or customer segment over a length of time is known as ________. return on investment lifetime customer value customer contribution customer loyalty customer relationship assessment (b; moderate; p. 444) GENERAL CONTENT: TRUE/FALSE QUESTIONS Direct marketing is a growth area because it is easy to evaluate its effectiveness. (True; moderate; p. 423) One advantage of direct marketing is that it affords flexibility in both form and timing. (True; moderate; p. 424) One disadvantage of direct marketing is that it is unable to reach everyone in the marketplace. (True; moderate; p. 424) The three primary objectives of direct marketing are lead generation, traffic generation, and maximize profits. (False; moderate; p. 425) Cloning is a technique of mining the information in databases to uncover prospective buyers whose characteristics match those of users. (False; moderate; pp. 425–426) Only the product or service is considered part of the offer in direct marketing. (False; moderate; p. 426) A two-step offer is designed to sell consumers a lower-priced item before offering them a higher-priced, and more profitable, offer. (False; moderate; p. 427) In direct marketing, logistics is the function that gets the product to the customer who ordered it. (False; moderate; p. 427) Because direct-marketing messages are constantly being measured, it is easier to learn what works and modify succeeding campaigns based on results than with advertising. (True; easy; p. 428) The database marketing process begins with a sale. (False; difficult; p. 428) Combining direct-mail lists is called merging, and deleting the repeat names is called purging. (True; moderate; p. 429) The three types of lists are house lists, response lists, and directory lists. (False; moderate; p. 430) Customer relationship management (CRM) identifies and analyzes patterns in customer behavior to maximize the profitability of each relationship. (True; moderate; p. 432) The four main players in direct-response marketing are the advertisers, agencies, the media, and the government. (False; moderate; p. 432) In direct marketing, service firms are agencies that specialize in supplying printing and mailing, and list brokering. (True; moderate; p. 433) Advertising agencies do not play a role in direct-response marketing. (False; moderate; p. 433) A business responsible for making sure consumers receive whatever they requested in a timely manner in direct-response marketing is known as a service firm. (False; moderate; p. 433) A direct-mail piece is a print advertising message for a product or service that is delivered by mail. (True; easy; p. 435) One of the primary advantages of direct mail is the low cost per thousand compared to mass media. (False; moderate; p. 435) The average response rate for a direct mail offer is 10 percent. (False; difficult; p. 435) A broadsheet is a multipage direct-mail publication that shows a variety of merchandise. (False; moderate; p. 436) More direct-marketing dollars are spent on telemarketing than on any other medium. (True; difficult; p. 438) Outbound telemarketing means the call center staff are calling unqualified numbers, sometimes just randomly selected, and this practice has a much lower response rate. (False; difficult; p. 438) Outbound telemarketing calls are the ones that generate the most consumer resistance. (True; moderate; p. 438) Cold call dialing techniques make it possible for telemarketing companies to call anyone—even those with unlisted numbers. (False; difficult; p. 438) Every state in the United States has a “do-not-call” list. (False; moderate; p. 439) In newspapers, response cards may be either bind-ins or blow-ins. (False; moderate; p. 440) Radio is not an appropriate medium for direct-response advertising. (False; moderate; p. 440) One limitation of infomercials is that they cannot easily be introduced into foreign markets. (False; moderate; p. 442) Direct marketing is the model for e-commerce. (True; moderate; p. 442) The use of e-mail as a marketing tool has really only been used by the usual e-commerce companies, such as Amazon.com. (False; moderate; p. 442) Unwanted e-mail is known as spam. (True; easy; p. 443) Permission marketing gives customers an opportunity to opt-out of a notification service from a company. (True; moderate; p. 443) Lifetime customer value is an estimate of how much purchase volume companies can expect to get over time from various target markets. (True; moderate; p. 444) In some foreign countries, government regulations of the postal service place limitations on the use of direct mail. (True; moderate; p. 445) GENERAL CONTENT: ESSAY QUESTIONS Discuss the advantages and disadvantages of direct marketing. Answer: Advantages of direct marketing: (1) Direct marketing technology allows for the collection of relevant information about the customer contributing to the development of a useful database and selective reach, which reduces waste. (2) Products have added value through the convenient purchase process and reliable, quick delivery mechanisms of direct marketing. Purchase is not restricted to a location. (3) The marketer (rather than the wholesaler or retailer) controls the product until delivery. (4) Advertising carrying direct-marketing components is easier to evaluate. (5) It affords flexibility in both form and timing. Disadvantages of direct marketing: (1) Consumers are still reluctant to purchase a product sight unseen. (2) There are annoyances associated with direct marketing, such as too many catalogs, junk mail, and calls during dinner. (3) Direct marketing strategies are unable to reach everyone in the marketplace. (moderate; p. 424) Name and describe the five basic steps in direct marketing. Answer: The steps in direct marketing are: (1) Setting Objectives and Making Strategic Decisions—The three primary objectives are lead generation, traffic generation, and action. (2) Offer—Typically consists of a description of the product, terms of sale, and payment and delivery information. An effective offer clearly calls on the buyer to take some action. Some other variables included are the price, the cost of shipping and handling, optional features, future obligations, availability of credit, extra incentives, time and quality limits, and guarantees or warranties. (3) Response/Order—All direct marketing aims to generate a behavioral response, especially sales. (4) Fulfillment and Customer Maintenance—Getting the product to the customer who ordered it. Fulfillment includes all the back-end activities that the company’s infrastructure is designed to make easy for the customer to respond to. (5) Maintenance of the Company’s Database and Customer Service (Relationship Building)—Evaluate the success of the campaign. (moderate; pp. 424–427) Name and describe the seven stages of the database marketing process. Answer: Stages in the database marketing process: (1) Collection Point—Initial information-collection point, and it could be the completion of a warranty card, entering a contest or sweepstake, opting in on a web site, or filling out a card at a trade show, to name a few. (2) Data Entry—Enter data into the computer to merge it with other information already in the file or added at the same time. (3) Data Assessment—Assess the data and determine the relevant level of detail. (4) Data Clustering—Create clusters of characteristics and behaviors representing valuable consumer segments or target markets (audiences). (5) Data Application—Apply the database to specific marketing problems or strategies. (6) Data Sharing—Make decisions about data sharing and partnerships, such as with retail outlets. (7) Data Refinement—Includes corrections, updates, additions, and deletions—Information that is fed back into the planning process. (difficult; pp. 428–429) Name and define the three types of lists. Answer: There are three types of lists: (1) House List—A list of the marketer’s own customers or members, its most important target market, and probably its most valuable list. (2) Response List—Derived from people who respond to something such as a direct-mail offer or solicitation. It is similar to the advertiser’s target audience. Such lists are usually available for rent from the original direct-mail marketer, and those on the list indicate a willingness to buy by direct mail. (3) Compiled List—Rented from a direct-mail list broker. It is usually a list of some specific category, such as sports car owners, new homebuyers, graduating seniors, association members, or subscribers to a magazine, book club, or record club. (easy; p. 430) Name and describe the four types of agencies involved in direct-response advertising. Answer: There are four types of agencies in direct marketing: (1) Advertising Agencies—Agencies whose main business is mass-media advertising either have a department that specializes in direct response or own a separate direct-response company. (2) Independent Agencies—Independent, full-service direct-marketing agencies specializing in direct response. (3) Service Firms—Firms that specialize in supplying printing and mailing, and list brokering. (4) Fulfillment Houses—Businesses responsible for making sure consumers receive whatever they request in a timely manner, be it a catalog, additional information, or the product itself. (moderate; p. 433) APPLICATION QUESTIONS: MULTIPLE-CHOICE QUESTIONS What is the name of the direct marketing industry’s award that is given for excellence in response rates, marketing strategy, and creative components? CLIO award Academy award Echo award DM award EFFIE award (c; moderate; p. 421) What was the challenge given the agency working on the Harley-Davidson’s account as described in the chapter’s opening vignette? to change Harley-Davidson’s image as only for motorcycle gangs to a brand for any motorcycle enthusiast to reach out to younger buyers and convince them that a Harley-Davidson motorcycle was attainable to increase sagging sales by 50 percent to gain acceptance in foreign countries to reach out to women and convince them that they can ride a Harley too (b; moderate; p. 422) Theo is implementing the direct marketing process in his business. Currently, he is conducting marketing research, segmenting and targeting markets, and setting objectives. Which step in the direct marketing process is he implementing? Step 1 Step 2 Step 3 Step 4 Step 5 (a; moderate; p. 425) Procter & Gamble has developed and purchased huge databases and has more than 30 million consumers in their current database. P&G routinely mines the information in the database to uncover potential buyers whose characteristics match those of their current customers for a given product and brand. What technique is P&G using? skimming searching prospecting relationship marketing data mining (c; moderate; p. 425) Scott is developing the offer in a direct marketing campaign. What should he include? description of the product terms of sale payment and delivery information other information such as price, optional features, future obligations, etc. all of the above (e; easy; p. 426) Josh is a broker who sells retirement investments to individuals. He uses direct marketing, but he uses it primarily to get customers to inquire for more information and set up an appointment to discuss investment options with him. That is, he doesn’t use direct marketing to create a sale directly. Which type of offer is this? one-step two-step primary secondary indirect (b; moderate; p. 427) Alvin wants to develop database marketing capabilities for his business, but he doesn’t even know where to begin. Which of the following is the first stage of the database marketing process? get to know your customers by name collect information enter data assess data cluster data (b; moderate; p. 428) The Pampered Soul is a new women’s shoe store in Birmingham, Alabama, and the owners want to target women between the ages of 30 and 45 with a household income greater than $50,000 with a special promotion. They have purchased two mailing lists: one with demographic information for their retail area and one with psychographic information. They want one list that combines both types of information, but they don’t want to mail someone twice. What should they do? purge, then merge the lists merge, then defile the lists merge, then purge the lists purge, the defile the lists combine the two lists and then visually scan them to remove duplicates (c; moderate; p. 429) Laurie is a college professor who teaches a course in direct marketing. She is a member of the Direct Marketing Association (DMA), which is a trade association for businesses in the direct marketing industry, because she finds it useful for attaining information for her course. However, she receives direct mail offers, e-mails, and telemarketing calls that are also sent to the other, practitioner, members of the DMA. What type of list is Laurie’s name on? house list response list compiled list professional list business list (c; moderate; p. 430) As described in “A Matter of Principle,” what does “becoming a customer-centric enterprise” mean? implementing the marketing concept finding out what motivates customers and treating them all the same way optimizing the short-term profitability optimizing the short-term customer satisfaction using insights into individual customers to gain a competitive advantage (e; moderate; p. 431) Knight-Abbey Commercial Printers and Direct Mailers is a large commercial printer in the southeastern United States. They develop, print, and prepare for mailing direct mail pieces for several businesses. One of their largest customers is Beau Rivage casino in Gulfport, Mississippi, and they personalize and print eight variations of a direct mail offer to customers. In terms of the types of firms in direct-response advertising, which type is Knight-Abbey? advertising agency independent agency service firm fulfillment house print brokerage (c; moderate; p. 433) As described in “The Inside Story,” who was the target market for the direct mail campaign developed for Miss Hall’s School? former students and past donors high school girls high school boys high school girls from families with household incomes greater than $500,000 high school students from families with household incomes greater than $500,000 (a; moderate; p. 434) Which of the following is NOT a practical tip for creating effective direct mail given in the “Practical Tips” box? Get the attention of the targeted prospect as the envelope comes from the mailbox. Use the word free as often as possible. Provide critical information about product use. Use an incentive to encourage a fast response. Inspire confidence, minimize risk, and establish that the company is reputable. (b; moderate; p. 436) Sandy likes to read magazines while she works out on the elliptical machine at her health club. However, she hates the cards that fall out when she turns the pages, so the first thing she does when she gets a magazine is shake all those out into the trash. What are those cards called? bind-ins puff-ins blow-ins tie-ins supplements (c; moderate; p. 440) As described in “A Matter of Practice,” who is the leading direct-response auto insurer? GEICO Allstate State Farm USAA Shelter (a; moderate; p. 441) As described in the “Hands-On” case at the end of the chapter, what is the purpose of the Federal Do-Not-Call Registry? to make businesses using telemarketing register all the numbers that they call to allow consumers to receive telemarketing calls only from marketers that they want to call them to stop telemarketers from calling cell phone numbers because consumers must pay for those calls to allow consumers to “opt-out” of telemarketing calls to stop telemarketers from calling people at work (d; moderate; p. 448) APPLICATION QUESTIONS: MINI-CASE MULTIPLE-CHOICE Solumbria, a company that sells medically recommended sun protective clothing, has ads in several different magazines that give consumers information about their products. The headline says “Serious Sun Protection” surprinted over a man and a woman dressed head to toe in the protective clothing. The body copy then goes on to tout the benefits of sun protection, their clothing, and how dermatologists have recommended Solumbria for their patients. The last paragraph of the copy says “For a FREE catalog of Solumbria hats, shirts, pants and accessories for men, women and children, call Sun Precautions: 1-800-882-7860.” The ad also provides a web address. Mini-Case Question. Which of the following best describes the type of advertising this print ad illustrates? retail advertising national advertising directory advertising direct-response advertising direct-to-consumer advertising (d; moderate; p. 424) Mini-Case Question. Which of the three primary direct marketing objectives does this ad illustrate? lead generation traffic generation action increase awareness enhance attitudes (c; moderate; p. 425) Mini-Case Question. What type of offer does this ad represent? one-step two-step primary secondary indirect (b; moderate; p. 427) Mini-Case Question. Once a consumer calls the phone number or visits the web site, he or she can purchase products by phone, mail, or the Internet. Which step of the direct marketing process gets the product to the customer who ordered it? objectives/strategy the offer response/order fulfillment relationship building (d; moderate; p. 427) APPLICATION QUESTIONS: SHORT-ANSWER What were the three objectives of the Harley-Davidson campaign as described in the chapter’s opening vignette? Answer: The objectives for the Harley-Davidson campaign were: (1) reach new prospects, (2) break down barriers to purchase (namely price misperception), and (3) generate leads to develop a new, younger customer base for the entry-level model. (moderate; p. 422) Compare and contrast indirect marketing and direct marketing, and state the four strategic tools of direct marketing. Answer: Direct marketing occurs when a seller and customers deal with each other directly rather than through an intermediary, such as a wholesaler or retailer, which is what they do if traditional marketing is used. Although both types of marketing include a strong focus on marketing research to guide strategy, direct marketing uses database development to better target customers. Students can also discuss the advantages of direct marketing over indirect marketing; these are are: (1) direct marketing uses more relevant information, which reduces waste, (2) purchase is not restricted to a location, (3) marketer (rather than the wholesaler or retailer) controls the product until delivery, and (4) it affords flexibility in both form and timing. However, there are some disadvantages, which are (1) consumers are reluctant to purchase a product sight unseen, (2) some are annoyed with direct marketing, and (3) unable to reach everyone in the marketplace. The four strategic tools of direct marketing are: catalogs, direct mail, telemarketing, and direct-response advertising. In turn, each of these tools provides an infrastructure whereby the transaction can actually take place. (moderate; pp. 423–424) After graduation, you plan on working in your family’s business and want to implement some of the direct marketing principles that you learned in this class. Explain the three primary objectives of direct marketing to convince your parents that it is the right move for the business. Answer: Direct marketing has three primary objectives: (1) Lead Generation—Providing basic information on companies or individuals who are potential customers. (2) Traffic Generation—Motivating customers to visit an event, retail outlet, or other location. (3) Action—Ordering products and make payments or take some other action, such as visiting a dealer, returning a response card, or visiting a web site. (moderate; p. 425) You are developing the offer for a direct marketing campaign. Explain what is included in the “offer.” Answer: The offer consists of a description of the product, terms of sale, and payment and delivery information. All the variables that are intended to satisfy the needs of the consumer are considered part of the offer. These variables include the price, the cost of shipping and handling, optional features, future obligations, availability of credit, extra incentives, time and quality limits, and guarantees or warranties. (moderate; p. 426) Your job at work is to develop and execute direct marketing campaigns. Direct marketers conduct a lot of testing before launching a big campaign. Explain how direct marketing professionals are able to continually evaluate and accurately measure the effectiveness of various offers in a single campaign. Answer: By employing such measurement tools as tracking printed codes on mail-in responses that identify different offers, and using different telephone numbers for each commercial (by time slot, station, or length), the DM professional can clearly identify those offers that yield the best results and modify the campaign to take advantage of them. (moderate; pp. 427–428) Many companies have developed databases and have begun database marketing. Explain what this means and discuss the primary objectives of a marketing database. Answer: Database marketing is a practice that uses databases to predict trends and monitor consumers to more effectively implement direct marketing strategies. A marketing database has four primary objectives: (1) To record names of customers, expires (names no longer valid), and prospects (2) To provide a vehicle for storing and then measuring results of advertising (usually direct-response advertising) (3) To provide a vehicle for storing and then measuring purchasing performance (4) To provide a vehicle for continuing direct communication by mail or phone (moderate; p. 428) As discussed in “A Matter of Principle,” why is becoming a customer-centric enterprise a source of competitive advantage, and how is it accomplished? Answer: Becoming a customer-centric enterprise is about using insights into individual customers to gain a competitive advantage. It is an approach to understanding and influencing customer behavior through meaningful communications, to improve customer acquisition, customer retention, and customer profitability. It’s about treating different customers differently, and relationships are the crux of the customer-focused enterprise. The exchange between a customer and the enterprise becomes mutually beneficial and forms the basis of the learning relationship. Even if a competitor were to establish exactly the same capabilities, a customer already involved in a learning relationship would have to spend time and energy teaching the competitor what the current enterprise already knows. This creates a significant switching cost for the customer, resulting in the customer becoming more loyal. (moderate; p. 431) Discuss the direct marketing campaign that was developed for Miss Hall’s School as described in “The Inside Story.” Answer: Gargan Communications was hired by Miss Hall’s School, a small, upscale New England girls’ prep school, to produce a series of direct-mail pieces for its annual fundraising campaign. The target market was former students and past donors. Based on the theme, “Shape the World,” they developed a series of brochures, each focusing on a current student, “her story,” and how the school has influenced her maturation. The box then goes on to describe the design of the brochures. (moderate; p. 434) Some advertising students are visiting your agency on a field trip and have asked you to provide some practical tips on creating effective direct mail. Give them five of the tips that were given in the “Practical Tips” box. Answer: Students can answer any five of the following: (1) Get the attention of the targeted prospect as the envelope comes from the mailbox (2) Create a need for the product, show what it looks like, and demonstrate how it is used (3) Answer questions, as a good salesperson does, and reassure the buyer (4) Provide critical information about product use (5) Inspire confidence, minimize risk, and establish that the company is reputable (6) Make the sale by explaining how to buy, how to order, where to call, and how to pay for the purchase (7) Use an incentive to encourage a fast response (difficult; p. 436) Converges is a nationwide call center operator and has several call centers in college towns. They are recruiting on campus, and your roommate is interested because the pay is pretty good and the hours are flexible. However, she doesn’t know much about telemarketing, except that people don’t really like it, so she asked you about it because you are taking this class. Briefly describe the two types of telemarketing. Answer: There are two types of telemarketing: inbound and outbound. An inbound or incoming telemarketing call originates with the customer. The consumer can be responding to an ad or a telemarketing message received earlier. Calls originating with the firm are outgoing; these outbound telemarketing calls are the ones that generate the most consumer resistance. (easy; p. 438) Barbara is the owner of a gift shop and is considering developing a catalog to increase her sales. Although there are several advantages of using catalogs, there are also some disadvantages. Discuss the disadvantages of catalogs that Barbara needs to be aware of. Answer: There are several disadvantages of catalogs: (1) Negative Perceptions—Catalogs are viewed as junk mail by many recipients. (2) Costs—The cost per thousand of catalogs is higher than mass media. (3) Response Rate—The response is relatively low at 3 to 4 percent. (4) Mailing List—Databases must be constantly maintained. (moderate; p. 439 [Table 15.2]) We all love to make fun of infomercials, but the fact remains that they have been around since the emergence of the cable industry in the 1980s and have become a multibillion-dollar industry. Explain what an infomercial is and why, today, it is viewed as a viable medium. Answer: An infomercial is a direct-response commercial and is typically 30 or 60 minutes long and tends to be played during non–prime time periods. Today, the infomercial is viewed as a viable medium because: (1) Consumers now have confidence in infomercials and the products they sell. (2) With the involvement of upscale advertisers, the quality of infomercial production and supportive research has improved. (3) Consumers can be better segmented and infomercials are coordinated with respect to these audiences. (4) Infomercials can easily be introduced into foreign markets. (difficult; pp. 441–442) As described in “A Matter of Practice,” GEICO, the leading direct-response auto insurer in a low-involvement category dominated by major brands, was successful in overcoming consumer inertia, driving customers to their phones and the Internet and attained the highest level of inquiries in company history. Describe the campaign that produced these results. Answer: The advertising used humor to stand out from the pack, particularly in the use of its unique brand character, the little green GEICO gecko. Their agency also recommended a new “Good News” TV campaign that largely spoofs TV and radio programming. The idea was to associate the “Good News” scenario with the idea of saving money in unexpected ways. The campaign was memorable and got customers to call or go to the web site to see how they could save money too. (moderate; p. 441) Although e-mail marketing is a very cost-effective way to reach millions of consumers, many people view it negatively and call it spam. Explain what spam is, and how can legitimate direct marketers respond to the criticisms surrounding e-mail marketing. Answer: Spam is the term used for unwanted e-mail, or junk e-mail. Legitimate direct marketers have responded in two ways. For one, companies now search their rich databases for customers’ buying habits or recent purchases. They then send these customers e-mail that offers deals on related products and connect it to their customer’s previous interactions with the company. A second approach, called permission marketing, is also being used to reduce criticism about spam. Permission marketing gives customers an opportunity to opt-in to a notification service from a company. The e-mail will ask if the recipient wants further e-mails and wants to be on the mailing list. Permission marketing also gives customers an opportunity to opt-out of the service when they no longer need a company’s products or services. They can sometimes even opt-down by reducing how frequently they receive messages. (moderate; p. 443) Some companies have large databases and have examined them to determine who their best customers are. Banks, in particular, have analyzed customer data and have learned that the top 5 percent of their customers are very profitable for the bank and the bottom 5 percent are very unprofitable. Name and describe the concept that many marketers are using to assess the value of customer loyalty. Answer: Lifetime customer value (LCV) is an estimate of how much purchase volume companies can expect to get over time from various target markets. LCV is the financial contribution through sales volume of an individual customer or customer segment over a length of time. The calculation is based on known consumption habits plus future consumption expectations. The estimate of the contribution is defined as return on investment—that is, revenue gains as a function of marketing costs. (moderate; p. 444) APPLICATION QUESTIONS: MINI-CASE SHORT ANSWER Proactive Solution is a skincare system to help those with acne. Proactive originally started out as being sold only through direct marketing, and the consumer had to enroll in membership in the Proactive Solution Clear Skin Club. However, now some large malls have kiosks selling Proactive Solution products without the club membership, but the prices are much higher. Proactive Solution has had one of the longest-running infomercials on television, and their product is also sold through magazine ads. Through these mediums, consumers can purchase the product directly by calling, mailing, or going through the Internet to submit an order. Mini-Case Question. Name and describe the type of advertising that Proactive Solution uses to promote and sell its product. Answer: This is direct-response advertising, which is a type of marketing communication that combines the characteristics of advertising (attention-getting visuals, interesting copy, and relevant timing) but also includes an element that allows the reader, viewer, or listener to make a direct response to the advertiser. The contact element can be a toll-free phone number, an order coupon, a request-for-information device, or a web site or e-mail address. (easy; p. 424) Mini-Case Question. The infomercials and print ads allow consumers to purchase directly from the ad itself. There is a mail-in coupon order form, a toll-free phone number, and a web address given in the print ad that states, “Call Now!” Some infomercials even state that “calls received within the next 30 minutes will receive ‘2 Free Bonuses’ when ordering.” Name and describe the type of offer this is, and explain how it is different from the other type of offer. Answer: The two types of offers are one-step and two-step. This is an example of a one-step offer because it asks for a direct sales response; it is crucial that there is a mechanism for responding to the offer. A two-step offer is designed to gather leads, answer consumer questions, get them to visit a store or set up appointments. (moderate; p. 427) Mini-Case Question. What do you think Proactive Solution uses to track consumer purchases? How can they use this to restart customers who have joined the club but later quit? Answer: Databases can be used to keep track of customers and identify prospective customers. Data are collected based on the customer’s behavior and interaction with the company. The information gathered through customer interaction feeds back into the process and becomes an input for the next round of communication efforts. Thus, knowledge of recent customer losses would generate different messages being sent as compared to those being sent to current customers. (moderate; p. 428) Mini-Case Question. Name and describe the three types of lists and explain which one is the most important to Proactive. Answer: There are three types of lists: (1) House List—A list of the marketer’s own customers or members, its most important target market. This is the most valuable list to Proactive. (2) Response List—Derived from people who respond to something such as a direct-mail offer or solicitation. It is similar to the advertiser’s target audience. Such lists are usually available for rent from the original direct-mail marketer, and those on the list indicate a willingness to buy by direct mail. (3) Compiled List—Rented from a direct-mail list broker. It is usually a list of some specific category, such as sports car owners, new homebuyers, graduating seniors, association members, or subscribers to a magazine, book club, or record club. (easy; p. 430) Mini-Case Question. Jill is a member of the Proactive Solution Clear Skin Club, and she received a telephone sales call trying to get her to purchase Proactive make-up, too. Jill registered her phone number with the National Do-Not-Call List and is upset that she received this call. Can Proactive call her? Explain any restrictions they must be aware of. Answer: According to the Telemarketing Sales Rule (TSR) enacted by the Federal Trade Commission in 1995, telemarketers are prohibited from calling before 8 a.m. or after 9 p.m.; it imposes strict information disclosure requirements; it prohibits misrepresentative or misleading statements; and it provides for specific payment collection procedures. More recently, FTC regulations require telemarketing firms to identify themselves on caller ID. The most serious restriction on telemarketing is coming from various state and national “do-not-call” lists. Some 30 states have set up these lists and a national do-not-call list took effect in 2003. However, even though a consumer may have registered their phone number on this list, companies can still legally phone individuals with whom they have an “existing relationship,” which in practice means the consumer has bought a product or has contacted the company within the previous 18 months. Because Jill is a customer, Proactive legally can call her. (moderate; pp. 439, 448) 506 507