As with all other communications programs, marketers must decide the message to be conveyed, the size of the budget, and so on. Perhaps the major difference between direct-marketing programs and other promotional mix programs regards the use of media.
 
Direct marketing employs a number of media, including direct mail, telemarketing, direct-response broadcasting, the Internet, and print. Each medium is used to perform specific functions, although they all generally follow a one- or two-step approach.

In the one-step approach, the medium is used directly to obtain an order. You’ve probably seen TV commercials for products like wrench sets, workout equipment, or magazine subscriptions in which the viewer is urged to phone a toll-free number to place an order immediately. Usually these ads accept credit cards or cash on delivery and give an address. Their goal is to generate an immediate sale when the ad is shown. The two-step approach may involve the use of more than one medium. The first effort is designed to screen, or qualify, potential buyers. The second effort generates the response. For example, many companies use telemarketing to screen on the basis of interest, and then follow up to interested parties with more information designed to achieve an order or use personal selling to close the sale.

Direct Mail

Direct mail is often called “junk mail”—the unsolicited mail you receive. More advertising dollars continue to be spent in direct mail than in almost any other advertising medium—an estimated $46.5 billion in 2001. Mail-order sales exceeded $582 billion in 2001 ($359 billion in the consumer market). Direct mail is not restricted to small companies seeking our business. Respected large companies such as General Electric, American Express, and Citicorp have increased their expenditures in this area, as have many others. Sales through direct mail in the business-tobusiness market are expected to reach over $345 billion by the year 2006.

Many advertisers shied away from direct mail in the past, fearful of the image it might create or harboring the belief that direct mail was useful only for low-cost products. But this is no longer the case. For example, Porsche Cars North America, Inc., uses direct mail to target high-income, upscale consumers who are most likely to purchase its expensive sports cars. In one example, Porsche developed a direct-mail piece that was sent to a precisely defined target market: physicians in specialties with the highest income levels. This list was screened to match the demographics of Porsche buyers and narrowed further to specific geographic areas. The direct-mail piece was an X ray of a Porsche 911 Carrera 4 written in the language of the medical audience. This creative campaign generated one of the highest response rates of any mailing Porsche has done in recent years. The Express retail chain and Vogue magazine teamed up to offer the store’s credit card holders a one-year subscription to the magazine, to be charged to their credit cards. Keys to the success of direct mail are the mailing list, which constitutes the database from which names are generated, and the ability to segment markets. Lists have become more current and more selective, eliminating waste coverage. Segmentation on the basis of geography (usually through Zip codes), demographics, and lifestyles has led to increased effectiveness. The most commonly used lists are of individuals who have already purchased direct-mail products.

The importance of the list has led to a business of its own. It has been estimated that there are over 38 billion names on lists, and many companies have found it profitable to sell the names of purchasers of their products and/or services to list firms. Companies like A. B. Zeller and VNU Business Media provide such lists on a national level, and in most metropolitan areas there are firms providing the same service locally.

While direct mail continues to be a favorite medium of many advertisers, and projections are that the market will continue to grow, this medium has been seriously threatened by the Internet. Between 1996 and 2001 direct-mail expenditures rose at the rate of 6.15 percent per year while Internet expenditures increased at the rate of 95 percent.18 Interestingly, the Internet is both a threat and an opportunity, as Internet companies have increased their expenditures in direct mail to drive potential customers to their sites. For example, AOL frequently mails disks with free time to induce trial of its Internet service. Nevertheless, the direct-mail business has experienced lower response rates from customers than in the past and has seen many advertisers shift dollars from this medium to the Net. Many companies, particularly in the business-to-business market, have shifted from print to online catalogs, and legal problems have also hurt the industry.

Catalogs
Major participants in the direct-marketing business include catalog companies. The number of catalogs mailed and the number of catalog shoppers have increased significantly since 1984, with sales growing by an average of 11.4 percent each year between 1996 and 2001. Catalog sales are expected to reach $16.3 billion in 2006.

Many companies use catalogs in conjunction with their more traditional sales and promotional strategies. For example, companies like Pottery Barn, Nordstrom, and JCPenney sell directly through catalogs but also use them to inform consumers of product offerings available in the stores. Some companies (for example, Fingerhut and Alloy) rely solely on catalog sales. Others that started out exclusively as catalog companies have branched into retail outlets, among them The Sharper Image, Lands’ End, and Banana Republic. L.L. Bean recently opened a superstore on the East Coast. As you can see by the following examples, the products being offered through this medium have reached new heights as well:

• The 2002 Neiman Marcus Christmas catalog was used to introduce the 2004 Cadillac XLR—MFRP $85,000. Cadillac produced only 101 of the “Neiman-Marcus XLRs—99 for sale through the catalog, 2 for charity. They sold out in 14 minutes!
• Victoria’s Secret featured a $1 million Miracle Bra in its Christmas catalog. Modeled by supermodel Claudia Schiffer, the bra contained over 100 carats of real diamonds as well as hundreds of semiprecious stones.
• Saks’ Holding Co., a division of Saks Fifth Avenue, offered a pair of Mercedes-Benz convertibles in a catalog, with bidding to start at $50,000.
• Hammacher Schlemmer featured a $43,000 taxicab and a $34,000 train set in its Christmas catalog.
• The Sharper Image offered a $375,000 silver saddle in its catalog (though it didn’t sell any).

In addition to the traditional hard copies, catalogs are now available on the Internet for both consumer and business-to-business customers. In some instances in the consumer market the catalog merchandise is available in retail stores as well. In others, the catalog and retail divisions are treated as separate entities. For example, if you purchase through the Eddie Bauer catalog, you can exchange or return the merchandise to the retail stores. Victoria’s Secret products must be returned to the catalog department. At the Gap, the catalog is used to supplement the inventory in stock, and phone orders for different sizes and so on can be made from the store and shipped for free.