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Direct marketing

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Direct marketing

  1. 1. Assignments
  2. 2. Assignments <ul><li>First Assignment: </li></ul><ul><li>Objective – To understand the effectiveness of Advertising </li></ul><ul><li>Methodology: Primary Consumer Research </li></ul><ul><li>Research Design – Each student to interview 20 respondents in different age groups to check for the ads liked most in 10 product / service categories and map them against actual brand purchase in that category. Students to explore why certain ads are liked in comparison to others and do they have direct impact on brand purchase. If yes why, if not why not. </li></ul>
  3. 3. Assignments <ul><li>Second Assignment: </li></ul><ul><li>Objective – Create familiarity with advertising industry in India </li></ul><ul><li>Methodology: Internet Research </li></ul><ul><li>Research Design – Each student to check detailed information about any one leading advertising agency in India. Check on origins and history, services offered, key clients, some major advertising campaigns. Class rep to assign one ad agency to each student. </li></ul>
  4. 4. Assignments <ul><li>Third Assignment: </li></ul><ul><li>Objective – Inculcate habit of self reading </li></ul><ul><li>Assignment – All students to read first 5 chapters of a book titled – “ Ogilvy on advertising” and write a note in about 1000 words on their take outs from the book. </li></ul><ul><li>Deadline for submission for all assignments is 5 th April 2010. Please email your assignments to [email_address] before the last date. </li></ul>
  5. 5. Client – Agency Relationship
  6. 6. Advertising Agency Selection – the important factors and steps
  7. 7. Agency Selection Process <ul><li>Some of the important considerations that drive the agency selection process are: </li></ul><ul><li>Size: Advertising agency size is of critical importance to advertisers. While large advertisers mostly prefer to work with large agency networks, small local clients may prefer to work with a small or a medium sized agency. As there is a shift happening from pure advertising to IMC, for large clients it is also important that the agency can conceptualize and implement a complete IMC program and plan. </li></ul>
  8. 8. Agency Selection Process <ul><li>Reputation: While size is very important, what the client is really buying is the solutions. Therefore agencies reputation and previous track record becomes even more critical in agency selection. Agencies that consistently develop excellent campaigns attract more walk in clients than agencies that produce mediocre work. Also for some clients creative ideas and execution are more important and for others strategy development, media planning and buying abilities etc are more important. </li></ul>
  9. 9. Agency Selection Process <ul><li>No Category Conflict: Most advertisers prefer to work with advertising agencies who are not working with any client who directly competes with them. At the same time most advertisers also prefer to work with advertising agencies who have experience of working on their product category and therefore understand their requirements and consumers of that category well. </li></ul><ul><li>Referrals: Some advertisers chose agencies based on recommendations of other clients, media representatives etc. </li></ul>
  10. 10. Agency Selection Process <ul><li>Personal Relationship with key managers: Advertising and IMC is people driven business. For most advertisers a personal relationship or previous working experience with a key manager in the advertising agency provides a lot of comfort and assurance. This helps in the advertising agency sometimes winning the mandate. It also provides the winning edge in a competitive pitch where the work and strategy presented by 2 or 3 agencies is equally good. </li></ul>
  11. 11. Agency Compensation
  12. 12. Agency Compensation <ul><li>Different clients have different systems for compensating their advertising agencies. These normally depend on the size of the advertising budget and services sought from the advertising agency. Some of these methods are: </li></ul><ul><li>Commissions from Media: The traditional method of compensating agencies is through a commission system </li></ul>
  13. 13. Agency Compensation <ul><li>Where the agency receives a specified 15% commission from the media, on any advertising space, time it purchases from its clients. </li></ul><ul><li>However most advertisers have since early 1990s shifted away from this system as the competition in the industry is stiff and to attract business many agencies started rebating part of the 15% to clients. </li></ul>
  14. 14. Agency Compensation <ul><li>Fee Based Arrangement: In this system the advertising agency charges a fixed monthly fees for all services provided by the agency and rebates the commissions earned from the media. The agency may also work on a system where a fees is charged for creative and planning services and a percentage of media commission is retained by the agency for media services. </li></ul>
  15. 15. Agency Compensation <ul><li>Cost plus agreement: Under a cost plus system, the client agrees to pay the agency a fee based on the cost of its work plus some agreed on profit margin (often a percentage of total costs). This system requires that the ad agency keep detailed cost records for time cost of personnel and other out of pocket costs. Certain markups are also allowed for overhead costs. </li></ul>
  16. 16. Agency Compensation <ul><li>Incentive plus fees: Under this system clients are linking the agency remuneration to actual performance and contributions made by the agency in achieving the goals set by the client organization. These goals could be in form of market share or sales growth. The agency is paid some fees to cover expenses and an incentive fees if goals set by the client are met. </li></ul>
  17. 17. Agency Evaluation
  18. 18. Agency Evaluation <ul><li>As advertising and marketing costs are rising year after year, advertising agencies are under tremendous pressure to deliver results or they run the risk of losing their clients business. Clients too under pressure to achieve pre determined sales results are constantly reviewing their advertising and marketing communication strategies and their relationship with ad agency and its performance. </li></ul>
  19. 19. Agency Evaluation <ul><li>If a client feels dissatisfied with the performance of the advertising agency or feels that their organization / brand needs a fresh advertising approach, they normally invite many agencies to make presentations and then decide on which one to appoint. This process is known as an Account Review or an agency pitch. </li></ul>
  20. 20. Agency Evaluation <ul><li>There are multiple reasons which can lead to dissatisfaction of the client and as a result the existing agency losing that business. Let’s examine some of these reasons: </li></ul><ul><li>Advertising Campaign fails to deliver desired results: One of the key reasons for an agency losing an account is when the advertising campaign developed by it fails to deliver the desired results. In this case clients seek fresh ideas and therefore invite many agencies to pitch for their advertising business. </li></ul>
  21. 21. Agency Evaluation <ul><li>Ad agency does not make timely deliveries of work: Another reason for an agency losing an account is poor logistics management or delay in delivering work to a client. Ad agency business is driven by people who are moody and also their work is dependent on their ability to come up with good ideas in given time schedules. This leads to a difficult and chaotic work environment where delays can happen with regular frequency. Most clients don’t appreciate this resulting in their desire for a change of ad agency. </li></ul>
  22. 22. Agency Evaluation <ul><li>Relationship issue between personnel on client side and agency side: A lot of times ad agencies lose businesses because of disagreements between the people representing the client organization and the ad agency. Failure on part of key account personnel on the agency side to maintain good relationship with key personnel on client side or some times unreasonable demands from clients lead to friction between personnel leading to a change in client – agency relationship. </li></ul>
  23. 23. Agency Evaluation <ul><li>Change of key personnel on client side or agency side: As a good relationship between the key personnel in the client organization and ad agency is one of the important factors in client – agency relationship, a change at either end can destabilize the relationship between two organizations. Key managers at ad agencies tend to poach on clients serviced by them in previous jobs and a new manager in the client organization may prefer ad agencies he is familiar with or he trusts for their ability to deliver results. </li></ul>
  24. 24. Agency Evaluation <ul><li>Compensation practices: If an ad agency feels that the remuneration that they are getting for their services is not adequate and the account is not profitable they may resign from the account. Sometimes a new business gain which is more remunerative and profitable may also lead to shift in focus of agency personnel leading to poor service and hence parting of ways between the two organizations. </li></ul>
  25. 25. Agency Evaluation <ul><li>Changes in IMC needs: Sometimes clients prefer to work with one organization or group for their IMC requirements as it facilitates one window solution. Even if the ad agency is delivering good work in area of mass media advertising but does not have competence to provide PR or Digital Media Services etc (or makes poor deliveries in these areas) it may lose the business on account of need for consolidation at the client end. </li></ul>
  26. 26. Agency Evaluation <ul><li>Client outgrows the ad agency and needs a bigger set up: As client organizations grow their needs change. For example a local advertiser may become a national advertiser, then a multinational advertiser and eventually a global advertiser. If the ad agency is unable to keep pace with the changing needs of the client, it is likely to lose the business to a bigger ad ad agency. </li></ul>
  27. 27. Direct Marketing
  28. 28. Terminology <ul><li>Direct Marketing is a term that includes distribution and / or advertising that occurs directly between the seller and the consumer, without the role of any retailer or distribution channel. Distinction should however be made between direct selling & direct advertising though the two may be combined. Distinction should also be made between direct response advertising and direct mail advertising. </li></ul>
  29. 29. Benefits of Direct Marketing <ul><li>The major appeal of direct marketing for most advertisers is its selectivity, which can take many forms. For some advertisers, the appeal of direct communication is its flexibility of format; other advertisers use direct communication because they can not reach a widely scattered market segments efficiently through the traditional media; still other advertisers need the timing flexibility of direct communication. </li></ul>
  30. 30. Benefits of Direct Marketing <ul><li>The Direct Marketing Association has outlined some major differences between direct marketing communication and other media: </li></ul><ul><li>Selectivity: Direct communication can be used to reach specific individuals or markets with greater control than can be obtained with any other medium. An appeal can be directed to 100 handpicked millionaires or a select group of 100000 book buyers. How else or how better could a promotion be limited to past or recent buyers or recommended buyers of a brand? </li></ul>
  31. 31. Benefits of Direct Marketing <ul><li>Personalization: One of the key benefits of direct communication is that it can be personalized even to the extent of making it very exclusive or confidential. Regardless of the content or number of people to be reached, a well managed direct communication program can do it successfully. Not all direct communication is of a confidential nature but when a confidential approach is needed, only this medium can provide the means. </li></ul>
  32. 32. Benefits of Direct Marketing <ul><li>Low Clutter: Another key benefits of direct communication is that it is a single advertiser’s individual message; it does not compete with other advertising and/or editorial matter. At the moment of reception, or when a piece of direct advertising reaches the reader, it has his or her complete attention. It will succeed or fail in its appeal just like any other advertisement – but at least it will have a better chance because there is less competition for the reader’s attention. </li></ul>
  33. 33. Benefits of Direct Marketing <ul><li>Few Format Restrictions: Direct communication specially direct mail does not have limitations on space and format of other advertising media. Almost no limit exists as to the size, shape, style, number of colours, and all other elements that enter into the make up of direct mail and printed promotion. The possibilities are as boundless as the designer’s ingenuity. </li></ul>
  34. 34. Benefits of Direct Marketing <ul><li>Flexibility: Direct communication specially direct mail permits greater flexibility in materials and processes of production than any other medium of advertising. All possible production processes including offset printing, silk screen printing, steel engraving, steel fabrication, plastic moulding, wood work etc can be used to create interesting mailers. </li></ul>
  35. 35. Benefits of Direct Marketing <ul><li>Novelty & Realism: Direct communication specially direct mail provides a means of introducing novelty and realism into the interpretation of the advertising theme. Cutouts, pop ups, and odd shapes and patterns are employed to good advantage by users of direct mail. If the mailer is required in the shape of a bottle or a box or any other theme its easy to create that effect. </li></ul>
  36. 36. Benefits of Direct Marketing <ul><li>Quick Response: Direct communication can be done / produced quickly. Advertisers can use it for quick promotion or in an emergency situation to reach out to their target audience </li></ul><ul><li>Research Feedback: Direct mail and other means of direct communication can also be used to test new ideas, in small groups prior to advertising in mass media. </li></ul>
  37. 37. Benefits of Direct Marketing <ul><li>Precise Timing: Direct communication can be done for accurate and in some cases exact timing. Direct mail or other forms of direct communications can be planned to a set schedule. </li></ul><ul><li>Invitation to respond: Direct mail and other forms of direct communication provide for more thorough means for TA to act or buy with exclusive promotions </li></ul>
  38. 38. Benefits of Direct Marketing <ul><li>Measuring Results and ROI: Since most direct marketing campaigns have a built in system of “ call for action” and a defined response mechanism it is easier to measure the results of a direct marketing campaign then the advertising done in mass media. </li></ul><ul><li>Product Sampling : Direct mail can be used effectively to distribute product samples. </li></ul>
  39. 39. Limitations of Direct Marketing <ul><li>Cost per contact: In comparison to mass media cost of reaching target audience through direct mail or telemarketing is much higher. </li></ul><ul><li>Updating Database: To avoid wastage it is important to have accurate database. However both acquisition and updating of database are expensive exercises. </li></ul>
  40. 40. Limitations of Direct Marketing <ul><li>Building Reach: Mass media can reach millions of audiences simultaneously. While in theory its possible with Direct Marketing, in reality it would be very expensive and logistically a very difficult exercise. </li></ul>
  41. 41. Thank You