Direct Marketing Summary

Direct Marketing Summary DIRECT MARKETING Direct marketing is a type of marketing that set sights on establishing and maintaining long term, structural, direct relationships between a supplier and its customers (Hoekstra and Zwart, 1993; Raaijmaakers et al., 1992). A relationship builds up through regular interaction, in which both parties react to one anothers actions. Direct marketing may be adopted at many levels in the distribution chain: producers, wholesalers as well as retailers may choose for direct marketing (e.g. Marshall and Vredenburg, 1988; Voorhees and Coppett, 1983). Developments in information technology, individualization tendencies, rising distribution costs and the increase of dual-income households have been known as the responsible factors for the increased confidence on direct marketing (Pettit, 1987). Direct marketing is escalating at two times the rate of traditional retailing methods (May, 1989). A Time magazine cover story anticipated the number of Americans responding to direct marketing solicitations to be 92 million in 1989 and the dollar amount of purchases to be $183 billion (Time, 1990). According to Statistical Fact Book (1993-1994), the percentage of adults spending $200 or more per year on products ordered through direct marketing rose from 16% to 21% in 1992. As a matter of fact, more money is currently spent on direct marketing programs and solicitations than on magazine or television advertising (Direct Marketing, 1994; Marketing News, 1992). Particularly, direct mail embraces the third largest percentage of all advertising expenditure, increasing from 16% in 1982 to 19% in 1992 (Statistical Fact Book, 1993-1994). In addition, a growing number of firms are now members of the Direct Marketing Association (DMA), including Fortune 500 firms and leading advertising agen cies (Direct Marketing-Annual Survey, 1984; Statistical Fact Book, 1993-1994). The following media can be used to communicate directly with specific individuals and/or households in order to transmit direct marketing offers and solicitations:  § direct mail: an addressed, written, commercial message that is delivered at the addressees by a postal service;  § telephone; and  § interactive devices like interactive TV and Internet. As a result of the growth of direct marketing, the use of direct media, in particular direct mail, increases continually (Direct Marketing Associations Statistical Factbook, 1993). The increase of the use of direct mail also stems from heavier reliance on the medium, both by previous users as well as by new users. DIRECT MAIL Unlike earlier years, when the direct marketing industry was subjugated by small, morn-and-pop businesses, many large firms are now members of the direct marketing industry, including Sears, Montgomery Ward, AARP, L. L. Bean, and Lands End. This has steered an increased level of competition among firms in the industry. The increased level of competition, sequentially, has led to the surplus of consumers with direct mail solicitations, predominantly that of catalogues (Business Week, 1993a; Miller, 1994; Schwadel, 1988; Storholm and Friedman, 1989; Tixier, 1987). Over 64 billion direct mail pieces finished up in consumers mailboxes in 1989 (Time, 1990). In the literature attention has been primarily focused on the selection of households. In contrast, little attention has been given to the optimization of the design of the mailing, although direct mail practitioners often apply the manipulation of characteristics (Hoekstraand Vriens, 1995). Two studies have been concerned with the elements of the direct mail package. Akaah and Korgaonkar (1988) studied the relative importance of risk relievers in a direct marketing offer. They found that direct marketers can enhance the effectiveness by offering money-back-guarantees rather than free trials/samples, by using established manufacturer names rather than unknown manufacturer names, and that both new and established products can be sold by means of direct marketing. James and Li (1993) studied the importance of the design characteristics of the mailing, by interviewing both consumers and managers through a direct questioning procedure asking about the attractiveness of a number of separa te design characteristics of the mailing. However, letting respondents self-explicate the importance of the various design characteristics of a mailing may not constitute an appropriate task for the respondents, and may produce invalid results (e.g. Green and Srinivasan, 1990). Communicating with target audiences through direct mail is an elegant alternative to total reliance upon broadcast and newspaper mass media. Sending information by direct mail gives an opportunity to make contact with target audience in their homes. The payoff of direct mail fit in the potential for reaching larger target audiences competently, the low cost as compared to many other modes of communication, and perhaps most prominently, its flexibility (Murray, et al., 1988). Direct mail has many advantages over other media. For instance, direct mail can engage in precision targeting to a greater degree than other media, it offers the opportunity to personalize to any desired degree, and there is a large flexibility with regard to formats, timing and testing. However, the relative high cost per potential customer, compared to alternative media, requires sufficient response rates to ensure profitable implementation. So, it is important to develop ways to improve the effectiveness of direct mail campaigns. Vriens, et al. (1998) proposed a method to improve the effectiveness of direct mail by determining the optimal mailing design. They proposed two approaches, based on conjoint methodology, to determine optimal mailing characteristics efficiently. First approach presented a model of the consumer response process and second discussed the mechanism to influence the consumer response process. Another approach for improving the effectiveness of direct mail concerns manipulating the characteristics of the offer and the design of the mailing (e.g. Akaah and Korgaonkar, 1988; Fraser-Robinson, 1989; Roberts and Berger, 1989; Throckmorton, 1992; Và ¶gele, 1992). Characteristics that are essential to the design of the mailing relate to its form (size of the envelope, use of graphics etc.) and to some aspects of the contents (style of writing, use of testimonials etc.). In order to be able to manipulate the characteristics of the offer and the design characteristics of the mailing, the direct marketing manager needs to know exactly to what extent the various characteristics of the offer and the mailing influence the behavioral components of the response process. Milne et al., (1993) conceptualize direct mail as an implied social contract between marketers and consumers. Four attributes constitute the direct mail social contract: volume, targeting, compensation, and permission. An examination of public opinion polls [Equifax 1990, 1991; Hume 1991; United States Postal Service 1992] and proposals to change the direct mail environment [Baker 1986; DiTalamo 1991; DMA 1990; Jones 1991; Miller 1991; Westin 1990] suggest that these four attributes are critical to consumer decisions to participate in direct mail social contracts: Targeting— there seems to be universal agreement that the targeting of direct mail needs to be improved, enabling consumers to receive information of interest to them, but not that which they perceive to be too personal or perhaps even offensive. Volume— most consumers have strong opinions about the volume of mail they receive, and the majority of proposals influence mail quantity in some way. Volume varies more than targeting in terms of preferences. Some people would like more mail, whereas others would like less [United States Postal Service 1992]. Permission— the third criteria used to decide whether to enter a social contract relates to how the information provided to complete a transaction is used subsequently. For example, once an organization obtains information about consumers, that information could be considered their property to do with what they wish, including selling it to other organizations. Alternatively, the information could remain the property of the consumer, and no organization would be permitted to use it for any other purpose without the permission of the consumer. Once again, there is disagreement concerning which option is best. Compensation— a final consideration included in the evaluation of the attributes of a direct mail contract is compensation. Some have suggested that consumers receive compensation (e.g., coupons, rebates, special offers) for providing personal information that is used for direct mail purposes [DMA 1990; Westin 1990]. Others have charged consumers a fee to place them on the mailing lists of their choice [Miller 1991]. Milne measured the trade-offs consumers make among these attributes. The results suggest consumers want improved targeting efficiency and lower mail volume, and they are not willing to pay for these improvements. These findings suggest that consumers consider several attributes in their evaluation of direct mail social contracts. Mentioning name on the envelops of direct mail solicitations yield very positive results in terms of consumers response. Dignan Bahnson (1994) carried out an experiment to investigate causes of influence on the effectiveness of direct mail advertising. Direct mail has exposed promise as a method for getting to target audiences that are complex to reach with other mass media advertising approaches. A randomized experiment was performed to estimate the influence of form of postage and address upon the response rate to direct mail. Results specified that there was no considerable advantage from use of first class over bulk rate postage, but the payoff was significantly larger when the envelope bore a name rather than resident or occupant. With direct mail, artistically built-up educational materials can draw the receivers attention towards the solicitation in a manner where there are less competing solicitations than in TV, radio, or newspapers. For audiences with restricted access to mass media, direct mail can be an imperative means of outreach. For example, those people with limited transportation may not come across billboards, posters, and other identical mass media, but they are more likely to obtain regular mail delivery. Additionally, unlike television and radio solicitations, educational materials, sent by direct mail, can be kept for future reference (Gillespie and coworkers, 1983). After all, direct mail put forward an opportunity to expand two-way communication with the target audiences because the mail can be used to encourage the recipient to act in response to the programs information as well. Gerber and Green (2000) conducted an experiment to study the effects of canvassing, telephone calls and direct mail on voter turnout. The experimental tradition harks back to Gosnells (1927) studies in Chicago, which assigned certain city blocks to receive nonpartisan mail reminders to register and vote. Gosnell found that turnout increased by 1% in the presidential election of 1924 and 9% in the municipal election of 1925. Furthermore, the principal experiment to examine the effects of personal canvassing in conjunction with mailings that used varying types of nonpartisan appeals was conducted by Eldersveld (1956; Eldersveld and Dodge 1954) in two Ann Arbor, Michigan, municipal elections. In both cases the effects of canvassing and mail were statistically significant. Gerber launched a series of turnout experiments in which randomly selected households were exposed to mailings, telephone calls, or personal appeals before the general election. The study was designed to measure the ef fect of personal canvassing, telephone calls, and direct mail appeals on voter turnout. To study the impact of direct mail, an experiment was intended to measure the turnout effect of both the number of mailings received and the message conveyed. To gauge the first effect, the treatment group was divided into three subgroups and sent one, two, or three mailings, respectively. The mailings were sent out at three intervals: 15 days, 13 days, and 8 days before the election. The subgroup that received two mailings was sent mail on the two dates closest to the election, and the single mailing was sent 8 days before the election. The findings indicate that personal canvassing is highly effective, much more so than the direct mail and telemarketing campaigns that have come to displace it. Personal canvassing had a far greater influence on voter participation than three pieces of professionally crafted mail delivered within two weeks of Election Day. Less effective than direct mail were cal ls from professional phone banks. Commercial marketers have been the most fruitful client of direct mail (Dillman, D. A., 1978). For them, response rates vary usually depending on the type of good or service promoted and the complexity of the advertisement. Response rates range from 2-3 percent for a simple direct mail advertising of consumer products to 20 percent for mailings that put forward free products as enticement for future orders (Kanuk, L., and Berenson, C., 1975). Direct mail can be executed efficiently by using commercially prepared lists of recipients mailing addresses (Kanuk, L., and Berenson, C., 1975). Such lists are organized from utility company records, telephone directories, voting records, and further sources. Direct mail also gains importance in not-for-profit organizations. These firms define direct mail in their own perspective as â€Å"Direct mail† is the term used to depict the letters forwarded by philanthropic organizations in an endeavor to raise funds for support. In several respects, these letters are not dissimilar from the promotional direct mail sales letters sent out by businesses (Abelen, Redeker, and Thompson, 1993; Bhatia, 1998). Direct mail is a massive business in the U.S., and there are a few not-for-profit organizations that do not use the direct mail advertising medium in one way or another (Torre and Bedixen, 1988). As Abelen, Redeker, and Thompson (1993) indicated, the direct mail letter is the â€Å"most important instrument for communicating the ‘good cause of a nonprofit organization to a wide range of prospective donors† (p. 325). It is in this solicitation that the prospective donor has to be swayed to give money. In a small scale study, com paring Dutch and American direct mail letters, Abelen et al (1993) reveal that direct mail letters do follow general persuasive strategies which can differ from culture to culture. Besides that, direct mail is considered as one of the imperative marketing tools in arousing the significance of health and dietary practices. Direct mail advertising has been used with extensive success by community-based health learning programs. The Minnesota Heart Health Program deployed a form of direct mail as a strategy to stimulate action by community residents at risk for hypertension (Murray, et al., 1988). In his study, 28.2 percent of the community residents who received a single direct mail letter recalled receiving the message encouraging them to focus attention on screening for hypertension by discussing their blood pressure with a physician. Of the 28.2 percent, 12 percent reported taking action and having their blood pressure checked. Moreover, Gillespie and coworkers (1983) conducted a research to study the effectiveness of using direct mail to improve dietary practices. Of 621 eligible families, 24.5 percent were enlisted for the direct mail nutrition education pro gram. Results portrayed that those completing the program improved productive family interactions about nutrition. Race is a leading communicator cue in taking buying decisions from the medium of direct marketing. This may be primarily relevant in the case of industrial direct mail advertising where straight rebuy and modified rebuy purchasing decisions are inclined to be low rather than high involvement (Hutt and Speh 1998). In such instances, peripheral cues (race) have been found to be an imperative factor in attitude formation and change (Petty, Caioppo and Schumann 1983). In exploring the black consumer market, it has been found that the use of black models in print media might determine, to a great notch, who gets the black segment of the buyer market. In the consumer direct mail advertising medium, Wilson and Biswas (1995) found that the depiction of black modals in consumer specialty catalogs was about 4 percent. Each of these studies concluded that the percentages of blacks in consumer studies trailed their representation in society. Stevenson and Swayne (1999) studied the portrayal of blacks in industrial advertising into a new medium, business-to-business direct mail, and endeavor to determine if the representation of African-Americans in this medium is consistent with that found in other print media. Results showed that the percentage of ads portraying blacks was quite close to the presence of blacks employed in the business world. Moreover, it was found that the qualitative portrayals employed in business-to-business direct mail differed from those found in other industrial media. Thus, it appears that business-to-business direct mail advertisers are responsive to the increasing presence of African-Americans in the buying center. On the other side, some researchers contend that very large volume of such mail is acknowledged to cause consumer annoyance (Schwadel, 1988). Also, it adds to consumer concern about invasion of privacy (Williams, 1991). Thus, the consumers who are concerned about too much catalogue or direct mail solicitations are likely to evince negative attitudes toward direct mailing. This emergent perception regarding direct mailing results in the invasion of consumer privacy which has led to limit marketing practices. These restrictions on practices could be evaded if direct marketers segment their markets based on their consumers attitudes toward direct marketing practices. Milne Gordon (1994) form segments that measured consumers attitudes toward privacy and direct marketing. Data was used from a conjoint study that evaluated 151 consumers attitudes toward diverse direct mail environment scenarios (Milne, et al., 1993). Each scenario was explained using four attributes: targeting efficiency, quantity of mail received by the consumer, com ­pensation, and permission. These attributes and levels were selected because each had been included in at least some of the proposals for re ­stricting direct mail practices (DMA (1990), Di Talamo, Nichoias (1991), Dickson, Roger, and Hollander, Stanley (1986), Miller, Annetta (1991), Westin, Alan F. (1990)). Results of the study suggest that consumers differ in their atti ­tudes toward direct mail, and therefore, in what they consider acceptable in terms of direct mail practices. Principally, the Demanding Middle segment is against paying for mail solicitation. In addition, the Demanding Middle seg ­ment reports a high utility for better targeted mail. The Prospective Lobbyists reported they are sent too much mail. Lastly, The New Right group was comfortable with the status quo. As the youngest of the segments, it may be the most contented with the computer age and feel that direct mail is an acceptable way of doing business. This group had the highest rating of direct mail across all three segments. The governing body of the European Community has proposed a far more restrictive direct mail environment. The proposed regulations would prohibit the use of information about consumers without their permission and require that companies notify consumers when and for what purpose this information is forwarded to another party. The regulations would provide for compensation if information about a consumer is misused. While these regulations apply to direct mail in Europe, they have implications for direct mail in the United States as well. This is because they would prohibit the transfer of data outside the European Community unless the receiving country could assure that the previously described measures would be followed (Di Talamo, Nichoias, 1991). Moreover, several researches find out the fact that potential consumer most often experience risk while purchasing through direct mail. Homer E. et al., (1970) determined whether or not consumers perceive greater risk in the act of buying by mail than in buying from a store or a salesman. For 20 products studied, consumers perceived more risk in the mail-order situation than in the store/salesman situation. ATTITUDE Attitudes are favorable or unfavorable dispositions toward social objects, such as people, places, and policies. Attempts to establish the validity of the attitude construct have most often sought to demonstrate positive correlations between measured attitudes and the favorable-unfavorable aspect of observed behavior toward their objects. The frequently weak correlations observed in these attempts define the predictive validity problem for attitudes (documented especially by Wicker, 1969; see also Festinger, 1964, and LaPiere, 1934). A notable accomplishment of modern research on attitudes has been the solution of this predictive validity problem. That is, conditions under which attitudes strongly correlate with behavior have now been well identified (especially by Ajzen Fishbein, 1980; Fazio, 1986, 1990b; Fazio Zanna, 1981; Fishbein Ajzen, 1974; Zanna Fazio, 1982). Myers (1990) summarized these and related programs of research as showing that our attitudes predict our actions. . .if, as we act, we are conscious of our attitudes (Myers, 1990, p. 40, emphasis added). Similarly, in the description of attitude-behavior relations in their recent treatise on the attitude construct, Eagly and Chaiken (1993, pp. 208-211) referred to the importance of attitudes [coming] to mind and the perceived relevance of attitude to action. Although the modern synthesis achieved by the Fishbein-Ajzen (1974) and Fazio-Zanna (1981) research programs is now well established, it is difficult to avoid concluding that the attitude construct lost scope in the process. For those who can remember it, there might be justifiable nostalgia for an era in which Allport (1935) was able to proclaim that attitude was social psychologys most indispensable concept. The following list gives several definitions that have been influential in guiding scholarly and empirical treatments of attitudes, as indicated by their frequent citation in other works. Although the list may appear dated (the most recent entry is from 1962), it nevertheless remains current. Recent works (e.g., Eagly Chaiken, 1993; Fazio, 1986; McGuire, 1985; Petty Cacioppo, 1981; Zanna Rempel, 1988) continue to draw on them and remain within their boundaries. Attitude is the affect for or against a psychological object. (Thurstone, 1931, p. 261) An attitude is a mental and neural state of readiness, organized through experience, exerting a directive or dynamic influence upon the individuals response to all objects and situations with which it is related. (Allport, 1935, p. 810) Attitude is . . .an implicit, drive-producing response considered socially significant in the individuals society. (Doob, 1947, p. 136) An attitude is a predisposition to experience, to be motivated by, and to act toward, a class of objects in a predictable manner. (M. B. Smith, Bruner, White, 1956, p. 33) [Attitudes] are predispositions to respond, but are distinguished from other such states of readiness in that they predispose toward an evaluative response. (Osgood, Suci, Tannenbaum, 1957, p. 189) [An attitude is] a disposition to react favorably or unfavorably to a class of objects (Sarnoff, 1960, p. 261). Attitudes [are] enduring systems of positive or negative evaluations, emotional feelings, and pro or con action tendencies with respect to social objects. (Krech, Crutchfield, Ballachey, 1962, p. 139) The lack of mention of consciousness in this collection of attitude definitions accurately reflects a long scholarly tradition of nonconcern with the distinction between conscious and unconscious operation of attitudes. At the same time, nothing in this scholarly tradition actively opposes either the possibility or the importance of unconscious operation of attitudes. Standing starkly in the above list as suggesting unconscious operation is Doobs (1947) definition, which labels attitude as an implicit, drive-producing response. In spite of Doobs association with a behaviorist theory (Hull, 1943) that had no use for conceptions of either conscious or unconscious cognition, it is clear that Doob did conceive attitude as operating unconsciously (May Doob, 1937, p. 13). Lately, Doob commented, before World War II we all were impressed by psychoanalysis in addition to behaviorism, suggesting that, even though it may have gone unmentioned in many published treatments, the idea that attitudes operated unconsciously was quite acceptable in the 1940s and earlier. That conclusion is supported also by several passing references to the possibly unconscious nature of attitudes in Allports (1935) review chapter. Recent work has established that attitudes are activated outside of conscious attention, by showing both that activation occurs more rapidly than can be mediated by conscious activity (Bargh, Chaiken, Govender, Pratto, 1992; Fazio, Sanbonmatsu, Powell, Kardes, 1986) and that activation is initiated by (subliminal) stimuli, the presence of which is unreportable (Greenwald, Klinger, Liu, 1989). The present analysis of implicit attitudes extends work on automatic activation to explain how the attitude activated by one object can be (mis)attributed to another. An implicit attitude can be thought of as an existing attitude projected onto a novel object. The interpretation of several important existing findings as implicit attitude effects substantially expands the predictive and construct validity of social psychologys attitude construct. It also prompts the empirical search for further members of the potentially large class of implicit attitude effects. In the domain of attitude chang e, two recent theoretical analyses (Chaiken, 1987; Petty Cacioppo, 1986) have distinguished relatively thoughtful (central or systematic) from relatively thoughtless (peripheral or heuristic) roles of cognition in persuasion. The implicit processes conceived in the present analysis are, in part, subsumed by the notions of peripheral or heuristic processing, but also involve processes operating even further from the range of conscious thought than conceived in these analyses. Several researches on the attitude of people towards direct mail revealed that people evinced positive attitude towards direct mail. Implied social contract provides a basis for evaluating attitudes toward direct mail and temporal changes in attitudes. On the attitudinal questions a four-component solution revealed the following dimensions: (1) favorability towards direct mail, (2) direct mail seen as a resource, (3) list management concerns, and (4) environmental concerns. Respondents concerned about list management and the environmental impact of direct mail. Report a somewhat favorable attitude toward direct mail on average, but do not strongly view it as a resource. (Milne Gordon, 1993) Although it is appealing to infer consumer attitudes by directly observing behavior (e.g., patronage/non-patronage of direct marketing products), it is often difficult and subjective to draw conclusions about attitudes from behavior. A consumer observed purchasing a given product might have done so to take advantage of a special deal on price rather than because he/she particularly liked the product. Moreover, the relationship between attitude and intention lends itself more readily to cross-sectional research than the relationship between attitude and future behavior. Indeed, the viability of patronage intention as a surrogate measure of future behavior is well established in the literature (Darden and Lush, 1983). Furthermore, the theory of reasoned action (as noted previously) suggests that consumer behavior is influenced by intention to engage in the given behavior. Intention, in turn, is influenced by consumer attitudes toward the stimulus (Ajzen and Fishbein, 1980). The results of the study by Bagozzi (1982) suggest that attitudes influence behavior but through intention. Additional support for this direction of linkage is provided by Bagozzi (1992) and Korgaonkar, Lund, and Price (1985). However, the linkage from intention to attitudes remains to be empirically established. Articulation of the norms that govern the direct mail social contract is useful in understanding why attitudes toward direct mail are changing and how they might evolve in the future. Norms have played an increasingly important role in shaping the direct mail environment and can be expected to do so to an even greater extent in the future. Illustrations of this are the growing percentage of customers who are aware of how information obtained through transactions is used by organizations [Equifax 1991], calls for consumers to receive compensation for their information [Westin 1990], and the practice of businesses charging a fee to provide certain types of offers (i.e., mail order catalogs). Because different types of individuals operate using different sets of norms, they will evaluate the attributes of the direct mail environment differently. Norms guiding the behavior of the majority of individuals and those who are most vocal in their opinions regarding direct mail can be expected to guide the evolution of the direct mail environment. However, researchers strived to identify the dimensions that derive knowledge of consumers attitudes toward direct marketing and the factors that underlie their attitudes but most of them have neglected the domains that determine the attitude of people towards direct mail. The significance of such knowledge lies in the fact that attitudes influence most aspects of consumption behavior (Ajzen and Fishbein, 1980; Sheppard, Hartwick, and Warshaw, 1988). As such, knowledge of consumer attitudes and their determinants is vital to the proper identification and implementation of corrective measures. This notwithstanding, not much empirical research has been conducted on the topic- exceptions being the studies by Jolson (1970) and Lumpkin, Caballero, and Chonko (1989). Moreover, neither of the two studies focused directly on the determinants of consumers attitudes toward direct marketing. Ishmael R Akaah et al., (1995) explored empirically the influence of shopping orientation factors as determinants of consumers attitudes toward direct marketing and the linkage between their attitudes and intention to patronize direct marketing offerings. The study results indicate that four of the five shopping orientation factors examined significantly underlie consumers attitudes toward direct marketing, i.e., too much direct mail, like to examine product before purchase, retail people are pushy and past direct marketing experience. The results also suggest that consumers attitudes toward direct marketing significantly influence their intention to patronize direct marketing offerings but not vice versa. Fishbein and his associates attitude model have received the greatest amount of attention (Ajzen and Fishbein, 1980; Fishbein and Ajzen, 1975). Accordingly, the framework adopted here is Fishbeins attitude towards object model (Fishbein, 1963; Fishbein and Ajzen, 1967). Concerning direct marketing, Fishbeins attitude-toward object model would suggest that consumer attitudes are a function of how positively or negatively its various attributes are evaluated. Thus, consumers overall attitudes toward direct marketing would be positive if they relate positively to direct marketing attributes and negative if vice versa (Ajze