DIGITAL DM: THE PLATFORM FOR A STRATEGIC FIRM
Introduction
The paper presents literature and evaluation of direct marketing concept, e-marketing and benefits of DM at the fore. Subsequently, a case analysis of Young Person’s Rail Card (YPRC) is highlighted to apply the preceding theories. YPRC is a discount card issued by participating train companies in Great Britain. The problem is that the association overlooked the potential of database and interactive website in enhancing the value of traditional DM. As a result, it could be phased declining customer base in the process. Amid 50% of United Kingdom’s population owns household computers and enjoys internet connection (), exploiting the situation and to remain competitive seems far from the reach YPRC. The analysis is followed by a recommendation on how to apply digital DM principles to present firm condition including conclusion to present major findings of the paper.
Direct Marketing Defined
Direct Marketing (DM) is a consumer-direct channel that directly sends corporate messages, delivers products/ services and seeks measurable responses from customers without middlemen or use of other forms of media that operate in a unidirectional manner ( 2003, ). It basically fosters the importance of personal and interactive contact between the firm and customers, and so with the aid of technology, alternative communication devices became popular due to cost and scope efficiencies like direct mail, telephone and web sites.
As a result, the communication loop is completed due to unambiguous and identifiable feedback from customers to be gathered by marketers on field or on virtual highway. In effect, the mass level scale of the product in terms of distribution does not undermine the importance of customer relationship (due to absence of customization) because concerns of customers are handled and addressed. DM is practical and helpful for firms offering expensive and risky products (2003) that are purchased occasionally (computers, cars) or those that suggest status or taste to the user (jewelries, dresses).
The operation of DM does not need middlemen rather electronic devices. It overtakes retail sales growth two times obtaining its profit from consumer market (53%), B2B (27%) and fundraising by charitable institutions (20%) ( 2003). It became widely used as technology continuously provide and upgrade the communication platform while firms wanted to prevent middlemen mark-ups and other transaction costs associated with distribution channels making prices uncompetitive in the market. It is also designed a firm to control and standardized customer service and obtains flexibility in operations as middlemen could have conflicting goals to the detriment of corporate objectives.
Traditionally and likely up to now, DM is considered more effective than mass-communication channels like television, radio and other print advertisements. It even gave Dell Corporation non-substitutable core competency ( 2003). The firm’s model positioned direct sales to save distribution costs; therefore, allowing it to launch price war in the personal computer business in 2001 that changed Compaq strategy. If Compaq is not flexible at that time, it had lost huge amount of resources.
However, mass media could enforce, if not allow, the application of DM and ultimately realizing its advantages ( 2003). It can permit opinion leaders, not simply marketers, who are expert and known in the field where the product belonged, to serve as liaison and bridge of the company/ product to the less involved and unclassified market to better appreciate DM. Marketing of pharmaceutical products could receive more success when influential physicians initially recognized the safety and reliability of the product in question.
Database and Internet Marketing: The Digital DM
Database and internet marketing have two different meanings, but when combined, it provides accurate advantages of e-marketing in DM. Corporations can simply create and maintain a website reflecting its sales and advertising missions; allocate relatively low-cost means of penetrating consumer base and competing against other brands; generate customer message, conduct reviews and provide appropriate actions; and measure the outcome of e-marketing in terms of communication and sales impact.
As a result, the primary goal of DM of building and maintaining customer relationships ( 2003) can be carried efficiently, that is, allowing huge customer scope and communication at low cost. The database capability will also allow corporations to collect necessary and real-time information on product performance in the eyes of customers (potential or actual) that could aid them in evaluating the present DM strategies. On the other hand, the website can take orders, customer complaints and suggestions relevant at the present marketing mix performance making customer relationship management (CRM) at low cost while resolution at faster rate.
Customization, a once forgotten integral part of CRM in mass-level manufacturing, can be addressed by e-marketing in distribution level of value chain. Dell is one who uses e-marketing to implement its customer-configured computers ( 2003); however, the impression is less because this is a hi-tech firm. In business to consumers industry, the producer of all-time favorite Barbie, Mattel, launched in 1998 Barbie.com wherein customers can choose the doll’s skin, hair and clothes including its name using an online questionnaire ( 2003). The firm also made delivery more sensational as the packaging bears the name of the doll including its determined personality that relates with that of the customer.
Further, in business-to-business market, e-marketing also helped Andersen Windows ( 2003), the home building industry’s leading window and patio door manufacturer, not only to raise sales revenues but also reduced the cost of one of its value chain activities. With increasing catalog sizes due to numerous customer-based designs, the firm resorted to developed interactive computer version of catalogs for distributors and retailers. As a result, salespeople of these businesses are guided by Andersen in solving customization problems including on-the-spot price quotations. The firm reduced finished parts inventory, one of its major expenditure, by producing made-to-order outputs.
With these examples, it is clear that database and internet marketing can positively impact not only advertising costs, sales revenues and manufacturing costs making the firm price competitive, but more importantly, adhere to CRM principles like customization and satisfaction (a result of fast resolution of complaints/ queries, ultimately, less trouble to consumers) making the firm sustain its competitive position in the long-run. However, the limited household ownership of computers and internet connectivity in some areas could impede, if not lessen, the fruits of e-marketing. As a result, there is a need to resort using other unidirectional media and enhance CRM through additional communication and research costs.
Strategic, Tactical and Operational Actions/ Responses: Benefits of DM
Even though these A/R are all considered efforts to build or defend competitive advantages, the three differs in the amount of resources required and the level of difficulty to implement and reverse them ( 2003) with the sub-title illustrating the highest extreme down to the lowest extreme. They basically tend to address long-, medium- and short-run issues respectively making their planning output devote certain level of resources to address bad-to-good or good-to-better firm conditions. Of course, the bigger and more complex the resources or combination of resources are (often occurs in strategic A/R), the more difficult to implement (may involve alliance) and reverse (breaking the contract) the already planned and deployed resources.
Customer relationship plans are strategic in nature. They are intended for long-term execution for sustainable competitive advantage. However, to be able to maintain such strategy and carry it effectively, tactical and operational A/R is necessary. This is in connection to the two business-life realities of imperfect plans and ever-changing environment wherein the relatively short-term problem solving capabilities of these latter A/R could provide the needed firm flexibility. Boeing’s strategic decision of developing A380 and Sonic Cruiser (2003) will be too costly and difficult to reverse, that is to stop production, as facilities and labor are already in place. However, minor modification in the interior design (tactical) or providing red carpet as package bonus (operational) is relatively simple troubleshooting feats on the part of engineers and marketing personnel. Nevertheless, sound customer relationship and communication is prerequisite in all these A/R to activate and effectively manage these flexible activities of the firm (yields to customer satisfaction at least cost), and in effect, create a rational strategy in the future based on customer interactions and contingency A/R experience.
In digital DM, strategic A/R can focus in costumer’s convenience of home shopping and lesser transaction costs that are constant and less risky through owning a computer and internet connection. Customers can choose wide variety of products through browsing different webpage of corporations ( 2003) viewing their difference in terms of design, features, price and value-adding services like delivery or discounts. And ultimately, selecting, ordering and paying their desired product just clicking the keyboard.
For the part of the firm, it can obtain efficiency and adhere to CRM despite of determined and installed strategic A/R because customization requirements of being left-handed, overweight and millionaires (2003) are taken into account before serving the customers. In this way, it allows the firm to adjust its resources (tactical and operational A/R) and leverage strategic A/R to be able to address customer requirements and obtain their satisfaction at least costs. The flexibility is permitted by the updated and available information in digital DM. As a result, long-term A/R is maintained as the firm is able to implement or adjust it (in the short-run) through tactical and operational A/R not only in flexible terms but also in prompt and interactive way for the benefit of both firm (efficiency and customer loyalty) and customers (satisfaction).
The YPRC and the Loopholes of their DM Model
The Young Person’s Rail Card (YPRC) is a rail discount card that costs 20 pounds a year and gives 1/3 discount to the holder at most train fares except to some first class and already discounted fares including fares occurred before 10am on weekdays. It is operated by the Association of Train Operating Companies (ATOC) in behalf train selected train companies in Great Britain. For the year 2006-2007, the discount scheme aimed to increase target market penetration up by 3% from the previous year and increase the average number of journeys made by YPRC holders (IDM Homepage).
The target market is composed of 16-25 age bracket and full-time mature students. To be able to avail of the card, the interested person should submit a passport-sized photograph, proof of age and the 20-pound fee. For the 26 and above, they should submit additional requirements to prove that they are full-time students. Channels to purchase the card include personal transaction to ticket offices (97% of holders utilize this channel) and over-the-phone order to participating train companies or sales agents (IDM Homepage).
Beyond this information, several detailed facts about card ownership are available in their website (YPRC Homepage) including present promotions that can lure potential holders (to avail the card) and present cardholders (to ride more) alike. Thus, marketing objectives for the current year are enforced. In relation to DM, participating companies through their ticket offices deliver their service including issuance of the card without intermediaries (as the presence of salesmen could be considered insignificant). However, with this traditional model, efficient gathering of customer data is undermined, thus, making it costly and harder for the association to group and evaluate pertinent customer information.
In addition, YPRC strategy limits its gains as it use relatively short-term approach to meet customer satisfaction. The replacement of contingency resolution to customer queries through personal and telephone communication (YPRC, IDM Homepages) against efficient databank though e-marketing makes customer satisfaction measurement less available, accurate and efficient. Long-run approach to come up with customer-driven strategy (seen in market research) is eclipsed by tactical and operational modes. If the association would argue it adhere to this, it can be said that additional monitoring and records costs are incurred on top of customer dissatisfaction due to lack of pro-active view of the former to recurring and indicative problems.
Also, the absence of interactive platform and on-line application (YPRC, IDM Homepages) weaken the opportunity of the association to achieve/ exceed its marketing aspiration of 3% increase in card subscription. Potential card subscribers that are far from ticket outlets and hesitant to call telesales of participating train companies due to additional expense, especially when they are only students aggravatingly out of home, could be less motivated. On the other hand, mature students who have part-time work and financially capable could also be less motivated to buy the card because of the long processing before issuance from the telesales that can exceed 14 days (YPRC Homepage). These relatively costly and inconvenient processes for potential market are on top of preparing the needed requirements. Visiting tourists, who are also allowed to purchase the card (YPRC Homepage), are also a market segment that is overlooked in the absence of interactive and online application.
It is to note that the primary target market aged 16-25 uses train as transportation at minimum of once a year basically for leisure journeys (IDM Homepage). As a result, the waiver of the association to card subscribers of giving their ticket offices sufficient time (YPRC Homepage), therefore an apparent inconvenience experienced by 97% of all cardholders, to process and hand them their cards is the biggest detriment that could trickle down to potential subscribers and ultimately disconnecting them to such idea. The situation and past subscriber experience suggests that it could only ruin their vacation breaks and impede the period of “discovering adulthood” (IDM Homepage).
Inefficient database and absence of interactivity/ online application could ultimately unhooked CRM activities of the company and prevent them to achieve its marketing objectives for the year. Thus, there is a need to provide possible resolutions into the loopholes of DM model of the rail card association. To continue undermining the importance of digital DM and strategic A/R can lead to further inefficiencies, customer relationship stagnation/ withdrawal and flexible but unframed and short-run tactical/ operational success.
Recommendations
The first thing to do is to plan strategically. DM activities should be integrated in a manner that all participating companies contribute and aware of their responsibilities. Regular meetings should be conducted to construct a comprehensive strategy with time frame that allows individual corporate objectives inputted and reconciled. This strategy will serve as the platform that will trickle down tactical and operational A/R not the reverse which is exhibited at present. In this planning effort, DM activities should not be limited to traditional media rather put emphasis to efficiency and CRM potential of digital DM including its adherence to long-run organizational aspirations like increasing profits, expanding customer base and enlarging train routes.
The second step is to implement and control the strategies. There are possible supplier detachments (telephone and paper) and downing regimes due to adoption of new technology while there would also be stakeholder relationship extension and enhancement (network provider, mailing company and computer-based customer service team). Thus, there is a need to handle stakeholder resistance and new relationships that could lead to societal dissatisfaction to the association. It is also high time for the association to tame the raged of past subscribers (that likely not renewed their cards) by sending them personalized greeting cards or interesting journals through internet. Also, non-Great Britain market could be intensively tapped including foreigners by providing them an information gateway that is interactive and low cost without the need of telephone.
Lastly, evaluation of results stemmed in strategies including those from tactical and operational A/R. The annual marketing objectives and aims can serve as the benchmark to determine improvements on performance from the past. With this, necessary adjustments of resources can be determined and conducted (enhanced by customers’ database) efficiently, that is, being flexible due to pro-activeness to identify future problems and customer expectations. The evaluation stage can also advise the association if there is a need to fine-tune tactics (include unidirectional media) to meet environmental changes or customer shifted preference and even modify strategy (inserting B2B transactions in the interactive website for institutional/ university tours) depending on the performance of adopted digital DM model.
Conclusion
Digital DM transforms the inefficient and short-term goal-oriented firm into a price competitive and customer-driven one. This modern DM strategy does not depart from the foundation and purpose of traditional DM observed in face-to-face and direct-intimate mails rather enforced and upgraded it to obtain cost-efficiencies and effective communication benefiting stakeholders in B2C and B2B transactions. As presented in this paper, it is also found that DM principles that ultimately aimed to build and enhance customer relationships can be personalized by a firm depending on its strategies. It can use different forms of DM from door-to-door marketing to an interactive website communication. However, as in the case of YPRC, the latter medium is more appropriate primarily because it is aiming for increase subscription rate and cardholder train usage rate. Without digital DM, the firm would probably be stocked focusing their sights at short term gains, thus, not supporting the determined goal of increasing these rates which highly relies on CRM. If unsatisfied subscribers are not managed and potential subscribers (that possibly got information from the former) are not served well, marketing possibilities for the firm would end at a decreasing rate.
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