Unit 11: Advertising and Direct Marketing
Advertising is any paid form of nonpersonal presentation and promotion of a product by an identified sponsor using the mass media that is intended to inform or persuade members of a particular audience. For many, advertising is the most familiar and visible element of the promotion mix. Because it can convey rich and dynamic images, advertising can establish and reinforce a distinctive brand identity. This helps marketers bond with customers and boost sales. Advertising is useful in communicating factual information about the product or reminding consumers to buy their favorite brand. Advertising sometimes suffers from a credibility problem because cynical consumers tune out messages they think are biased or are intended to sell them something they don’t need. Advertising can be expensive; therefore, firms need to take great care to ensure their messages are effective. Mass consumption and geographically dispersed markets make advertising particularly appropriate for marketing products using the same promotional messages to large audiences.
Types of Advertising:
Product advertising is an advertising message that focuses on a specific product. This is the type of advertising the average person usually thinks of when talking about most promotional activities.
Institutional advertising is an advertising message that promotes the activities, personality, or point of view of an industry, organization, person, geographical location, or government agency. Institutional advertising is often closely related to the public-relations function of organizations. Some institutional messages state an organization’s position on an issue to sway public opinion. This is called advocacy advertising. Public service advertisements (PSAs) are advertisements the media runs free of charge for not-for-profit organizations that serve society in some way or to support an issue.
Retail and Local Advertising
Major retailers and small, local businesses advertise to encourage consumers to shop at specific stores or to use local services. Much of the local advertising focuses on store hours, location, and products that are available or on sale. Retail advertisers spend more than any other type of advertiser per year.
Advertising usually has one of three purposes. If a product is in the introductory stage of the product life cycle, advertising will educate people about the new product. Other product advertising emphasizes a brand’s features and tries to convince the target market to choose it over competing brands. Last, many ads are designed to ensure that people don’t forget about a product that is already well established. In summary, marketers use advertising messages to accomplish three primary objectives: to inform, to persuade, and to remind.
Informative advertising seeks to develop initial demand for a product. The promotion of any new market entry tends to pursue this objective because marketing success at this stage often depends simply on announcing product availability. Thus, informative advertising is common in the introductory stage of the product life cycle.
Persuasive advertising attempts to increase demand for an existing product. Persuasive advertising is a competitive type of promotion suited to the growth stage and the early part of the maturity stage of the product life cycle.
Reminder advertising strives to reinforce previous promotional activity by keeping the name of a product before the public. It is common in the latter part of the maturity stage and throughout the decline stage of the product life cycle.
Traditionally, marketers stated their advertising objectives as sales goals. A more current standard views advertising as a way to achieve communications objectives, including informing, persuading, and reminding potential customers of the product. Advertising attempts to condition consumers to adopt favorable viewpoints toward a promotional message. The goal of an ad is to improve the likelihood that a customer will buy a particular product. Advertising illustrates the close relationship between marketing communications and promotional strategy.
Organization of the Advertising Function:
Organizational arrangements for the advertising function vary among organizations. In small companies, advertising may be handled by someone in the sales department. The advertising function is usually organized in larger organizations as a staff department reporting to the vice president or director of marketing. The director of advertising is an executive position with the responsibility for the functional activity of advertising. This position requires a skilled and experienced advertiser and an individual who communicates effectively within the organization. The success of a firm’s promotional strategy depends on the advertising director’s willingness and ability to communicate both vertically and horizontally in the organization. The major tasks typically organized under advertising include advertising research, design, copywriting, media analysis, and sometimes sales and trade promotion.
An advertising campaign is a coordinated, comprehensive plan that carries out promotion objectives and results in a series of advertisements placed in media over a specified time period. Although a campaign may be based around a single ad, most have multiple ads with all ads in the campaign having the same look, feel, and message. Creating and executing an advertising campaign often means many companies work together, and it requires a broad range of skilled people to do the job correctly. Some firms may do their own advertising. In many cases, however, organizations retain one or more outside advertising agencies to develop advertising messages on their behalf. Most large companies use outside advertising agencies because they offer several advantages. Some companies who use advertising agencies also manage to reduce the cost of advertising by avoiding many of the fixed expenses associated with maintaining an internal advertising department.
An advertising agency is a marketing services firm whose marketing specialists assist organizations in planning, preparing, implementing, and evaluating all or portions of their advertising programs. A limited-service agency provides one or more specialized services such as media buying or creative development. A full-services agency provides most or all of the services needed to mount a campaign, including research, creation of ad copy and art, media selection, and production of the final messages.
Today’s advertising agencies employ specialists who can often perform advertising tasks better than the company’s own staff. Agencies also bring an outside point of view to solving the company’s problems, along with much experience from working with different clients and situations. As a result, even companies with strong advertising departments of their own use advertising agencies.
Advertising agencies are now starting to diversify into related marketing services as well. These new diversified agencies offer a complete list of integrated marketing and promotion services including advertising, sales promotion, marketing research, public relations, and direct and online marketing. Some have even added marketing consulting, television production and sales training units in an effort to become full “marketing partners” to their clients.
Ad agencies traditionally have been paid through commissions and fees. In the past, the agency typically received 15 percent of the media cost as a rebate. However, both advertisers and agencies have become more and more unhappy with the commission system. Larger advertisers complain that they pay more for the same services received by smaller ones simply because they place more advertising. Advertisers also believe that the commission system drives agencies away from low-cost media and short advertising campaigns. New agency payment methods may include anything from fixed retainers or straight hourly fees for labor to incentives keyed to performance of the agencies’ ad campaigns, or some combination of these.
Developing an Advertising Campaign:
An advertising campaign should be intimately related to the organization’s overall promotional goals. The organization and its advertising agency, if it uses one, must have a good idea of whom it wants to reach, what it will take to appeal to this market, and where and when the messages should be placed. Organizations and/or agencies need to take several steps to develop and implement the advertising campaign: identify the target market; set message goals; set the budget; design the ads; pretest; select media; execute the campaign; and posttest.
Identifying the Target Market
The target market of an advertising campaign is identified from research and segmentation decisions. Researchers try to understand the customer so that messages can be created that the customer will comprehend and respond to.
Setting Message Goals
Message goals for a campaign can be increasing brand awareness, boosting sales by a certain percentage, or changing the image of a product. Sometimes the objective is simply to get people to recognize that they need the product. Effective advertising strategies accomplish at least one of three objectives: informing, persuading, or reminding consumers. The secret to success in choosing the best strategy is developing a message that best positions a firm’s product in the audience’s mind. Marketers often combine several advertising strategies to ensure that the advertisement accomplishes set objectives. As markets become more segmented, the need for personalized advertising increases.
Setting the Budget
After determining message goals, the organization next sets its advertising budget. Advertising is expensive. A firm allocates a percentage of its overall promotion budget to advertising, depending on how much and what type of advertising it can afford. Five methods for setting promotion budgets are listed below:
A brand’s advertising budget often depends on its stage in the product life cycle. New products typically need large advertising budgets to build awareness and to persuade consumers to try the products. Mature brands, however, usually require lower budgets as a ratio to sales.
Market share also impacts the amount of advertising that is needed. Building the market or taking share from competitors requires larger advertising spending than does simply maintaining current share. Therefore, low-share brands usually need more advertising spending as a percentage of sales.
Brands in markets with many competitors and high advertising clutter also must be advertised more heavily to be noticed above the market noise. Undifferentiated brands—brands that closely resemble other brands in their product class, such as beer, soft drinks, and laundry detergents—may require heavy advertising to set them apart.
Designing the Ad
Creative strategy is the process that turns a concept into an advertisement. An effective advertising message should satisfy four requirements that marketers call the AIDA concept, which is an explanation of the steps through which an individual reaches a purchase decision: attention, interest, desire, and action. An effective message should get attention, hold interest, create desire, and produce action. First, the promotional message must gain the potential customer’s attention. It then seeks to arouse interest in the product. At the next stage, it stimulates desire by convincing the would-be buyer of the product’s ability to satisfy his or her needs. Finally, the advertisement attempts to produce action in the form of a purchase or a more favorable attitude that may lead to future purchases. One ad usually can’t take the consumer through all four stages. The goal of the advertising campaign is to present a series of messages and repeat it to a sufficient degree so that the customer will progress through the AIDA stages.
The first step in creating effective advertising messages is to decide what general message will be communicated to consumers. Developing an effective message strategy begins with identifying customer benefits that can be used as advertising appeals. Ideally, advertising message strategy will follow directly from the company’s broader positioning strategy. Message strategy statements tend to be plain, straightforward outlines of benefits and positioning points that the advertiser wants to stress.
The advertiser must next develop a compelling creative concept—or “big idea”—that will bring the message strategy to life in a distinctive, attention-getting, and memorable way. The “big idea” may emerge as a visualization, a phrase or slogan, or a combination of the two.
When designing ads, advertisers come up with many ingenious ways to express a concept. Advertisers can use a number of different appeals in advertisements. Advertising appeals should be meaningful, believable, and distinctive. Appeals are usually either factual or emotional. In general, logical, rational, reason-why appeals are more effective in persuading educated audiences; and emotional appeals are more effective in persuading less-educated consumers. Frequently used emotional appeals are fear, humor, and sex.
Strong fear appeals tend to be less effective than mild fear appeals. Marketers should use reasonable but not extreme fear appeals. They should also realize that fear appeals are not always appropriate.
Many marketers use humorous appeals in the belief that humor will increase the acceptance and persuasiveness of their advertising. Some marketers believe that younger, better-educated, upscale, and professional people tend to be receptive audiences for humorous messages. Research has demonstrated that surprise is almost always needed to generate humor and that the effectiveness of humorous ads is influenced by message elements such as warmth and playfulness. Humor attracts attention, doesn’t harm comprehension, is not more effective at increasing persuasion, does not enhance source credibility, and enhances liking. Humor that is relevant to the product is superior to humor that is unrelated to the product. Audience demographic factors affect the response to humorous advertising appeals. The nature of the product affects the appropriateness of a humorous treatment. Humor is more effective with existing products than with new products. Humor is more appropriate for low-involvement products and feeling-oriented products than for high-involvement products.
Sex appeals have attention-getting value. However, studies show that they rarely encourage actual product consumption behavior. Sexual appeals interfere with message comprehension, particularly when there is substantial information to be processed. More product-related thinking occurs in response to nonsexual appeals; visual sexual elements in an ad are more likely to be processed than its verbal content, drawing cognitive processing away from product or message evaluation. Some researchers have concluded that nudity may negatively impact the product message. Sexual advertising appeals often detract from the processing of message content. If a sexually suggestive or explicit illustration is not relevant to the product advertised, it has little effect on consumers’ buying intentions.
The advertiser now has to turn the big idea into an actual ad execution that will capture the target market’s attention and interest. The creative people must find the best style, tone, words, and format for executing the message. Any message can be presented in different execution styles, such as the following:
Message structure and presentation are important parts of message strategy. Should marketers tell their audiences only the good points about their products, or should they also tell them the bad? If the audience is friendly or if it is not likely to hear an opposing argument, a one-sided (supportive) message that stresses only favorable information is most effective. If the audience is critical or unfriendly, if it is well-educated, or if it is likely to hear opposing claims, a two-sided (refutational) message is likely to be more effective. Two-sided messages tend to be more credible than one-sided advertising messages because they acknowledge that the advertised brand has shortcomings.
Is it best to present your commercial first or last? Communications researchers have found that the order in which a message is presented affects audience receptivity. Commercials shown first in a series are recalled the best, whereas those in the middle are recalled least.
After the creative personnel have developed the ads, how can you know if the campaign ideas will work? Advertisers try to minimize mistakes by getting reactions to ad messages before they are actually placed. Much of this pretesting, the research that goes on in the early stages of a campaign, centers on gathering basic information that will help planners to be sure they have accurately defined the product’s market, consumers, and competitors. This information comes from quantitative sources, such as surveys, and qualitative sources, such as focus groups. Copy testing measures the effectiveness of ads. This process determines whether consumers are receiving, comprehending, and responding to the ad according to plan.
One of the most important decisions in developing an advertising strategy is the selection of appropriate media to carry the organization’s message to its audience. The media selected must be capable of accomplishing the communications objectives of informing, persuading, and reminding potential customers of the product being advertised.
Media planning is a problem-solving process for getting a message to a target audience in the most efficient and effective fashion. The decisions to be made include audience selection and where, when, and how frequent the exposure should be. The choice depends on the specific target audience, the objective of the message, and the budget. For the advertising campaign to be effective, the media planner must match up the profile of the target market with specific media vehicles. The first task for a media planner is to find out when and where people in the target market are most likely to be exposed to the communication. This is called aperture.
Impressions, Reach, Frequency, Impact, and CPM
When analyzing media, the planner is interested in assessing advertising exposure, the degree to which the target market will see an advertising message in a specific medium. Media planners talk in terms of impressions, which measure the number of people who will be exposed to a message placed in one or more media vehicles. To calculate the exposure a message will have if placed in a certain medium, planners consider reach and frequency. Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign at least once during a given period of time. Frequency is a measure of how many times the average person in the target market is exposed to the message. Gross rating points (GRPs) are calculated by multiplying reach times frequency. Media planners can use GRPs to compare the effectiveness of different media vehicles. The advertiser also must decide on the desired media impact—the qualitative value of a message exposure through a given medium and/or medium vehicle. The same message in one magazine, for example, may be more believable than in another. In general, the more reach, frequency, and impact the advertiser seeks, the higher the advertising budget will have to be. Although some media vehicles deliver superior exposure, they may not be cost-efficient. To compare the relative cost-effectiveness of different media and of spots run on different vehicles in the same medium, media planners use a measure called cost per thousand (CPM). This figure compares the relative cost-effectiveness of different media vehicles that have different exposure rates and reflects the cost to deliver a message to 1,000 people.
The media planner has to know the reach, frequency, and impact of each of the major media types and the specific vehicles being considered for each type. The major media types are newspapers, television, radio, magazines, outdoor, and the Internet. Each medium has advantages and disadvantages.
Because of television’s ability to reach so many people at once, it is the medium of choice for regional or national companies. Advertising on a television network can be very expensive. Advertisers may prefer to buy local television time rather than network time because it’s cheaper or because they have a more localized target market. Television advertising offers good mass-market coverage and low cost per exposure. Television combines sight, sound, and motion, appealing to the senses. It has high absolute costs, fleeting exposure, and less audience selectivity.
One advantage of radio advertising is flexibility. Marketers can change commercials quickly, often on the spot by an announcer and a recording engineer. Radio is attractive to advertisers seeking low cost and the ability to reach specific consumer segments. Radio has good local acceptance as well. On the negative side, radio only offers audio and has fleeting exposure. There tends to be low attention by the audience, and the audience can be fragmented.
Retailers in particular have relied on newspaper ads since before the turn of the century to inform readers about sales and deliveries of new merchandise. Newspapers are an excellent medium for local advertising and for events that require a quick response. Newspaper advertising is flexible, timely, and believable. It has good local market coverage and broad acceptability. Disadvantages include a short life, poor reproduction quality, and a small pass-along audience.
Magazines are an important advertising medium because approximately 92 percent of adults look through at least one magazine per month. Magazines have adapted to changing times by narrowing their segments. New technologies such as selective binding allow publishers to personalize their editions so that advertisements for local businesses can be included in issues mailed to specific locations only. Magazine advertising has high geographic and demographic selectivity, credibility and prestige, high-quality reproduction, and long life and good pass-along readership. Unfortunately, magazine advertising presents a long ad purchase lead time, high cost, and no guarantee of position.
Traditional outdoor advertising takes the form of billboards, painted bulletins or displays, and electric signs and displays. Today, advertisers are finding new places to put their messages outdoors. This form of advertising is flexible, has high repeat exposure, is low cost, has low message competition, and has good positional selectivity. However, outdoor advertising has little audience selectivity and creative limitations.
Internet advertising consists of two major categories of messages: email messages and advertising messages. Online advertising offers several advantages. The Internet provides new ways to find target customers. User preferences can be tracked as well, allowing advertisers to deliver ads based on previous Internet behavior. Also, exact response to advertising can be measured. Online advertising is also interactive, letting consumers participate in the advertising campaign; and in some cases they can even offer advertising ideas. Internet advertising is highly selective and low cost. The audience, however, is small and demographically skewed. Internet advertising has relatively low impact, and the audience controls the exposure.
The media planner must decide how to schedule the advertising over the course of the campaign. If a campaign, for example, lasts over the course of a complete calendar year and sales for the advertiser are seasonal, the decision must be made on whether to vary advertising by following the seasonal pattern, opposing the seasonal pattern, or to be the same all year long. Most firms do seasonal advertising of some type.
Finally, the media planner has to choose the pattern of the ads. Continuity means scheduling ads evenly during the campaign. Pulsing means scheduling ads unevenly over the campaign. The idea behind pulsing is to advertise heavily for a short period to build awareness that carries over to the next advertising period. Those who favor pulsing feel that it can be used to achieve the same impact as a steady schedule but at a much lower cost. Other media planners feel that pulsing sacrifices depth of advertising communications.
A famous retailer, John Wanamaker, once said, “I am certain that half of the money I spend on advertising is completely wasted. The trouble is I don’t know which half.” Research findings generally support the wisdom of spending money on advertising. Studies show that increased advertising increases sales, and that increased product usage is linked to advertising exposure. There’s no doubt, however, that much advertising is ineffective. Therefore, organizations should evaluate their advertising efforts in order to increase their advertising success.
Posttesting means conducting research on consumers’ responses to advertising messages they have seen or heard. In some cases the ads are popular, but they send the wrong message to consumers. Three ways to measure the impact of an advertisement are unaided recall, aided recall, and attitudinal measures. Unaided recall tests by telephone survey or personal interview whether a person remembers seeing an ad during a specified period of time without giving the person the name of the brand. An aided recall test uses the name of the brand and sometimes other clues to prompt answers. Attitudinal measures probe more deeply by testing consumer beliefs or feelings about a product before and after being exposed to messages about it.
Direct marketing is direct nonpersonal communications between carefully targeted consumers or organizations and sellers designed to both obtain an immediate response and cultivate lasting relationships. The response could come in the form of an order, a request for further information, and/or a visit to a store or other place of business for purchase of a product. While many people equate direct marketing with direct mail, this promotional category also includes telephone marketing (telemarketing), direct-response advertising and infomercials on television and radio, direct-response print advertising, and electronic media such as fax, email, and the Internet.
Benefits and Growth of Direct Marketing:
Whether used as a complete business model or as a supplement to a broader integrated marketing mix, direct marketing brings many benefits to both buyers and sellers. As a result, direct marketing is growing rapidly. For buyers, direct marketing is convenient, easy to use, and private. Direct marketing is immediate and interactive. For sellers, direct marketing is a powerful tool for building customer relationships. Using database marketing, marketers can target small groups or individuals, tailor offers to individual needs, and promote these offers through personalized communications. Direct marketing can also be timed to reach prospects at just the right moment. Direct marketing also gives sellers access to buyers that they could not reach through other channels. Direct marketing offers sellers a low-cost, efficient alternative for reaching their markets. As a result of these advantages to both buyers and sellers, direct marketing has become the fastest-growing form of marketing promotion.
Catalog marketing is direct marketing through print, video, or electronic catalogs that are mailed to select customers, made available in stores, or presented online. Over two-thirds of the U.S. adult population order from a catalog at least once a year. Many stores use catalogs to complement their in-store efforts. This allows the store to reach people who live in areas too small to support a store. Catalogs can be an efficient and expensive way to do business. Catalog retailers mail out 10 to 20 books for every order they receive, and paper and printing costs are rising steadily. Today, many traditional print catalogers have added web-based catalogs to their marketing mixes, and a variety of new web-based only catalogers have emerged. Web catalogs currently generate only 13 percent of all catalog sales. Printed catalogs remain the primary medium, and many former web-only companies have created printed catalogs to expand their business. Print catalogs are intrusive and create their own attention. Web catalogs, however, are passive and must be marketed. U.S. firms are using catalogs to reach overseas markets.
Direct-mail marketing is direct marketing through single mailings that include letters, ads, samples, foldouts, and other “salespeople with wings” sent to prospects on mailing lists. A direct-mail offer has an advantage over a catalog because it can be personalized. Direct mail accounts for more than 23 percent of all direct-marketing media expenditures and 31 percent of direct-marketing sales. Direct mail is well suited to direct, one-to-one communication. It permits high target-market selectivity, can be personalized, is flexible, and allows easy measurement of results. Although the cost per thousand people reached is higher than with mass media such as television or magazines, the people who are reached are much better prospects. Direct mail has proved successful in promoting all kinds of products, such as books, magazine subscriptions, insurance, gift items, clothing, gourmet foods, and industrial products. Direct mail is also widely used by charities, political groups, and other not-for-profit organizations. Until recently, all mail was paper-based and handled by the U.S. Post Office or delivery services such as FedEx. Three new forms of mail delivery have become popular: fax mail, email, and voice mail. These new forms deliver direct mail at rapid speeds compared to the post office’s “snail mail.” Yet, much like mail delivered through traditional channels, they may be resented as “junk mail” if sent to people who have no interest in them.
Telemarketing is direct marketing involving the use of the telephone on an outbound basis by salespeople or on an inbound basis by customers who initiate calls to obtain information and place orders. Compared to door-to-door selling, this method is cheap and easy. Surveys indicate that one out of six Americans find it difficult to resist a telemarketing pitch. One in three, however, complained of feeling cheated at one time by a telemarketer. Telemarketing is more successful and more profitable for organizational markets than for consumer markets. When B2B marketers use the telephone to keep in contact with smaller customers, it costs far less than personal sales calls and lets small customers know they are important to the company. Properly designed and targeted telemarketing provides many benefits, including purchasing convenience and increased product and service information. However, the recent explosion in unsolicited telephone marketing has annoyed many consumers. The result of this annoyance has been legislation banning unsolicited calls during certain hours and the availability of “Do Not Call” lists that prohibit calls to households on the list. Most telemarketers support some action against random and poorly targeted telemarketing.
Direct-response television marketing is direct marketing via television, including direct-response television advertising and home shopping channels. Direct marketers air television spots, often 60 or 120 seconds long, which persuasively describe a product and give customers a toll-free number for ordering. Some successful direct-response ads run for years and become classics. Examples of direct-response advertising are ads for Ginsu knives, Armourcote cookware, Veg-O-Matic, the Pocket Fisherman, Mr. Microphone, the Giant Food Dehydrator, Beef Jerky Machine, and the Showtime Rotisserie & BBQ. Television viewers often encounter 30-minute advertising programs, or infomercials, for a single product.
Infomercials are half-hour or hour commercials that resemble a talk show but in actuality are intended to sell something. A survey by TV Guide found that 72 percent of respondents have watched at least one infomercial, and about one-third made a purchase as a result. Top-selling categories include cosmetics, self-improvement products, fitness products, kitchen appliances, music, and videos. For years, infomercials have been associated with somewhat questionable pitches for juicers and other kitchen gadgets, get-rich-quick schemes, and nifty ways to stay in shape without working very hard at it. In recent years, however, a number of large companies such as GTE, Johnson & Johnson, Sears, Procter & Gamble, Revlon, IBM, Cadillac, Volvo, and Land Rover have begun using infomercials to sell their products over the phone, refer customers to retailers, send out coupons and product information, or attract buyers to their websites.
Home Shopping Channels
Home shopping channels are another form of direct-response television marketing. They are television programs or entire channels dedicated to selling products. Some home shopping channels broadcast 24 hours a day. Viewers call a toll-free number to order. At the other end of the operation, operators handle many incoming lines, entering orders directly into computer terminals. The typical American home shopping customer is in a low-income bracket, and the most frequently purchased product is inexpensive jewelry. The top three shopping networks combined reach 248 million homes worldwide, selling more than $4 billion of goods each year. They are now combining direct-response television marketing with online selling. Viewers are urged to go online immediately after a given product showcase. Once there, viewers find a web cast continuation of the product pitch.
Direct-response Print Advertising:
Direct-response print advertising is direct marketing via newspapers and magazines. Over three thousand newspapers and four thousand magazines target a wide variety of market segments, making direct-response print advertising potentially very effective. High pass-along rates for this type of direct marketing—especially for magazines—give direct-response print advertising staying power. Direct-response print advertising can also be designed so that results for specific ads can be tracked for evaluation. It differs from conventional newspaper and magazine advertising because the ads are designed to obtain an immediate response in the form of an order or a request for further information by mail, email, the telephone, or the Internet, and/or a visit to a store or other place of business for purchase of a product—sometimes accompanied by a discount coupon found in the advertisement. Traditional newspaper and magazine advertising, on the other hand, is used to accomplish three primary objectives: to inform, to persuade, and to remind.
Internet retailing is direct marketing by selling directly to customers via virtual storefronts on the Internet. Internet-based retailers usually maintain little or no inventory, ordering directly from vendors to fill customer orders received via their websites. Traditional retailers, using the Internet to support brick-and-mortar stores, have had much better staying power than the Internet-based retailers—many of whom have failed.
Automatic merchandising is direct marketing via vending machines. The world’s first vending machines dispensed holy water for five-drachma coins in Egyptian temples around 215 B.C. This retailing method has grown rapidly ever since. Today, about 4.7 million vending machines sell approximately $25 billion in convenience goods to Americans. Traditionally, U.S. vending machines have been limited to snacks, soft drinks, and lottery tickets. U.S. marketers have begun to realize the potential of this underused marketing tool. Improved technology and the use of credit cards make it easier to sell high-cost items. Vending machines now offer $15 movie soundtracks and boxer shorts!
Public Policy and Ethical Issues:
Direct marketers and their customers usually enjoy mutually rewarding relationships. Occasionally, however, a darker side emerges. The aggressive and sometimes shady tactics of a few direct marketers can bother or harm consumers, giving the entire industry a black eye. Abuses range from simple excesses that irritate consumers to instances of unfair practices or even outright deception and fraud. The direct-marketing industry has also faced growing concerns about invasion-of-privacy issues.
Note: The above lecture notes were compiled by David Gerth. These materials are a composite of quotations, paraphrases, and ideas from Marketing: Real People, Real Choices, Solomon & Stuart, 2003, Prentice Hall; Contemporary Marketing, Boone & Kurtz, 2004, Thomson; Principles of Marketing, Kotler & Armstrong, 2004, Prentice Hall; Consumer Behavior, Schiffman & Kanuk, 2004, Prentice Hall; and David Gerth. They are only intended for the noncommercial use of students in David Gerth’s marketing classes for educational purposes.