Direct Marketing

Situation A (Consultant- Boston Consulting Group)

Company Name : AAA
Nature of Business : Supply Office Stationery
Location : Subang Jaya (Small Office)
Incorporation : January 2013
Nature of staff : 20
Revenue up to date: RM500,000
Net profit up to date: RM80,000
Advice : Should go for in-house or outside fulfilment? 4 to 5 reasons
Outsource Because of small office
- Lack Expertise (focus on your main activites instead of secondary ones) allow
AAA to focus on marketing & sales activities opposed to delivery
(warehousing + distribution)
- Save costs ( Save on logistics and infrastructure investments such as software
and hardwares. Additionally, there may be other costs like storage and
inventory. If in-house fulfillment activities will be expensive eg
investment in software, logistic etc. additionally increase in other cost :
storage/ inventory
- Reduce / eliminate hiring & additional staff & training expenses
- Higher efficiency staff are focused on what they are doing
- Easy to manage (smaller number of people, more focused on primary job)












Situation B (Consultant- Boston Consulting Group)
Company Name : BBB
Nature of Business : Supply Office furniture
Location : Shah Alam (Warehouse + Office)
Incorporation : March 2011
Nature of staff : 130
Problem : Receives numerous of customers negative feedbacks such as
a) Slow response
- Response: inhouse call centres training is needed
- Improve customer response and inquiries through improvement in IT
infrastructure (Internet)
- Provide multi-channels such as through mail, telephone, fax and email
- BBB should improve the consumer responses (inquiries) or transactions
(orders) via mail, telephone, fax, or the Internet. In order to improve this
process, employees should be trained on how to handle the process efficiently;
they should be equipped with well knowledge on the product, company
process, policy and procedure. Besides, BBB also could implement a standard
pricing procedure, which mean sales admin or sales person can get the
quotation of common products immediately without any delay. By doing so,
BBB will enhance the receipt of an order or inquiry process.

b) Inefficient processing
Upon receving of order
- Editing and coding checking and capturing vital data for updating database
- Documentation must be in order
- Shipping labels
- Billing notification
- Inventory instructions
- If there is delay, immediately inform customer or anticipate compaints (Be
open-minded)

- After BBB receives the order, BBB should undertake editing and coding as
well as credit checking and capturing of vital data for updating the database
For instance, person-in-charge, contact number, company address, and so
on.Next, the employee of BBB must prepare a series of documents such as
shipping labels, billing notifications, and inventory instructions by using
computerized system. The system must be able to generate relevant documents
automatically by clicking on few options. Thus, this can avoid redundancy
which may lead to erroneous of order details such as quality and products
specification. At this stage, if there is a delay in shipping an order, BBB should
let the customer know and anticipates any possible complaints.

c) Wrong shipping
- Invest in more efficient computerised system such as barcode system, tracking
system
- Inventory Control System
- Compensation to customers

- BBB should invest on a computerized inventory control system, which will
ensure the properness and timeliness of shipment. For each of the shipping,
BBBshould design a shipping code to further investigation. BBB should also
integrate an online tracking system to ensure the delivery of products is
traceable. The online tracking system could be checked by BBBand customer
via online portal. Beside, punishment such as fines should be imposed on BBB
to encourage the effectiveness and efficiency of shipping process. The
performance of the department should be measured in the employees key
performance indicator (KPI).

d) Erroneous billing and
- Provide different modes of billing such as credit, debit, cash, cheques
-
BBB could integrate a computerised billing system with the sales system. That
is, once the order is confirmed by the customer, the transaction will be
recorded and generate relevant invoice or billing automatically. In the other
hand, if BBBwishes to maintain the current system without incurring any
additional cost on system, BBB could assign another finance staff to double
check the billing details before sending to the customers, such as the payment
method (credit, debit, cash, or check), amount, order details, and the terms of
payment.
e) Poor customer service
- Train personnel
- Service Scripting
- Feedback box on customer service
- Record calls / conversations to learn how to improve
- Assign a team to handle complains
- Recovery system (apology, compensation, follow ups)

BBB should assign a division or a team to handle complaints, inquiries,
replacements, and special problems. Importantly, follow-up practise should be
emphasised within the employees. The top management should give full
support on this division, and the division will have 100% authority on the
reporting of poor feedback from any relevant departments. Besides,
departments of BBB should accountable for any complaint made by customer.

Advice : How to solve the issue?


Situation C (Consultant- Boston Consulting Group) Chapter 8
Company Name : CCC
Nature of Business : Wedding photography
Location : Ara Damansara (Small Office)
Incorporation : February 2007
Nature of website : Web 1.0
Advice : Should upgrade from web 1.0 to online interactive media? 6
reasons
worldwide audience
open 24-7
enables small companies and entrepreneurs to become global
relatively low cost
speed of transmission
creative formats

a) Convenience
Accesible 24 hours, transactions can be done at home at own pace and own time.
Time saving. opportunity to make a purchase on-the-spot
b) Selective communication
c) Low cost
Lower overhead expenses - By providing shoppers the convenience of instant,
electronic purchasing, you eliminate much of the need for warehouses, showrooms,
sales representatives and cashiers because transactions are made online.
Saves on printing and postage. Instead of printing and mailing a product catalog, an
online catalog can reach millions more people with no delivery cost. It can also be
easily and electronically updated to save on reprinting and distributing new print
catalogs.
d) Creative variety
Lots of variety of creative designs to choose from. Such as frame, photo filters and
many more.
allows them to customize a wedding photography.
Can choose the style of the photo, decorations, size and frame and view it next to an
"Add to Cart" button that encourages the purchase
e) Inbound transmission ease
f) Flexibility
Situation D (Consultant- Boston Consulting Group)
Company Name : Canon
Nature of Business : Camera equipment
Would like to position the following market segment: Female, 20 to 29, less than
RM3,000, Heavy online and daily usage user
Advice : What are the 6 factors that direct marketers should consider
when planning the product positioning for canon.
Positioning differentiation attributes an offer [chapter 3SLIDE 11 PPT]
a) Product quality
Has to have top quality performance and can be directly connected to social
medias to upload their photos, or arts. Can access internet and should have a
front camera as well. Must be unique and differ from competitors.
b) Product size
Small so that it is convenient to bring around and carry around. If possible,
pocket size like a normal digital camera. Unlike dslr cameras that cannon offer.
Would not be convenient for girls to bring it around, can be easily snatched.
c) Product color
Should have a variety of colours and not only pink. Some females like blue,
black and purple. Colours of the product must be matching and should not be
colour disoriented.
d) Distribution method
direct mail via your own catalog or flyers
telemarketing on your own or through a contract firm
Internet marketing, selling your products online

e) Time of day
f) Price
Should be priced around below rm3,000 if not it would be overly priced for a
digital camera and would not be reasonable. Since the product is targeted to
females who are only 20-29. Their income are only at an average level,
majority of them would not be able to afford it with their own income.

g) Packaging
h) Gifts
i) Warranty





Situation E [CHAPTER 4 PPT SLIDE 12, TXTBOOK PG 98]
Company name : Adidas
Section :Sportswear
Location : Malaysia
Advice :What are the components of the offer details direct marketers
must consider when planning the offer for ADIDAS sportswear
Product can be tangible / intangible [physical product / service]

Pricing / Payment terms (price elasticity of demand)

Trial / Examination period
This may be the best offer ever devised. A customer can try out your product free and
without obligation for 10, 15, 30 days, or more. The time frame should fit the product.
This offer removes risk for the prospect, overcomes inertia and works with just about
any product.

Guarantees ( if things go wrong, warranty like 30 day money guarantee back, double
your money back)
This is perhaps the second best offer. A customer pays upfront but, if dissatisfied, can
return the item for a full refund. Like the free trial, this offer removes risk but allows
you to use customer inertia to your benefit since few people will take the trouble to
return something.

Sweepstakes / Contests ( improvement of database, get info from potential customers)
This increases your order volume if youre selling easy-to-understand impulse items.
However, these customers arent loyal, and you may find yourself forever trapped in
an endless cycle of contests.

Gifts / Premiums (get response. Can be offered for buying, trying or inquiring)
When you offer a freebie your customer wants, your offer will usually outpull a
discount offer of similar value. Thats because a gift is a more tangible benefit. This
also has the advantage of not devaluing your product with a price reduction.

Time Limits (While supplies last, limited time period only!)
An offer with a time limit gets more response than an offer without one. You can
display an exact date or suggest a response time frame, such as 14 days or 30 days.
This forces a decision. And the faster you can force a decision, the more likely it will
be in your favor.

Continuity ()

Situation F(CHAPTER 8 SLIDE 9)
Company name : GGG Mille Crepe
Nature of business :Specialize in delivering handmade mille crepe
Location : Malaysia
Number of Outlet : 150 outlets
Situation : No website, no e business resources
Future Plan : E-business, such as online purchase from
www.gggmillecrepe.com
Advice :What are the 6 stages of e business evolution that mille crepe
should consider

Stage 1: Brochureware
In this stage, organizations began to use the Internet as a bulletin board for brochures,
employee telephone directories, and over time for more critical documents such as
catalogs and price lists.
Stage 2: Customer Interactivity
This next phase is when companies created an interactive dialogue with their
customers, encouraging them to inquire, request, register, and online.
Stage 3: Transaction Enabler
In this stage, companies began using the Internet to expand transaction. ( selling
products, procuring supplies , enabling internal processes)
Stage 4: One-to-one relationships
This is when the Internet began to be used to create customized silos of interactivity.
Because web technology allows companies to deal with customers on a one-to-one
basis, product pricing became fluid, dictated by individual customers, often in an
auction process.
Stage 5: Real-Time organization
Zero latency organizations are able to plan, execute, and aggregate buyers and sellers
in a virtual arena. These companies understand customer needs and deliver in real-
time.
Stage 6: Communities of interests (COINS)
The Internet helps companies create communities of common interest (by content, by
community and by type or commerce) that closely link various partners in a value
chain. Examples of this stage of involvement include marketing companies such as
eBay where consumers who possess common needs or interest can competitively bid
on a given product.























Situation G
Company name : Seiko watch S114
Advertising expense : RM2500000 on Twitter ad
Reached : 4000000 Twitter users
Response Rate : 1%
Selling price per seiko S114 : RM1250
Variable cost of per seiko S114 : RM 1125
Variable shipping cost per seiko S114 : RM25
Standard advertising per Seiko S114 :RM 50
Advice : Good or poor direct response ad campaign?

Comparison between direct and standard advertising
1. (Contribution Margin) Unit margin = Selling price per unit Variable cost per unit
= 1250 1150 = RM100 per unit.

2. Breakeven units = Fixed Cost / Contribution Margin = 2500 000 / 100 = 25000
units

3. Response = Reached x Response rate = 4000000 x 1% = 40000 units

4. Unit at full profit = Response : 40000
Break even units : 25000
Excess / surpluse : 15000 units

5. Net profit = Contribution margin per unit x Unit profit = 100 x 15000 = 1500000

6. Return on investment = Net profit / fixed costs = 1 500 000 / 2 500 000 = 0.6% =
60%

7. Cost per order (use of twitter) = promotion cost / responses = 2 500 000 / 40 000 =
RM 62.5

8. (Variance) Comparison between direct vs standard advertising cost = RM 62.5
RM 50 = RM 12.50 [ higher / over ]
Based on the analysis, the direct response twitter ad was statistically proven not to be
a successful project due to the following reasons.

1. ROI is only 0.6 / 60%, which mean every 1 ringgit spent on direct ads wil
have a return of RM0.60. which might be considered as an unsatisfactory
result. The direct marketer should look for better options
2. As compared with the normal advertising budget, (RM50), twitter direct
response ad requires RM62.50, which SEIKO malaysia has to incur additional
RM12.50 for each of the units sold. Thus, normal advertising should be
focused due to lower expenditure

Special Remark: Students might argue Twitter direct response ad as a good method
because it shows a positive cash inflow for the company, eventhough ROI is merely
0.60 and there is RM12.50 extra expenditure. Eventually, this prject still contributes
positive result to the company. As compared to standard advertising, it does not
guarantee any sale revenue with every RM 50 spent on it.

Situation H
Advertising expense : RM 5000000 on facebook ad
Reached : 10 000 000 Facebook users
Response rate : 0.3%
Selling price per iphone6 : RM2588
Variable Cost per iphone 6 : RM2000
Variable insurance per iphone6 : RM20
Variable shipping cost per iphone 6 : RM10
Standard advertising per iphone 6 : RM80
Good or poor direct response ad campaign?

Unit contribution margin = RM2588 2000 20 10 = 558
Break even units = RM 500 0000 / 558 = 8960.57 = 8961 units
Responses = Reached x Response rate = 10 000 000 * 0.3% = 30000
Net profit = Unit margin x units at full profit = 558 * 21039 = 11739762 (Units at
full profit = responses break even units)

Return on investment = Net profit / cost of promotion = 11739762 / 5000000 =
2.3479 = 234%
Cost per order = promotion cost / responses = 5000000 / 30000 = 166.67
Comparison between direct and standard = 166.67 80 = 86.87

Advertising cost is extra by RM86.67 per unit, however the net profit and and ROI is
very good for the company.