The Direct Approach: Has marketing moved on?

Digital is the most important development ever to hit marketing, Professor Derek Holder says.

The last bastion of business to be transformed by the IT revolution was marketing. In the 70s and 80s, IT transformed accounting, finance and production, often under the all-embracing guise of enterprise resource planning. Finally, in the 90s, it conquered marketing, permitting companies from all sectors to appreciate they could recognise, record and store their individual customers' transactions and purchase behaviour at a fractional cost. The icons of this decade were Tesco, with its Clubcard, Direct Line, with its red phone, and First Direct, the first telephone bank.

In the 90s, direct marketing was at its zenith in terms of known media opportunities. Branding, advertising and marketing research, previously the pillars of marketing, had all become surrogates to a real relationship with customers, while direct marketing positively encouraged consumer feedback and dialogue.

Entering the new century, we witnessed the rise and fall of hundreds of internet companies, the emergence of electronic marketing, the rise and demise of customer relationship marketing systems and buzzwords such as media-neutral planning and integration, both of which were not really new, although they had eluded the marketing practices of many businesses.

Today, we can look back at the real event that has transformed marketing as we knew it. The internet led to the first fundamental change in marketing since the discipline's conception in the 1850s by Cyrus McCormick of the International Harvester Company.

In reality, marketing is a post Second World War phenomenon. It has gone through four distinct stages. First, there was the era of "mass" marketing, offering consumers little choice of product or location.

This was followed in the 70s by "niche" marketing, when even the large FMCG companies recognised the need to "segment" their markets. Typically, however, segmentation was limited to 24 boxes. You were either AB, C1, C2 or D, under or over 35, a man, woman or housewife - 24 boxes. Early in this period, Jerome McCarthy invented the "4Ps" of marketing - product, pricing, promotion and placement - in his book Basic Marketing in 1960. Kotler and Levitt ruled the academic marketing world, preaching the gospel of the marketing concept.

The 90s, spurred on by technology and the success of direct marketing, was the era of customer marketing. Companies played catch-up, building huge customer databases while finally recognising that real profitability resides in keeping customers and extending the lifetime of their relationship with the business.

The final stage, the digital revolution, has changed the game altogether. While it could be said to just offer a new media or channel to market, it has dramatically changed distribution time and costs and opened global markets to small players, but most importantly, it has shifted the balance of power from marketer to consumer.

The rules of marketing have to be reinvented - companies have to continually reinvent themselves or face extinction.

In the era of networked consumers and digital everything, the economics of distribution are changing rapidly. In the entertainment business, for example, the internet has become retail store, theatre and broadcaster at a fraction of the original costs. It has exposed thousands of niche markets that were never visible under the old system.

The internet has changed the tools by which many companies operate (the 4Ps). Consumers can now choose when and how they want to view a company's advertising, and decide what channels they choose to buy through. For many businesses, it is no longer about getting the 4Ps correctly formulated; now, the priority is upping their search-engine rankings.

It has produced a raft of new intermediaries that act on behalf of the consumer, not the manufacturer (confused.com, expedia.co.uk). New global brands have appeared overnight - Google, eBay, i-space. The power of communities on the net is yet to really impact on marketing but it is all a question of time.

For direct marketers, the internet offers DM on speed. The internet offers a new channel to market and instant responses, is extremely personal and can create a wealth of marketing data for direct marketers. It is the ultimate one-to-one marketing medium.

However, all this needs to be put into context. While £2 billion today is spent on digital marketing, £5.3 billion is spent on direct mail. The old way of thinking about media as above and below the line is history. A better way to differentiate media is as addressable and non-addressable media. Addressable media includes direct mail, fax, e-mail and mobile, while non-addressable media covers the press, radio and posters, etc. The real task in designing a marketing communications programme is to know which medium to use for what purposes. Each has its place, including direct mail, now and in the future. A well-crafted, personal, targeted letter can produce phenomenal response. Equally, direct mail is used increasingly to encourage website visits.

The beauty of direct mail is it can be a very tactile medium. Consumers still enjoy receiving a well-produced glossy catalogue, which may contain aspirational or dream products. A print ad with the headline "I bought a £50,000 luxury yacht for £10" will still pull the reader in by the eyelashes.

All the technology in the world will not change the basic rules of consumer behaviour. Maslow's hierarchy of needs, which starts with physiological needs and goes up to safety, belonging and love, self-esteem and self-actualisation, is as relevant today as it was when he first described it in 1943.

For all the digital revolution may have changed the way companies market, consumers' basic buying behaviour and underlying motivations do not change. In a world full of dazzling opportunities to target customers, there is slight comfort in the fact that if you don't understand the customer's behaviour and needs, you won't sell anything anyway.

- Professor Derek Holder is the founder and managing director of the Institute of Direct Marketing.

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