Before we can begin to truly understand what direct marketing is and what it isn't, we'll have to blow up some old paradigm thinking about the famous four P's and the Marketing Communications mix. So, before you read on, please be prepared to challenge everything you thought you knew about marketing.
As long as Principles of Marketing classes have been taught around the world, the famous 4 P's have been the course's centerpiece. The 4 P's or the "Marketing Mix" are an organization's strategy related to Product, Place (or distribution), Price, and Promotion. We'll be discussing the 4 P's throughout this text in a new and more relevant way focusing first on why the traditional perspectives no longer work and then replacing the traditional view with a view that works, a view that is customer driven, a view that seeks to create insulated customer relationships, "delighted" customers, a view that insulates us from competitive attacks.
Today, we live in a radical and constantly changing global marketplace. Exponential increases in information processing capabilities and technology enhancements have altered traditional markets. In fact, it's safe to say that what worked in the past simply will not work today. The 4 P's as traditionally viewed, aren't relevant for today. We need to consider global changes and major paradigm shifts in order to create a relevant new perspective on the famous 4 P's.
The exponential gains in technology referred to above, such as the process of digitalization, have rendered product oriented advantages short term at best. This has enabled many competitors to quickly enter the market and match the newest technology. It ultimately transfers all the power to the consumer who now has many choices.
Today, it is a customer driven global marketplace. Many excellent texts have been written which well describe this phenomenon. "The Great Marketing Turnaround" by Rapp and Collins describes the changes I'm speaking about as a great paradigm shift from a market driven economy to a customer driven economy. Peppers and Rogers, in their book, "The One to One Future" describe it as a new one to one economic system with personalized media which aims to gain greater share of customer business, one customer at a time. The traditional mass marketing strategies which aim for some percentage of market share yield ineffectual results because the smartest of marketers are no longer mass marketing, but rather, seeking to understand unique, distinct, customized, individualized customer needs. Once identified, the relationship marketer will deliver products and services which meet the highly personalized needs of the consumer.
Technology today, enables any competitor to quickly emulate or improve upon any product innovations and quickly eliminate any product oriented competitive advantage. It is therefore necessary for marketers who wish to remain in business, to move away from traditional "product oriented" thinking toward developing preferred and insulated customer relationships, those which are insulated from price wars (a result of the product parity created by many competitors who have relative ease of entry into almost any global market).
To simplify the above, think back (only just a few years) to when we were marketed to on channels 2, 4, and 7 and marketers told us, in monologue fashion, why we "needed" their products and services. They utilized creative and emotional appeals (sex, fear, death) to try to create a sense of need. These old consumer behavior manipulations won't work today. These methods are totally non measurable, but more importantly, today's consumer who is in control of information and has choices, will not be manipulated (at least this is true of most of our highly desirable customers). Nothing will turn a customer away faster than traditional manipulative selling techniques. Have you ever heard the old saying, "When we get the first order, the relationship begins"? Well, today we must recognize that we'll never get the first order until the relationship is first established.
To better explain the paradigm shift referred to above, focus on three specific elements; technology, competition, and customer. Today, technology enables any competitor to match our product advantages, improve upon them, and offer them at lower prices, (with lightening speed of course). Ultimately, the consumer has many choices for need satisfaction and all other things being equal, will seek out the lowest price. Technology no longer advances "incrementally". Technological change is "exponential". A new iteration in technology doesn't advance a product line, it obsoletes an entire industry.
Needless to say, I'm attacking traditional thinking related to the first "P" of the Marketing Mix, namely, the "P" of Product. In my humble opinion, there is no such thing as a long product life cycle or sustainable physical product advantages. When CD Rom drives were introduced for example, they had about a 1 year life cycle (2x drives). We've progressed to 4x, 8x, 16x, 32x, and who knows where else by the time of this writing These extensions of the original product innovation only have approximately 3 month product life cycles. In fact, if R&D costs aren't recouped and if a profit isn't generated during the initial product launch period, (during the first three months), the product introduction is considered a failure and huge losses can result.
Let's look at another example. When Apple Computer introduced the Macintosh in 1984, its user friendly operating system was a significant product oriented advantage (remember that this is 1984). The product oriented advantage lasted roughly seven years, or until the introduction of Windows. I believe that with the rapid technological advancements which we see in our world today, that if Apple had introduced the Macintosh in 2001, Microsoft would have responded with an answer by the next trade show, maybe at the same trade show.
Traditionally, manufacturing companies have sought to reduce manufacturing costs and "eek" out a profit through cost plus based formulas. Volume and economies of scale were the objectives. Today however, any manufacturing advantage can also be easily matched and improved upon. Why be the technology leader spending millions on R&D just so your competitor can say "thanks" and quickly knock you off? Don't think that patents can protect you either, it's certainly very easy to alter product offerings slightly enough so as not to infringe on patents. Just look at how Microsoft used Windows to emulate the user friendly Mac O.S.
So, back to the famous first "P" of Product. We've been taught for years (and in many schools across the country even today) to create superior products and deliver them in volume to masses of consumers. We must recognize that today there aren't mass markets to draw from, only specialized niche markets who are demanding customization.
There's no question, it's a great time to be a consumer. We never have to buy anything at full price. We have cola wars, burger wars, rebates, low financing, and many other downward spiraling price wars scenarios. Ultimately, when we play the "product game", there is no way to sustain lasting competitive advantage.
Think about the traditional product life cycle, you know, the famous "bell shaped" curve. We saw products move through early introduction and super growth phases of the life cycle, on to maturity and eventually to the declining stages of the product life cycle. Sadly, there's no such thing as the traditional bell shaped curve, today, it's dramatically shortened. If I were to draw it, I'd draw a line straight up, then straight back down. The window of opportunity is minute, there are no longer incremental increases in the product technology, only exponential changes which obsolete existing technology. Even if we could somehow sustain product or technology advantages (I'm not saying we can), would it be wise to shoulder the burden of industry wide R&D, just so the competitors can say "Thanks" and knock you off?
Why are there so many strategic alliances today? Why are so many of them R&D alliances entered into globally between competitors? Because each knows it's impossible to sustain product or technology advantages, each knows the window of opportunity is short, each knows that it would be foolish to bear the industries R&D costs alone.
Well, with the traditional perspective "blown up", we have to replace it, replace it with a new, more relevant perspective. What's the new perspective? It's called "augmented" product and is the bundling of value added services that meet time, convenience, fear reduction, or risk reduction needs.
If we know that product advantages are not sustainable, does it mean we should simply enter the service industry? Nope, that's not what I'm talking about. Just because we serve coffee and have longer hours now at the bank doesn't mean the advantage is sustainable. The bank across the street could match and improve upon this idea in a day.
What it means is to say, "I don't sell (fill in the blank). Rather, I meet my customer's individualized needs for time, convenience, fear reduction or risk reduction.
Let's say you have a Dodge Caravan, a ten year old Dodge Caravan. You just love it, but it is getting old, and it's time for a new car. Let's say you want another Caravan, would you buy it from me online? What? You wouldn't? Why not? If I were to look at all of your reasons, they'd all fall under the four needs categorizations I outlined above (time, convenience, fear reduction or risk reduction).
So, I must say to myself, "I don't sell Dodge Caravan's, I meet time, convenience, fear reduction and risk reduction needs". What if I bypass the traditional channel, the nasty, manipulative "dealer process"? I can sell the car for three thousand dollars less. What if you could go online and click on "customize your Caravan". You could design the custom Ice Blue Caravan with the chrome wheels, luggage rack and beige leather interior. You can bet that the vehicle you've custom designed isn't sitting on the dealer lot.
Now, I deliver it to your door with a complete six months warranty. If you simply don't like the car, for ANY reason, for the first six months, just call me, I'll come to your house, pick up the van and give you all of your money back. You can talk to any and all of my previous customers if you'd like, they're all "delighted".
Why wouldn't I do this? There's no risk. If I help you customize your choice, deliver tons of information to you, help you evaluate competitive models, if I make sure you're an astute buyer and if I deliver what I promise, you'll be delighted and you won't be returning the van. Did I sell you a Caravan? Nope. I met your fear and risk reduction needs.
