Direct marketing 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, given 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 invasion of privacy concerns and online marketers must deal with internet security issues.
Direct marketing excesses sometimes annoy or offend consumers. Most of us dislike direct response TV commercials that are too loud and too insistent. Our mailboxes fill up with unwanted junk mail, our e-mailboxes bulge with unwanted spam and our computers screens flash with unwanted banner or pop under ads.
Beyond irritating, some direct marketing have been accused of taking unfair advantage of impulsive or less sophisticated buyers. TV shopping channels and program-long infomercials targeting television addicted shoppers seem to be the worth culprits. They feature smooth talking hosts, elaborately staged demonstrations, claims of drastic price reductions “while they last” time limitations and unequaled ease of purchase to inflame buyers who have low sales resistance.
Worse yet, so called heat merchants design mailers and write copy intended to mislead buyers. Even well-known direct mailers have been accused of deceiving consumers. A few years back, sweepstakes promoter PCH in the United States paid more than $50 million to settle accusations that its high pressure mailing confused or misled consumers, especially the elderly into believing that that had won prizes or would win if they bought the company’s magazines. Even the venerable reader’s digest has hold to pay restitution to consumers for deceptive marketing in its sweepstakes contests.
Fraudulent schemes such as investment scams or phony collections for charity, have also multiplied in recent years. Internet fraud, including identity theft and financial scams has become a serious problem. One known farm of internet fraud is phishing, a type of identity theft that uses deceptive email and fraudulent web sites to fool users into divulging their personal data. Although many consumers are now aware of such schemes, phishing can be extremely costly to those caught in the net. It also damages the brand identities of legitimate online marketers who have worked to build user confidence in the web and e-mail transactions.
Many consumers also worry about online security. They fear that unscrupulous snoopers will eavesdrop on their online transactions, picking up personal information or intercepting credit and debit card numbers. In a recent survey, 70 percent of participants said they were concerned that their credit or debit card information will be stolen if they use their cards for online purchase. More than one-third also sees the internet as the medium most likely to result in identity theft. Internet shoppers are also concerned about contracting annoying or harmful viruses, spyware and other malware. A search engine study of 4.5 million web sites found that 10 percent of them were downloading malware.
Spyware programs track where you go on internet and clutter your screen with annoying pop-up advertisement for everything from pornography to wireless phone plans. Spyware can get stuck in your computer’s hard drive as you shop, chat or download a song. It might arrive attached to that clever video you just nabbed at no charge. A web security company estimates that nearly three quarters of all sites listed in response to internet searches for popular phrases like free screen saver or digital music attempt to install some form of advertising software in visitor’s computers. Once lodged there, spyware can sap a PC’s processing power, slow it functioning and even cause it to crash.
Assault of Privacy
Invasion of privacy is perhaps the toughest public policy issue now confronting the direct marketing industry. Consumers often benefit from database marketing. They receive more offers that are closely matched to their interests. However, many critics worry that marketers may know too much about consumer’s lives and that they may use this knowledge to take unfair advantage of consumers. At some point, they claim the extensive use of databases intrudes on consumer privacy.
Online privacy causes special concerns. Most online marketers have become skilled at collecting and analyzing detailed consumer information. For example, behavioral tracking use data about consumers, web travels to deliver relevant ads to them. As web tracking technology grows in sophistication, digital privacy experts worry that unscrupulous marketers will use such information to take unfair advantage of unknowing customers. Some consumers and policy makers worry that the ready availability of information may leave consumers open to abuse if companies make unauthorized use of the information in marketing their products or exchanging databases with other companies. For example, they ask, should phone companies be allowed to sell marketers the names of customers who frequently call the 800 numbers of catalog companies? Should credit card companies be allow to make data on their millions of cardholders worldwide available to merchants who accept their cards? Is it right for credit bureaus to compile and sell lists of people who have recently applied for credit cards? Or is it right for states to sell the names and addresses of driver’s license holders along with weight, height and gender information, allowing apparel retailers to target tall or overweight people with special clothing offers?
In their drives to build databases, companies sometimes get carried away. For example, a famous company caused substantial privacy concerns when one version of its window software used a registration wizard that snooped into users computers. When user went online to register, without their knowledge that company read the configurations of their PCs to learn about the major software products they were running.
Need for Action
All of these calls for strong action by marketers to prevent privacy abuses before legislators step in to do it for them. For example, to curb direct marketing excesses, various government agencies are investigating not only, do not disturb lists but also do not mail lists or do not track lists and can spam legislation. In response to online privacy and security concerns, government all over the world have considered numerous legislative actions to regulate how web operators obtain and use consumer information.
Of special concern are the privacy rights of children. In 1998, the U.S. Federal Trade commission surveyed 212 web sites directed towards children. It found that 89 percent of the sites collected personal information from children. However, 46 percent of them did not include any disclosure of their collection and use of such information. As a result, the American Congress passed the children’s online privacy protection act (COPPA), which requires web site operators targeting children to post privacy policies on their sites. They must also notify parents about the information they’re gathering and obtain parental consent before collecting personal information from children under age 13. Under this act, teen social networking site xanga.com was fined $1 million for collecting, using and disclosing personal information from 1.7 million children under the age 13 without first notifying parents and obtaining their consent.
Many companies have responded to consumer privacy and security concerns with actions of their own. Still other is taking an industry wide approach. For example, truste.com a nonprofit self-regulatory organization works with many large corporate sponsors including Microsoft to audit companies’ privacy and security measures and help consumers navigate the web safely. According to the company’s website, truste.com believes that an environment of mutual trust and openness will help make and keep the internet a free, comfortable and richly diverse community for everyone. To reassure consumers, the company lends its trust mark stamp of approval to websites that meet its privacy and security standards.
The different marketing industry as a whole is also addressing public policy issues. For example, in an effort to build consumers’ confidence in shopping direct in the United States, the direct marketing association (MMA) and interactive marketing with more than 4800 member companies launched a privacy promise to American consumers. The privacy promises require that all DMA members adhere to a carefully developed set of consumer’s privacy rules. Member must agree to notify customers when any personal information is rented, sold or exchanged with others. They must also honor consumer request to “opt out” of receiving further solicitations or having their contact information transferred to other marketers. Finally, they must abide by the DMA’s preference service by removing the names of consumers who wish not to receive mail, telephone or e-mail offers.
Direct marketing know that, left untended such direct marketing abuses will lead to increasingly negative consumer attitudes, lower response rates and call for more restrictive state and federal legislation. Most direct marketers want the same things that consumers want honest and well-designed marketing offers targeted only toward consumers who will appreciate and respond to them. Direct marketing is just too expensive to waste on consumers who don’t want it.
Benefits of Direct Marketing
Direct marketing has become the fastest growing form of marketing. Direct marketing continues to become web oriented and internet marketing is claiming a fast growing share of direct marketing spending & sales. Whether employed 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.
Benefits of Buyers
For buyers, direct marketing is convenient and private. Direct marketers never close their doors and customs don’t have to battle traffic, find parking stage and trek through stores to find products. From the comfort of their homes or offices, they can browse catalogs or company web sites at any time of the day or night. Business buyers can learn about products and services without tying up time with salespeople.
Direct marketing gives buyers ready access to a wealth of products. For example, unrestrained by physical boundaries, direct marketers can offer an almost unlimited selection to consumers almost anywhere in the world. Just compare the huge selections offered by many web merchants to the more meager assortments of their brick and mortar counterparts.
Direct marketing channels also give buyers access to a wealth of comparative information about companies, products and competitors. Good catalog or websites often provide more information in more useful forms than even the most helpful retail salesperson can. For example, amazon site offers more information than most of us can digest, ranging from top ten product lists, extensive product descriptions and expert and user product reviews to recommendations based on customer’s previous purchase.
Finally, direct marketing is interactive and immediate; buyers can interact with sellers by phone or on the seller’s website to create exactly the configuration of information, products or services they desire and then order them on the spot. Moreover, direct marketing gives consumers a greater measure of control. Consumers decide which catalog they will browse and which websites they will visit.
Benefits of Sellers
For sellers, direct marketing is a powerful tool for building customers relationships. Using database marketing, today’s marketers can target small groups or individual consumers and promote their offers through personalized communications. Because of the one to one nature of direct marketing, companies can interact with customers by phone or online, learn more about their needs and tailor products and services to specific customer’s tastes. In turn, customers can ask questions and volunteer feedback.
Direct marketing also offers sellers a low cost, efficient, speedy alternative for reaching their markets. Direct marketing has grown rapidly in business to business marketing, partly in response to the ever increasing costs of marketing through the sales force. When personal sales calls cost an average of more than $320 per contact, they should be made only when necessary and to high potential customers and prospectus. Lower cost per contact media such as telemarketing, direct mail and company websites, often prove more cost effective.
Similarly, online direct marketing results in lower costs, improved efficiencies and speedier handling of channel and logistics functions such as order processing, inventory handling and delivery. Direct marketing can also offer greater flexibility. It allows marketers to make ongoing adjustments to its prices and programs or to make immediate, timely and personal announcements and offers.
Finally, direct marketing gives sellers access to buyers that they could not reach through other channels. Smaller firms can mail catalogs to customers outside their local markets and post 1-800 telephone numbers to handle orders and inquires. Internet marketing is a truly global medium that allows buyers and sellers to click from one country to another in seconds. A web user from Paris or New York can access online catalog as easily. Even small marketers find that they have ready access to global markets.
Electronic purchasing often called e-procurement has grown rapidly in recent years. Advances in information technology have changed the face of the B to B marketing process. Virtually unknown less than a decade ago, online purchasing is standard procedure for most companies today. E procurement gives buyers access to new suppliers, lowers purchasing costs and hastens order processing and delivery. In turn, business marketers can connect with customers online to share marketing information, sell products and services, provide customers support services and maintain ongoing customer’s relationships.
Companies can do e-procurement in any of several ways. They can conduct reverse actions in which they put their purchasing requests online and invite suppliers to bid for the business or they can engage in online trading exchange through which companies work collectively to facilitate the trading process. For example, an online trading exchange that connects buyers and sellers in the aerospace and defense industry. Its goal is to improve trading efficiency and reduce costs among industry trading partners. Companies also can conduct e-procurement by setting up their own company buying sites. For example, general electronic operates a company trading site on which it posts its buying needs and invites bids, negotiates terms and places orders or company can create extranet links with key suppliers. For instance they can create direct procurement accounts with suppliers such as Dell through which buyers can purchase equipment, materials and supplies directly.
B to B marketers can help customers who wish to purchase online by creating well-designed, easy to use web site. For example, a few years ago, oracle.com completely redesigned its web site. It was most interested in finding a better way to present deep information on its thousands of complex server, storage and software products and services while also giving the site is more humanistic view. It came up with a tab driven menu design that puts an enormous amount of information within only a few clicks of customers’ computers. Actions oriented menu labels such as evaluate, get, use and maintain leave nothing to the imagination and makes navigation a snap. Business to business e procurement yields many benefits. First, it shaves transaction costs and results in more efficient purchasing for both buyers and suppliers. A web powered purchasing program eliminates the paperwork associated with traditional requisition and ordering procedures and helps an organization keep better track of all purchases.
E procurement reduces the time between order and delivery. Time saving is particularly dramatic for companies with many overseas suppliers. Beyond the cost and saving, e procurement frees purchasing people to focus on more strategic issues. One purchasing says, you can now focus people on value added activities. Procurement professionals can now find different sources and work with suppliers in reduce costs and to develop new products. At the same time that the web makes it possible for suppliers and customers to share business data and even collaborate on products on product design. Many buyers now use the power of the web to pit suppliers against one another and to search out better deals, products and turnaround times on a purchase by purchase basis.
E-procurement can also create potential security disasters. Although e-mail and home banking transactions cab be protected through basic encryption, the secure environment that businesses need to carry out confidential interactions is sometimes still lacking. Companies are spending millions for research on defensive to keep hackers.