The presence of intense competition among Personal Computer (PC) manufacturers operating in both business to consumer and business to business market as well as challenges arising out of extended customers’ knowledge and demand in products and services offered has made it essential for the manufacturers to be competitive in all areas instead of solely competing based on pricing. It is high time that PC manufacturers start assessing their marketing strategies in order to reach out to wider customer groups to understand changes in customers’ preferences as well as to implement relational marketing strategies to retain customers for long-term. In this context ‘direct marketing’ can be considered as one of the key strategies as against ‘channel marketing’ which PC manufacturers could explore to enhance their competitive advantages. However, the success to the firms evolving through shifting from channel marketing to direct marketing depends on the influence of many key success factors.
The purpose of this dissertation is to identify the critical success factors (CSFs) that enable PC manufacturers achieve their marketing objectives by shifting from channel marketing strategies to direct marketing strategies. Based on an extensive analysis of the success factors, this study recommends appropriate marketing strategies for PC manufacturers. In the process, the research will explore the key characteristics of various direct marketing strategies, the drivers, enablers and barriers to adopt direct marketing by the PC manufacturers.
The critical success factors are interrelated and interdependent to each other. The outcomes of this research will add to the existing knowledge of PC manufacturers in the area of direct marketing as it serves to provide an exploratory overview of direct marketing strategies through an in-depth research on key the success factors.
Executive Summary – Summary of Conclusions
This summary presents the key findings of the current research. The current research identified the following key success factors that would help PC manufacturers to adopt direct marketing strategies by shifting from channel marketing strategies.
- Creation of a value proposition – Developing a strong value proposition is the most important strategic process, which the manufacturer should engage to ensure the success of the program as it establishes the core purchase value of the manufacturer is delivered to the market.
- Setting objectives and Strategies – Setting objectives and strategies always provide a clear direction on where the manufacturer wants to be by moving into direct marketing and determine how the manufacturer should work in order to achieve the objectives and goals set.
- Making customer segmentation – Segmentation, a method of grouping customers based on variables, plays an important role in direct marketing to allow the manufacturer classify the customer into different groups based on similar characteristics and it will allow the manufacturer to predict customer behaviour more accurately, design the solutions and offers easily and target the customers in precise way.
- Resolving channel conflicts – PC manufacturers must factor in the partner’s vulnerability, and ability to retaliate and its impact in the exercise of direct marketing.
- Managing Change – Commitment and support from company leaders is important for introducing direct marketing. Obtaining support from management level will help to encourage the acceptance throughout the organization.
- Efficient project management – A project team formed comprising of talents from different fields, which cover end-to-end functions from pre-sales, marketing, finance, supply chain, after-sales is needed to ensure that knowledge can be shared among the team in all respects.
- Managing efficient supply chain infrastructure – The manufacturer is required to manage the supply chain infrastructure efficiently to enhance on their fulfilment of lead-time in order to enable direct supplies to customer seamlessly and to conclude the purchase transactions in any stores.
- Efficient Customer Relationship Management (CRM) – CRM act as a tool in helping to increase customer loyalty, which is one of the key drivers for enabling the manufacturer move into direct marketing.
- Better security management to protect data – Security management to protect customer database is one of the essential success factors in succeeding in direct marketing.
The success of the marketing strategies of any business organization depends largely on its ability to put to use its resources and capabilities in an effective way towards achieving the overall organizational objectives. The manufacturer with a planned and innovative utilization of its organizational and human resources will be able to create a dominant market presence in addition to the creation of strong customer loyalty and satisfaction. Present day market leaders confront a number of challenges in securing new orders and customers. These challenges may take the form of a larger number of players influencing the customer decision process, increased buying criteria, greater expectations of faster feedback, and more expectations from the customers that the sales force understand the customer’s requirements. The customers have become more demanding and the competitors have become more productive which have also increased the challenges being faced by the businesses. The businesses are expected to possess the characteristics of flexibility, speed, easiness in dealing, fast, resilience, customer focus, and human warmth in their dealings. It therefore becomes important that the companies evolve and adopt suitable marketing strategies so that they will be able to attract new customers as well as retain the existing customers. This is particularly true in the case of PC manufacturers where the competition is severe. PC manufacturers mostly adopt channel marketing in which they rely on their dealer and distribution networks for achieving targeted sales growth. This study advocates the shifting of the marketing strategies from channel marketing to direct marketing by the PC manufacturers so that they can achieve superior performance. In this context, the study focuses on critical success factors for successful direct marketing strategies for PC manufacturers.
Marketing Strategies – an Overview
“The concept of marketing is the exchange process in which two or more parties give something of value to each other to satisfy perceived needs.” 1People exchange money for goods or services depending on their needs and preferences. The services may be both tangible as well as intangible and exchange of money can take place in return for a combination of goods and services. Although marketing has always been regarded as a part of business, the importance of marketing has varied through time and the history of marketing has passed through, production era, sales era, marketing era and finally relationship era. After the periods of Great Depression and World War II the marketing era emerged during which there had been a shift in the focus from products and sales towards satisfying customer needs.
The shift from the seller’s market to buyer’s market created the need for consumer orientation by the businesses. The need for the companies to market their products and services increased and this brought changes in the marketing concepts. Marketing assumed a conceptual base in which a manufacturer-wide customer orientation to achieve a long-term success of the business became the primary element2.
The objective of marketing strategies has undergone major changes in the last decades towards building the commitment of the customer towards a brand or a dealer. The development has taken the forms of:
- creating customer satisfaction through the delivery of superior quality products and services,
- building brand equity, which is facilitated by factors like perceive quality, brand loyalty, association of the customer towards the brand, trademarks, packaging and convenience of distribution channels,
- creating and maintaining relationships.
Of these three forms, customer satisfaction by delivering quality products and services and creating and maintaining customer relationships have to be pursued more particularly by PC manufacturers, in view of the nature of the product and competitiveness of the market.
Personal Computer Market – an Overview
After the first half of 2009 showed a constraint on the market, later half of 2009 witnessed improved global PC market because of the steep discounted prices offered by the manufacturers and improving global economy. “Portable PCs remained the key market driver, with shipments increasing 18.4% in 2009 compared to 2008. Consumer purchases of portable PCs were the sole driver of the market, growing at 38.5%.” Commercial shipments showed severe constraint. However, the commercial segment showed an increase of 1% during the last quarter of 2009, indicating a potential increase in 2010. While the volume of mini notebook showed a slow growth, other note book categories registered an increase of about 22% on a year over year basis. Jay Chou, research analyst with IDC Quarterly PC Tracker remarks.
“With lean margins and further market consolidation remaining a harsh reality for the foreseeable future, vendors are increasingly looking to a mix of volume and specialized products to grow revenue, including new combinations of portability, performance, and the intriguing possibilities of touch computing.”
Overcoming challenges, such as synchronizing data across multiple devices, will be an important step in enabling adoption of more devices and expanding market growth.”
The discussion on the overview of the PC market clearly depicts a significant market growth and at the same time the necessity for the manufacturers to look for innovative ways of improving their market share. The dominant position of consumer purchases of portable PCs and the weak response from commercial segment (distributors and dealers) clearly indicate the necessity for a shift in the marketing strategies of PC manufacturers from channel marketing to direct marketing. The central focus of this study is to explore the key characteristics of direct marketing strategies and the factors that influence the success of direct marketing.
Aims and Objectives
The central aim of this research is to explore the key success factors for direct marketing strategies to be adopted by PC manufacturers. In the process of achieving this central aim this study accomplishes the following objectives.
- To explore the salience of different marketing strategies;
- To assess the key success factors for direct marketing strategies and recommend appropriate marketing strategies for PC manufacturers;
- To examine and elaborate on the role of information technology in aiding direct marketing by PC manufacturers.
Direct marketing is defined as a “type of marketing that uses media to contact a prospect directly and elicit a response without the intervention of a retailer or personal sales.” Direct marketing does not mean replacing the retail or wholesale distribution channels but to increase the direct communication between the owners of the brand and the consumers, which is the essence of direct marketing. The purpose of direct marketing by the PC manufacturer can be viewed as the manufacturers of the brands taking direct responsibility for the marketing and success of PC brands. Instead of leaving the communication of the brand exclusively to the distribution network to promote the products to the consumer the manufacturers take some responsibility for the success of their brands. Direct marketing does not imply that the PC manufacturers will compete with their own distribution channels; rather they will commit to the effort required to have the brand communicated to the prospective and existing consumers. The integrated channel strategy leaves the promotion of brand attributes and pulling the consumers through the distribution channels. In the channel strategy, the consumer purchases the brand from any one of the numerous possible distribution points. “Direct marketing in this approach promotes all of the distribution points possible – not competing to undercut or overprice any of the existing distribution channels.”
Steps involved in Implementing Direct Marketing Strategies
As the brand owners, PC manufacturers can communicate the brand as they intend to and at frequencies of their discretion. This enables the manufacturer to distinguish his product from several other brands available in the market. Direct marketing strategy involves the steps shown in the above figure.
This study uses desk-based study. An extensive review of past literature including research findings, articles in professional journals and other publications and reference to textbooks form the sources for information and data for the research.
Organization of the Dissertation
For a comprehensive presentation, this study is organized to have different chapters.
- Chapter 1: Presents an introduction on the topic of study and this chapter also lay down the objectives the study will try to accomplish along with the purpose of the study.
- Chapter 2: Contains a detailed review of the relevant literature on retail-banking strategies from the customer perspective and their relationship with the bank performance.
- Chapter 3: Presents the findings of the research.
- Chapter 4: Presents the analysis and discussions on the findings from the literature survey and other secondary sources.
- Chapter 5: Summarizes the findings as concluding remarks and recommendations of direct marketing strategies for PC manufacturers and this chapter also provides few suggestions for further research in the field.
The objective of this chapter is to present a survey of the past literature on marketing strategies in general and on the key characteristics, drivers, enablers and barriers of direct marketing strategies. The review is expected to add to the existing knowledge of the readers about direct marketing and their implementation by PC manufacturers.
Personal Computer manufacturers have greatly relied on channel marketing in the past, where the products or services are sold through distributors, wholesalers and retailers. This model provided only minimum direct interaction of the brand owners with consumers.
In the 21st century, innovations in the personal computer industry had reached the mature stage and changed the traditional way of operating the business. The rapid development of media and advancement in technologies such as the communication systems (e.g. internet, email), equipments (e.g. Computer, mobile phone, video conferencing, etc) has dramatically improved the convenience and speeding of the whole communication cycle not only within the country but globally.
Consumers are able to access a wide range of information on products and services instantly; purchases them through different channels directly by the assistance of the current technology. These IT savvy consumers have become more sophisticated in term of knowledge and demand far better services than companies were offering in the past. Consumers wish to be treated according to their personal circumstances. They want to be in control in the products or services purchased, and increasingly want the option of contacting the brand owners directly. Consumers are more vocal than in the past and Internet used as an important tool for them to share and publish their feedback and experience. All these changes created different consumer behaviour and switching the buying power to a different direction as compared to the past.
Simultaneously, demographic changes to society have continued at an incredible pace, IT infrastructure (Internet) enabled globalization, which provided the opportunity for consumers and businesses purchase from any place, anytime. These raised intensive competitions between PC manufacturers in both business-to-consumer and business-to-business market. The competition increased not only on price, but on qualities and services such as after sales support, lead-time, customer care, etc.
Marketing philosophies no longer depended solely on 4Ps (product, price, place and promotion) but involved relationship marketing, a model emphasises on building relationships with customers over a period of time and the importance of bringing customer-led quality, service and marketing within a manufacturer together. It is crucial for PC manufacturers to be competitive from all aspects instead of solely compete on pricing.
The situation forced PC manufacturers to rethink their business model and start re-accessing their marketing strategies in order to reach out to wider customer groups and understand customers’ requirements as well as building up relationship marketing in order to retain customers in longer term and capture market share.
Instead of solely depending on traditional channel marketing, direct marketing became one of the key strategies, which PC manufacturers explored with the objective to increase the competency among competitors. Direct marketing developed as a powerful tool in customer loyalty strategies; allows manufacturer deliver services and quality, access to customers’ database directly; allows control and precision, leading to better targeting and campaign measurement, in addition, companies also see direct marketing as a way of adding value and differentiating their offerings.
IBM started selling direct to corporate customer in 1979. In 1994, Dell becomes the first manufacturer to exit from channel marketing and sell exclusively through direct marketing. Compaq started selling through direct by keeping channel, and becoming more aggressive in selling through direct marketing after HP/Compaq merger. Dell led the PC market and successfully transformed the industry from supply-driven to demand-driven production for almost a decade and HP/Compaq manage to surpass Dell in end of 2006. There is no doubt that the strategy of selling direct helps the PC manufacturers’ growth. However, the success of shifting the marketing thrust from channel marketing to direct marketing depends on many key success factors, the evaluation of which is the central focus of this study.
Marketing Function Defined
According to American Marketing Association, states that “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organisational objectives.”
“Marketing is to establish, maintain, enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises.”
Alderson (1957 cited in Brassington & Pettitt) defines marketing as an exchange process between an organization and the consumers of its products or services. Successful marketing is in fact a complex process. Brassington & Pettitt state the scope of marketing function includes an extensive range of business activities encompassing the identification of the product; the timing of the introduction of the product in the market; fixing an appropriate price and making marketing communication with the customers enlightening them with all pertinent information on the product to attain utmost customer satisfaction. “The model describes the exchange being goods and services one way and money in return”. Effective marketing also involves the flow of information and data from the manufacturer to the prospective purchaser as an important component of communication. “Communication of the product or brand from company to consumer will be the result of a successful advertising campaign whereas information from consumer back to the company will provide the seller with an insight into the success of the product of service.”
The marketing function varies enormously according to the nature of the business and organization and the market, which it serves. “The majors concerns of marketing are usually referred to as the “four Ps” or the “marketing mix”: product, price, place, and promotion.” McCarthy, (1960) introduced the 4ps into the marketing mix with the thinking that these four groups of elements will influence the demand for the product. Although essential for the success of any business, the marketing function need not be seen as the largest or most important function. “In fact, in a truly marketing-oriented organization the need for a specialized marketing is far less than it is in a sales or production dominated manufacturer.”
Consumer behaviour is one of the important determinants of marketing strategies. Blackwell et al., define consumer behaviour as actions taken by people, at the time of procuring, using and getting rid of products or services. Consumer behaviour with respect to certain product or service is analyzed to ascertain the response of the potential customers to different advertising strategies of an organization. The firm makes an analysis of consumer behaviour for creating unique selling point. This selling point is developed to attract target audience so that the firm can reach its marketing and advertising goals. The manufacturer must have a thorough understanding of the consumer behaviour in order to maximize the return on its investment on marketing and advertising.
Based on the analysis of the consumer behaviour, a firm will create and implement its marketing strategies around those factors, which influence customer behaviour. There are a number of aspects, which impact the buying choices of the consumers. These factors include the previous buying experience of the buyer, their current preferences, influence of environmental factors and the impact of the marketing and advertising campaigns launched by the manufacturer. Other demographic factors like age, occupation, educational background, personality and life style of the consumer influence the customer’s choice. Brand loyalty represented by the preconceived thoughts about the quality and functionality of the products or services also has influence on the buying decisions of the consumers. Kotler, (2006) identifies culture as one of the basic determinants of the consumer choices. Culture in this context represents the norms and beliefs of the society. In addition, culture also covers the customs learnt from the society, which ultimately become the value of the society.
Customer satisfaction with respect to the quality and utility of the product or service is another major factor, which needs to be considered in attracting and retaining customers for any product or service. In this context, relationship marketing is the new paradigm in marketing literature, which has challenged the existing marketing theories and philosophies. Relationship marketing is a strategy used to learn more about the moods of the customers and their behaviours so that a firm can develop stronger relationship with them. In the investment-banking context, relationship marketing is of particular importance, as the investment banks have to establish and maintain successful relationships with the customers to thrive among stiff competition.
An overview of Channel Marketing and Direct Marketing
This section provides an overview of channel marketing and direct marketing.
Channel marketing describes commerce transactions as without selling direct to end users but using marketing channel, which includes one or more marketing intermediaries such as distributor, wholesaler, retailer, etc. Each channel member performs variety of functions, generating values in order to gain economic return. Typically, the marketing intermediaries offer values in the form of providing information, planning and executing promotion, negotiating, providing or co-sharing marketing funding and act as a risk taker since they own the physical inventory of products and services and managing the payments.
Most of the companies used intermediaries as they will purchase in bulk, help to control the waiting time in the market by stockpile inventories, enable products or services with wider coverage in term of locations and product variety as well as service support can be easily rendered through intermediaries. All the activities carry out by intermediaries ease the roles of manufacturer by passing most of the responsibilities in marketing and supply chain to intermediaries.
“Direct Marketing is a communication between seller and buyer directly. No Intermediary media is used. No distractions come between – hopefully.”
“Direct marketing is the marketing weapon of the 1990s and beyond. It is the most precise, targeted form of marketing on a large scale that there is, and it is also the most cost effective when it is done properly. Direct marketing is any form of marketing in which you deal direct with the customer without going through any intermediary such as an agent, wholesaler, or retailer.”
“Direct marketing (layman definition) – find out what each of you individual customers wants and deliver it to them profitably – one customer at a time.”
Planning, implementation and management of customer relationship is influenced largely by the types of distribution channels used by the firm (Hughes, 2006). With the addition of new channels of distribution, the complexity in the management of customer relations increases. This is because with the addition of new channels, there emerge new structural issues (Ward, 2001). The firm in order to acquire new customers and retain them at a profit has to attend to these structural issues on priority. The integration of the existing customers into the new channel and keeping them satisfied pose challenges to the firms. Especially in the context of direct marketing adopted in the place of channel marketing, the firms have to consider the impact of channel conflict and work towards arriving at an optimal channel mix with maximum volume of business and minimum channel conflict. Direct marketing being an enabler of relationship, brand building and quality product offering enabler, however, can help the firm solve some of the probable issues connected with the channel conflict.
From the above definitions, it can be inferred that direct marketing is not synonymous with mass marketing but target on and reach to specific groups of customer be it from consumer or business in an appropriate manner for them. It applies to both product and service oriented businesses, and even to non-profit organizations. The fundamental is no intermediary involved in the sales and purchase process.
Organization may leverage on several ways to deliver products and services to their customers, which may include “using a direct sales force, catalogs, websites, email, direct mail, telemarketing, seminars, trade shows, and other “one-to-one” techniques to communicate and sell to their customers and clients.”29 Customers can generally feel, touch, see or hear your communication them as individuals30 and respond to it. The response may take the form of an enquiry for purchase or placing the order for products. It is an essential requirement for the manufacturers that there should be a feedback mechanism to implement direct marketing strategies and for helping in the development of customer loyalty which would result in increased organizational growth. Sometimes, organization may use direct marketing in concert with other marketing channels. Hewlett-Packard (HP) is one the good example who move into direct marketing but still remain distributors and retailers as a main stream to sell their products.
Types of Direct Marketing
Similar to other channel of marketing, direct marketing can be divided into two major types, that is business-to-consumer (B2C) and business-to-business (B2B).
B2B describes commerce transactions between businesses, where products or services sell to business, industry, or professionals rather than consumers. In contrast, B2C designed to sell the products or services to individual consumers, families or households.
B2C Direct Marketing
Generally, post, face-to-face meeting, Internet, email, telephone and mobile are the common media used in approaching B2C customers. Consumers’ choice can be influenced by couple of determinants such as extrinsic factors that can be controlled by marketers and intrinsic factors, which are within the control of the consumer. Extrinsic factors include the location, timing and content of the products or services exposed to. Intrinsic factors include personality, consistency with their beliefs, the perceptual benchmarking; the motivation it posses and the needs to purchase the products or services; the feeling about the products and buying process. Even though those maybe intrinsic factors, it can now be influence by the marketer using direct marketing to create learning for customers on the products knowledge, promoting brands value which may invoke and commit the consumer in seeing brand switching is a risk. In addition, social factors influence the decisions of buying as well for instance the status that products will bring and conformity to norms.
An effective direct marketing depends on thorough understanding of customers in term on how they think, act and buy through studying consumers’ behaviour. In particularly, IT products and services since it is high involvement decisions’ product. The quality of such studies had grown, particularly in relation to concepts and empirical research techniques. Besides, statistics, mathematics, sociology, psychology and information technology play a part on this. The marketers are now better equipped than ever before.
B2B Direct Marketing
B2B direct marketing may use the same media as B2C direct marketing in approaching customer. However, advertising is less important than in consumer markets, but emphasis more on trade shows, sales promotions, sales incentives, sales force management and public relations.
The buying process maybe similar to consumer buying decisions framework shown in figure 1, however, it is definitely much complicated in term of number of influencer involved, steps in evaluating, assessing and approaching the products and services are much complex and taking longer time in making decision. The business buyers usually concerned with how to meet the needs of their organization.
Generally, the buying behaviour between B2B and B2C customers can be quite different. Business buyer buys when they find a need or looking for solution to achieve specific objectives. However, purchases may be effected by the consumer for luxurious reasons rather than for essential purposes. Business buyer usually are more sophisticated, going through rigorous assessment, and usually it will not be single step process to complete the transaction due to multiple influences involved in the organization. Comparatively, consumer is much simpler since so long as they feel they want and they like the product. Business buyer buys for the manufacturer and hence they may or may not have particular liking for the products or services.
Direct Marketing and Relationship Management
With the development of technology, the support to the managers in building relationships has become increased (Chen & Popovich, 2003). The essence of relationship management can be seen in the ability of the firm to collect information relating to the customer needs swiftly and the actions taken by the firms to provide customized products and services to the customers to result in an enhanced customer loyalty (Rigby et al., 2002). Study of Reinartz, Krafft and Hoyer (2004) conceptualize CRM as more process-related with distinct stages of initiating, maintaining and terminating stages in the customer relationship.
Even though there is no consensus on what constitutes the relationship management of customers, the process of planning, implementing and managing the customer relationship has been identified as the key issue of CRM. In fact the essence of direct marketing involves maintaining the customer relationship to gain the advantage of providing a customized service to the customer. CRM therefore becomes a significant factor in direct marketing concept. There are certain inherent benefits of CRM, which is available to direct marketing as well. When the firms start using multiple techniques of direct marketing like personal selling or through emails and Internet, they are likely to experience fragmented and disjointed customer interactions from the different channels or application of techniques of direct marketing. If the firm is unable to assimilate the information gathered in a systematic way, it might lead to inequitable treatment of customers and resulting erosion of customer trust and loyalty. CRM enables firms to bridge this gap to the benefit of the selling organization (Buttle, 2004).
Enablers of Direct Marketing
There are different factors operating internally from within and externally from outside the organization, which act as enablers to the implementation of direct marketing in any firm. First in the list is the customer satisfaction, which can be achieved by the firm by perceiving the changes in the preferences of the customers and meeting these preferences swiftly. The overall goal of direct marketing is to achieve a high level of customer satisfaction and achieving customer satisfaction becomes complicated with changes in the customer expectations, extensive marketing communications and intense competition. However there a strong relationship has been established between the profit earning capacity of the firms and customer satisfaction. This phenomenon makes achieving high- level customer satisfaction crucial at the firm level. Firms can strive to improve upon the customer satisfaction through measures like improved customer service, loyalty and rewards programs, product customization and building customer trust.
Brand building is one of the important enabler of direct marketing as it has a critical role in improving the customer trust. Duncan (2002) defines brand as the “perception of an integrated bundle of information and experiences that distinguishes a company and its products from competition.” Brand can be created by introducing an attribute in the product that identifies and differentiates the particular product from those of the competitors (Keller, 2003). Brand includes the emotional value attached to a product. Strong product brands are of strategic importance for the sales growth of a firm, as brands increase customer loyalty and they are affected less by price sensitivity. Branding in B2B context involves gaining an understanding of the customer perceptions of the brand, while branding in B2C market is designed considering the purchasing decisions of ultimate user. B2C marketing involves different aspects of promoting the sales including selling on a personal basis and direct marketing. Brand building by promoting brand loyalty improves the sales potential of firms adopting direct marketing.
Quality and product offering is another distinct and effective enabler of direct marketing. With the sophistication and improvement in information and communication technology, firms have developed on-demand capabilities in respect of products and product developments, which support the direct marketing initiatives of the firms. The technological developments have enabled the manufacturers develop superior skills in developing customized products quickly and thereby meet the specific demands of the customers. The product customization has been aided by the developments in technology in the form of highly automated production facilities. The introduction of CRM technologies will improve the ability of the company in product customization. This will help the company in meeting the needs and preference of the customers.
Direct Marketing and Key Account Management
The definition of a ‘key account’ includes customers deemed to possess strategic importance by the seller (Millman and Wilson, 1995). Thus any account where there is the existence of an opportunity or threat exists, especially from a competition perspective, the account is regarded as a key account. Although there is no prior research on the field, the existing studies are more or less descriptive in nature. Literature has identified the role of key account management in consultative selling to industrial sales and other B2B markets (Rackham, 1991). The focus of key account management can be traced to a combination of the perspectives of relationship marketing, supply chain partnerships and the core competence of the selling organization. There is large volume of literature developed on relationship marketing and SCM. The integration of lean supply and manufacturing has enabled firms to achieve substantial cost reduction in the processes. Prahalad and Hamel (1990) studied the idea of core competence of the organization. Key account management strives to achieve the combined effect of the advantages of these three concepts. Firms can develop the practice of key account management as a part of their direct marketing practices. In order to achieve efficiency in key account management, the firms should formulate strategies outlining the proposed actions in the area and redesign their systems and processes in a way that meets with the objectives of key account management. On the confirmation of key account status on a customer, it involves an implied commitment on the part of the company, an anticipation of enlarged sales and it entails a special treatment to the key account customer. The success of key account management depends on the ability of the seller to build the trust of the buyer.
Impact of Information Technology on Direct Marketing
With the proliferation of information technology (IT), businesses have developed their ability to provide superior quality customer service, which is the essence of direct marketing initiatives. This study explores the role of information technology in enabling PC manufacturers to adopt to direct marketing strategies, where the companies have more scope for meeting the customer demands for product preferences as well as service demands. Sawhney & Parikh, (2001) have observed significant developments in digitization of information and advances in telecommunicating technologies have led to higher value creation in any economy. Overall, IT enables firms to enter into more complex transactions with existing and potential customers, where the transactions involve large volume of information. Distance from the site of the firm to the location of the customer to complete the transactions is no more a barrier (Young, 1993)44. This section will focus four main outcomes of IT that would help PC manufacturers to adopt direct marketing strategies by extending their capabilities to offer better services to the customers.
The accelerated progress in IT in the form of Internet, CRM programs, wireless networks, supply chain management networks and data mining tools will enable PC manufacturers to provide efficient customer service. E-service is sure to increase the customer satisfaction and lead to improved profitability.
Demand Driven Production Systems
Advanced IT has enabled PC manufacturers to migrate from supply-driven production to demand-driven production. “Sophisticated internal information systems can now integrate all the fulfilment process, from order entry, manufacturing, and billing to delivery. Information technology allows the three main stages of customization to be integrated in a seamless network: elicitation, the mechanism to interact with the customer and obtain specific information, process flexibility to fabricate the product according to the information, and logistics to deliver the right product to the right consumer.”
Personalization of Communication
One of the other important outcomes of IT proliferation is an effective and personalized communication with the customers. The PC manufacturers would be able to design effective marketing communication to address customers in different market segments. The communication can be made more personalized and this will increase the reputation and value of the manufacturer in the minds of customers.
With advanced IT capabilities, the PC manufacturers would be able to quickly detect and seize market opportunities (Sambamurthy et al., 2003). Previous research findings show that companies with wide-ranging information networks had the capabilities to respond to changes in market conditions in an efficient and fast manner.
Presentation of Findings
This chapter presents the findings of the research on the drivers and barriers to adopting direct marketing strategies by shifting from channel marketing by the PC manufacturers.
Drivers of Direct Marketing
Firms are provided with a number of choices for developing relationships with their customers. Since it is expensive and inefficient to use all channels of for business growth the firms are forced to choose between different channels and arrive at the optimal channel mix so that the firms can avoid channel conflict (Hobmeier 2001; Rollo 2004). There are several factors, which act as drivers enabling the firms to choose particular channels for distribution of their products and services (Skiera, 2003). The nature of the product purchased, the stage of the transaction process and the characteristics of the customers are some of the factors that influence the choice of the customers about the channels which they would like to deal with. Indirectly these factors influence the channel choice of the suppliers of products and services too.
From the perspectives of suppliers, choice of direct marketing will result in reduction of costs, developing better customer relationship, enhanced sales revenue and reduction of risks by reaching new markets and customers (Koller, 2000).
Direct marketing enables the manufacturers and sellers to enter new markets and to cater to additional customer segments using multiple tools of direct marketing. This reduces the dependency of the firms from a limited number of existing channels of distribution like dealers and distributors. This facilitates the spreading of the risks to a broad customer segments. This is one of the unique drivers for the firms to adopt direct marketing as against the traditional channel marketing (Kelly, 2004).
By adopting direct marketing, firms will be able to meet the changing needs and preferences of the customers. The establishment of direct contacts with the customers through Internet, email, call centres and other Web-based tools direct marketing facilitates the collection of adequate information that will enable the suppliers to manufacture products/services to meet the exact requirements with respect to quality and price. The ability of the firms to meet exact customer needs places the company in the position of delivering personalized and rewarding experiences and products to the customers (Rollo 2004). Direct marketing helps in achieving repeat purchases, cross selling and referrals. Therefore, increased sales revenue can be considered as one of the key drivers for the adoption of direct marketing.
Cost reduction is another key driver for firms to adopt direct marketing strategies. With no large requirements of human resources, direct marketing results in lesser administrative costs. Selection of high-tech channels like Internet, telephonic contacts and emails enable firms reduce the marketing costs substantially (Kelly, 2004).
Direct marketing leads to superior level of customer relationship management and the following figure shows the value drivers to CRM, which is the essence of direct marketing.
Early researchers proposed that CRM leads to different benefits depending upon the nature of the industry (Rust, Lemon, Zeithaml, 2001). The variation in the benefits can be attributed to the processes and technologies associated with CRM initiatives customized to meet the individual industries. However, later research has found that CRM benefits do not vary greatly depending on the nature of industries (Reinartz et al. 2004). There are certain benefits accruing to the firms by adopting direct marketing techniques and the evolving CRM because of direct marketing efforts. Prior research in the area of CRM have identified the following have been identified as the core benefits of CRM which acts as the drivers for the implementation of direct marketing initiatives as well. “Richards and Jones (2008) developed a conceptual model relating to CRM value drivers and identified seven core benefits:
- improved ability to target profitable customers;
- integrated offerings across channels;
- improved sales force efficiency and effectiveness;
- individualized marketing messages;
- customized products and services;
- improved customer service efficiency and effectiveness;
- improved pricing” (Richards & Jones, 2008).
Jones, Sundaram & Chin (2000) have identified the correlation between the sales force automation and improved sales force efficiency. Direct marketing strategy aims at improving the efficiency of sales force through adoption of different marketing tools.
Improved sales force efficiency acts as a value driver for introducing direct marketing.
This driver leads to another potential benefit of improved employee motivation (Rigby et al. 2002). The potential ability of the firms to target the most profitable customers can be understood by comparing the cost benefits accruing to the firm by acquiring and maintaining customers for a longer period. The central focus of direct marketing is to communicate to the customers the brand value of the related products so that the customer loyalty can be improved drastically. Increased customer loyalty leads to retention of the customers at lower cost. Therefore, the expected rate of return on investment from each customer association enlarges proving the value of targeting profitable customers as a value driver for direct marketing (Rigby et al. 2002). Studies have assessed the cost of retaining the customers and acquiring new customers and have determined that firms always do not consider the long-term profitability, which justifies the initial acquisition cost associated with attracting the customers with the objective of retaining them for a longer time (Reinartz et al. 2004; Chen & Popovich, 2003). The essence of direct marketing is to employ such marketing tools to build a brand loyalty so that the retention rate of the customer improves over time.
Barriers to Direct Marketing
Direct marketing is found to be difficult to penetrate in markets of heterogeneous nature. Psychic and cultural distance is often found to act as a barrier in building up the relationship with the customer. Cultural and social distance tends to create a psychic distance. Psychic distance is defined as the “extent to which the norms and values of the companies differ because of their national characteristics,” (Ford, 1984). Some of the business cultures treat the trust as an essential ingredient in the relationship between the parties and this consequently calls for a face-to-face interaction. This has its own implications in the high-context cultures. High-context cultures are those in which implicit contents and emotional values are attached with the communications between parties. The high-context cultures need an implicit and non-verbal content in the communication process (Usunier & Lee, 2005). This makes the implementation of personalized, non-personal communication difficult. Lack of communication, which does not involve personal contacts, does not appear to be successful in such contexts. In cultures, which are high feminine and high uncertainty avoidance cultures, face-to-face and personal contacts become necessary to make the marketing attempt successful. In these cultures, business development is associated with personal contacts and the risk appears to be reduced by cultivating personal relationships (Hofstede, 2001).
In cultures, which are masculine in nature like western countries, people tend to be more businesslike (Batonda & Perry, 2003). Nevertheless, it appears that based on the cultural and social distances and their impact on direct marketing, even standardized business models like franchising or other channel marketing need to be supported by occasional face-to-face personal communication because of the impact of culture. Businesses in these cultures to be managed from a distance through communication tools like direct mail and Internet based does not appear to be a successful proposition.
Development of trust is another important aspect that appears to be lacking in direct marketing (Conway & Swift, 2000). Because of communication barriers based on culture and language in some cases the required trust is not created leading to sluggish business growth.
Country or origin effect acts a barrier to the development of direct marketing efforts (Zhang, 1996; Amine, Chao and Arnold, 2000). The information on the country of origin of a product constitutes the country of origin effect. In the minds of consumers, certain products are associated with certain countries. This country of origin image reflects on the preference for the products and therefore influences the purchasing decisions of the consumers. Country of origin provide a shopping cue to the customers.
Diffidence existing between parties belonging to different cultures play a dominant role as a barrier to direct marketing. Amine, Chao and Arnold (2000), argue that when the mutual feelings between the parties are affected by the negative attitudes towards products originating from a particular country due to political, economic and military reasons or other trade related restrictive legislations, it acts as a barrier to direct marketing.
Discussion on and Analysis of Findings
This chapter presents an analysis of the findings about the key success factors for direct marketing by PC manufacturers and an elaborate discussion on the key success factors identified by the research.
“Critical Success Factors (CSFs) describe the idea that every business has a small number of things that must go right if the business is to prosper.”
For every planning and implementation process, there are a number of key areas, which need to be focused and handled carefully in order to succeed with the implementation. The concept of key success factors has been adopted by many organizations as a strategic planning framework. This approach brings the ability to focus management attention on the important tasks and activities.
Critical Success Factor 1 – Value Proposition
It is important that the PC manufacturers that they systematically understand and reinvent the value propositions by defining the different aspects of the concept so that they can form a successful marketing approach.
“A value proposition is a clear statement of the tangible results a customer gets from using your products or services”.
“A description of the value that a product, service or process will provide a customer.”
. “Should be defined abstractly to assure one understands who all the competitors are. Thus, rather than saying one provides customers with book, one should consider saying that one provides education or entertainment.”
All the above definitions focus on the customer proposition as the important element of value proposition. Value proposition is all about value that the customer wants, value that the manufacturer can deliver to customer. Value proposition is concerned with the relationship between the product offerings of a supplier as received by the customer and in the process value proposition identifies the ways in which the manufacturer meets the requirements of the customers, in the case of several classes of customers. “Specifically, it defines the relationship between the performance attributes of a product or service, the fulfillment of needs across multiple customer roles (e.g., acquiring, using, and disposing of products/services), and the total cost.”
Importance of a Strong Value Proposition
A strong value proposition allows customers to understand the benefits they will receive out of this initiative and ensures higher customer retention levels. This enhances quality leads and increases the revenues. Simultaneously, value proposition increases the turnover of products or services, which enables faster time to market and increase in market share. It allows improvement in operational efficiency and helps in decreased cost and employee turnover. All the tangible results substantiate the importance of solid value proposition.
Recommendation: Methods to Develop and Create Value Proposition
In order to introduce or change value proposition successfully the PC manufacturers should establish a value map showing the relative position of different companies in an industry based on the cost-performance of each firm. The firms should establish their value frontiers. “The value frontier defines the maximum performance currently feasible for any given cost (to the customer), and represents the different segments offered to customers.” “However, if all the competitors converge toward a similar point on this frontier, the industry faces commoditization and potentially reduced margins.” This is what that has happened in the PC market.
“Value propositions can be changed along three dimensions (cost, performance, and customer roles) to achieve one of the three strategies which alter positions on or of the value frontier (extending toward the low-end, toward the high-end, and shifting the frontier).” Dell has followed the strategy of shifting the value proposition by purchasing components on the third party market and assembled them in its plants. It adopted direct selling and delivered products directly from its factory. The company offered services of call centres for queries and assistance in connection with installation of hardware and software applications, which proved to be a unique selling point for the company. This enabled the company to shift its value propositions. Dell was able to offer products with a similar performance as that of the competitors for a much lower price and this changed the value frontier of the considerably in the PC market. Therefore, the firms may first specify the features of value frontier as the starting point of the process of arriving value proposition. A firm by adopting different value frontiers would be able to shift its value propositions. “Value propositions can be changed along three dimensions (cost, performance, and customer roles) to achieve one of the three strategies which alter positions on or of the value frontier (extending toward the low-end, toward the high-end, and shifting the frontier).”
It is advisable for the PC manufacturers to adopt the strategy of shifting the value frontiers to ensure that they can change their value propositions.
Critical Success Factor 2 – Setting Objectives and Strategy for Direct Marketing initiatives
Objectives for Direct Marketing Initiative
Establishing marketing goals always provide a clear direction on where the manufacturer wants to be by moving into direct marketing and determine how the manufacturer should work in order to achieve the goals established. Some companies may just move into direct marketing by joining the crowd but have no ideas what they try to achieve from the initiative and how this program is going to help the manufacturer grow or capture the market share. An initiative without objectives definitely will lead to failure since there is no direction towards the end state. Tracking, monitoring and measurement cannot be in place simply due to lack of parameter. Hence, it is important and critical to determine direct marketing objectives that allow manufacturer as a whole to be able to evaluate and measure the success or failure, redefine their actions to meet the goals. Besides, it is important that direct marketing goals are linked with overall marketing goals and further with corporate strategy. Through linking direct marketing objectives to overall marketing objectives, the organization will be able to gain clarity of purpose by converting sales objectives to customer-based objectives. Besides, it will provide a guidance on marketing spend and retention rate target.
Recommendation: Framework in Establishing Goals
Generally, the act of establishing goals take place after analysis of current situation is complete. By then, Manufacturer should have a clear understanding of the likely opportunities and threats. Analysis enables the manufacturer set objectives, which realistically represent what the manufacturer can achieve over the next planning period.
Goals should be set in a hierarchical manner, where the goals of each department such as marketing, finance, operations will fit together and corporate strategies are met if everyone is meeting their respective goals. Likewise, all the different marketing function objectives should come together to achieve the primary marketing objectives. The above figure illustrates the way direct marketing needs to be positioned alongside other marketing objectives.
Critical Success Factor 3 – Segmentation
Moving into direct marketing simply means that now the manufacturer has to deal with humongous customer base. In the past, manufacturer was required to deal only with wholesalers, distributors or to certain extent with some big retailers; however making the number of contact points relatively much smaller than dealing with individual customers. Dedicated communication to each individual customer is a key in direct marketing. However, it is impossible for manufacturer to carry out “one-to-one” marketing effort and communication for every single customer.
The market segment may take the following form.
Hence, segmentation, a method of grouping customers based on variables, plays an important role in direct marketing to allow the manufacturer classify the customer into different groups based on similar characteristics. Through segmentation, it will allow the manufacturer to predict customer behaviour more accurately, design the solutions and offers easily and target the customers in precise way. In addition, it helps the manufacturer to determine the prioritization among all customer groups and invest amount of resources accordingly.
Recommendation: Possible ways of Segmentation
Some examples of typical major characteristics are previous purchase behaviour, demographics, geographical, psychographics or lifestyle characteristic. Segmenting customers into different group helps to determine the marketing actions on how the manufacturer should engage with the specific groups. The following table indicates different steps involved in market segmentation for PC manufacturers.
According to variables used in classification, there can be a choice-based classification, benefit-based classification and demographic classification. For quite a long-time, catalogue companies and direct marketers have been using Recency, Frequency and Monetary value (RFM) analysis for segmenting their customers. Although this approach to segmentation was simple and cost-effective, this technique is found suitable only for those businesses where there is high level of purchase frequency. For PC manufacturers with relatively low purchase frequency, the variables involved in the RFM approach are doubtful to enhance the segmentation values.
Benefit-based segmentation addresses the reasons for which the customers choose products rather than the actual products they choose. Heuvel and Devasagaym (2004) has recommended benefit-based segmentation method approach market segmentation based on the perceptions of the customers about the intrinsic value of the products. The model seeks to base the segmentation on the feeling of the customers instead of identifying the customers based on their addresses or income.
Demographic segmentation looks at general variables. Kou et al. (2002) introduced a two-staged method that encompasses self-organizing feature maps and K-means algorithm. This method has excelled the conventional two-staged method that uses multivariate analysis procedures.
There are number of techniques available to segment the customers by the PC manufacturers. Most frequently used methods are: cluster analysis, conjoint analysis, CHAID/Regression trees and discriminant analysis. “CHAID/Regression Trees This was called Automatic Interaction Detection for a long time and now also goes under various names used by software vendors, including Regression Tree, Answer Tree, Classification Tree and CART” is employed frequently in Data Mining. “It can quickly analyse a large set of candidate explanatory variables to determine the most influential variables on a dependent variable.” This method works with the idea of segmenting the target population hierarchically, using a particular dependent variable on the customer database. The explanatory variable may also be categorized into variables describing the demography of customers including the age group and other personal details. It also includes the attitudes of the customers and the behaviour pattern of their previous purchases. Segmentation adopting any of the suitable methods will help PC manufacturers enlarge their profits by catering to the preferences of the customers. With segmentation, they may also be able to have a better positioning of their products in the selected target segments. This leads to the capturing of higher market share by the firms and helps them to acquire large volume of business. By doing classification the PC manufacturers can segment only the most profitable categories.
Critical Success Factor 4 – Resolving Channel Conflict
In the globalized market for the PCs companies are forced to adopt a multichannel strategy, in which firms choose to use two or more channels of distribution including direct marketing. The companies adopt a multichannel strategy with different aims to achieve a higher market share, to cut the costs, to cover different market segments, or to meet different customer preferences. In this process, while on one side the decision-makers develop new distribution channels for meeting the consumer buying behaviours, on the other side they are confronted with the dilemma of “channel conflict” arising because of the addition of new channels of distribution, especially from the old traditional distributor. This is an unavoidable issue for the PC manufacturers, who want to adopt direct marketing strategy. In such a complex situation, the manufacturers have to take swift decisions concerning several variables, which would enable them to achieve an optimal channel structure. This optimal channel structure should enable them to maximize the profits and minimize the conflict among channel partners.
Recommendation: Approaches to Resolve Channel Conflicts and Ways of Minimize Channel Conflicts
There are different theoretical models evolved for measuring and tackling the channel conflict. For example, Webb (2002) has focused on the complex issue of channel distribution in the e-commerce era and developed twelve propositions, through which the suppliers can influence the level of channel conflict. Eight of the recommendations focus on how to combine the channels and four of them look at the interaction between channels. Sharma and Merhotra (2007) have proposed a model for “Choosing an optimal channel mix in multichannel environment”. There are six steps involved in this model. However, this model cannot be applied to a manufacturing set up. The model developed by Rosenbloom (2007) will be of great help for PC manufacturers, proposing to adopt direct marketing, as this model has e-commerce as a new channel for manufacturers. However, a review of the related literature reveals that most of the studies have approached the issue from a qualitative angle. The research works have ended up with different conclusions in the form of propositions, frameworks, and recommendations. There is an exception in the work of Sharma & Merhotra (2007); but this research can be applied only for service companies. Therefore there is the need for the development of a simulation model, which would quantify the managers’ problems and provides them an accurate, reliable and feedback for any decision and the impact of the decisions on the complex channels variables. The development of a simulation model becomes important in view of the complex nature of the channels and the number of variables that interact with each other. The variables have an effect on each other. This simulation model that takes into account all the variables should be able to help the manufacturers decide an optimal channel structure with a maximum profitability and minimum conflict.
Critical Success Factor 5 – Implementing Change Management
Roles of Management
Commitment and support from management is essential for the implementation of any new strategy. Through the transformation, there tend to be number of changes in and re-structuring of the organization. Leader who initiates the program is definitely required to share and convince the management. Obtaining support from management level will help to encourage the acceptance throughout the organization. Without management support, it might become the barrier for the project team to make changes on the existing policies and practises.
Apart from this, management is required to trust and have high level of confidence towards the resources that involve be it during transformation or when direct marketing is in operation.
Besides, management should also demonstrate their commitment and support in several ways. Firstly, involve them by playing as a leadership role in term of providing the direction and be specific on visions. Secondly, be a sponsor for any major changes in process. It is impossible for the manufacturer to shift from channel marketing to direct marketing if management did not show their interest and commitment in the initiative.
Implementing of Change Management
The implementation of change management involves the following attributes, which the manufacturer has to follow closely for successful implementation of change management.
Role of Communication in Change Management
The most important thing in the change management process is an effective communication. Even when an organization wants to change the technology, the first thing it should do is to communicate with the people of the intended change. Similarly in the case of change from channel marketing to direct marketing it is vitally important that the organizational members are advised about the change. There are a variety of communication tools, which can be used to have an effective communication with employees at all levels. In house-training, meetings and seminars, emails, intranet, newsletters and other publications are some important means of communicating with the employees of the proposed change in the marketing method and its impact on the organization as a whole and on individual level. Such communication is an effective and essential key success factor in introducing the direct management concept in the organization.
Efficient Hiring and Training
Most of the time recruitment for direct marketing focuses on technical direct marketing skills without considering management skills and personality requirements. The manufacturer may become a real expert at targeting, media selection and judging creative, but hopeless at managing a complex network of relationships. However, relationship is a key to the success in direct marketing. Hiring visionaries is one of the key successes in order to evolve the manufacturer’s marketing model. The return of investment will not happen within short period, as there tend to be obstacles and challenges that might shaken the belief. However, visionaries will be committed to their belief and will continue in the path.
Adequate training and education for existing employees is vital. Human may feel frustration when they face unresolved problems and discourage to adapt to the changes and new practices due lack of trainings. Therefore, manufacturer should always ensure sufficient training conducted whenever there is redeployment.
Undertaking Organizational Restructuring
Restructuring the organization is necessary since direct marketing is an entirely different business model as compared to channel marketing, which requires different expertise in resources, different concepts and ways in running business. Direct marketing is not just a pure marketing strategy change, but it changes the whole manufacturer its entire ways of doing things.
Dell is one manufacturer, which adapted itself quickly and decisively by aligning their organization according to customer segment. This calls for the respective department to focus only on specific group of customers and be an expert in the respective areas.
Critical Success Factor 6 – Efficient Customer Management
Brand Building represents the idea of the manufacturers’ or the sellers’ perception of the brand identity of their products. Brand identity encompasses the definition of what the seller wants the brand to represent. Brand building consists of creation of a brand identity also known as a brand image. PC manufactures can use direct marketing effectively for a successful brand building. This is possible because of the manufacturers directly communicate with the end user and therefore they have the liberty and option to communicate the product values and utility in their true perspective, which is the essence of brand building. The brand image is a promise and when the manufacturer himself makes a promise about the product functionality and quality, he will be able to make a honest representation and build the trust of the consumers on the products. When the manufacturer projects the brand as his commitment to the customer, then the customer experiences the fulfilment of the commitment by consuming the product to his satisfaction. Obviously the PC manufacturer cannot leave the customer experience to a chance.
Once the manufacturer is clear about the brand identity, it is possible to build the brand by using effective marketing tools. One of the popular tools that are being employed in the brand building exercise is the direct communication under direct marketing approach. This can be a strategic promotional measure. This framework uses both the traditional methods of advertising the products and the innovative approach of direct marketing.
Superior direct marketing strategy requires that the PC manufacturers enable customer to realize increased value, which is in excess of the value provided by the competing products. “To offer superior delivered value, marketing should directly influence three core business processes: product development management (PDM), supply chain management (SCM) and customer relationship management (CRM) (19).”
There are clear objectives established for CRM. “The objectives of the CRM process are to shape customers’ perceptions of the organization and its products through identifying customers, creating customer knowledge and building committed customer relationships.” (Ragins & Greco, 2003) In essence, CRM “is a business strategy that attempts to ensure every customer interaction (whether for sales or service) is appropriate, relevant, and consistent — regardless of the communication channel.” (Khirallah, 2000).
B2B market uses more of Internet and relationships with B2B customers are longer as compared to B2C market. B2B market offers multiple marketing opportunities. These marketing opportunities are often combined with longer sales happening in multi-stage. B2B customers expect their products and services enable them to ensure that they function with a higher value addition in the way in which they function. Here relationships built on performance, history and trust are the essential elements for a continued successful business. PC manufacturers should have information on the buyer organization in the form of profiles of senior leaders who have an influence in the purchasing decisions at the customer point. “Business customers can be contacted directly by sales representatives, with the Web or call centers used for straight rebuys or information gathering.”
As compared to B2B market, B2C market is relatively smaller, requiring different types of associations, information on customer needs and preferences, and approaches to collect the customer related information. B2C association is usually small having a smaller duration of sales transaction completion. Interactions with the B2C customers are driven by the individual transactions. B2C consumer may expect the manufacturer to provide a perfect combination of product usability, price and product functionalities. “The contact strategy for the B2C market includes using past purchase patterns to anticipate new needs and wants that can be targeted with new offers.” PC manufacturers can expect quick and prompt buyer review through entering into communications on both ways on the Internet.
“Depending on the type of product or service and also on the type of individual, different relationship partners may potentially become more salient.” To meet the different needs and preferences of different customers the manufacturers have to collect different information and should have different contact strategies to gather the required information. An appropriate CRM software would help the manufacturers collect and maintain multiple data about customer needs and preferences, behaviour and other related information which may be useful in any marketing environment. The information may be helpful particularly in a B2C market for helping the manufacturer to build a relationship with the customer. It would also help in enhancing the profitability of the company through ecommerce in the case of B2C market. Through Internet the manufacturers have the closest contact with the customers. “Information from these personalized contact points can be linked to statistical and reporting software tools when these data are captured, ideally in real time.”
Critical Success Factor 7 – Supply Chain Infrastructure
“Apart from global optimization of operational or tactical CRM and SCM decisions, the traditional view that the distinction between CRM and SCM derives from a flow model of the value chain is limited by today’s world of complex partnerships where firms may have reciprocal relationships: they can simultaneously be vendors, customers and competitors. When the distinctions between SCM and CRM are transaction-based instead of based on the enterprise organization chart, then many SCM aspects of the relationship between two firms may be relevant to the customer side of the equation.” “For example, a computer system company A can be both a supplier of integration services to a chip manufacturer B, as well as a customer who buys chips from B.” This relationship calls for a complete rethinking on the ways of integrating the SCM and CRM applications. This integration becomes quite possible especially because of the availability of new data mining techniques and other software applications aiding quick and efficient business decisions. “The effectiveness and value of a CRM system can be significantly enhanced by the information considered in its supplier relationship management (SRM) system. Emerging strategic relationship management technologies are aiming to enable prediction and decision making that combine CRM and SRM at a strategic level.”
Recommendation for Efficient Supply Chain Management
A tight integration between SCM and CRM in the case of PC manufacturers is is one of the best solution for improving the efficiency of SCM in their respective settings. It enables the firms to meet the challenges in their day-to-day business planning. The manufacturers would be able to maximize their overall efficiency by effectively driving the sales planning to the demand planning. The business process integration of SCM and CRM helps firms to manage and service a customer profitably. The integration enables the firms to gain insights from the customers who are placed in the front end of the business planning process. The knowledge so gained can be transformed into profits for the firms by efficient planning of the supply chain. In fact this is one of the key success factors of Dell, while the company shifted its focus towards direct marketing. The availability of up to date IT capabilities including data mining will make it a simple task at the firm level to integrate both applications.
Critical Success Factor 8 – Customer Relationship Management (CRM)
Direct marketing is a unique business model where manufacturer is able to engage in continued dialog with customers and establish, grow, and maintain a customer relationship. CRM act as a tool in helping to increase customer loyalty, which is one of the key drivers for enabling the manufacturer move into direct marketing.
CRM are vital business asset to manufacturer. CRM is how the manufacturer can find, get to know, keep in touch, connect to customer, ensure customers get what they want, check and ensure customers getting what manufacturer promised to deliver. It is important because the cost of adding new clientele usually is more costiler than retaining the customers. CRM is an essential concept to be present in direct marketing.
Recommendations for Successful CRM
For a successful implementation of CRM, the following are some of the strategies the PC manufactures have to adopt.
- Developing a corporate culture: All the key people need to be involved in the CRM implementation. The role of the key people includes assessing the business goals, setting CRM approaches, making organizational level policies and issuing the necessary directions to the subordinates involved in the implementation process. Communicating CRM approaches to the organizational members through well-define goals, directions and well-planned education go a long way in making the CRM initiative a success (CRM Asia Solutions).
- Establishing a CRM strategy: Implementing CRM is not just installing or using software. “In fact CRM strategy is more about identifying critical relationships between business goals and CRM implementation strategy: business processes, people and IT tools.”101 Establishing key performance metrics in the areas like sales, marketing and customer support and comparing them with previous metrics or with those of competitors wherever possible is another important factor for ensuring a successful CRM implementation (CRM Asia Solutions).
- Defining CRM Goals and Setting CRM Expectations
“Every department within any organisation has its own needs and sense of priority.” These should be identified and a priority evolved for meeting such requirements. If the organization does not fix the priorities for CRM requirements, it will quickly lose focus of the CRM objectives. There are several other factors like structure of the organization, hierarchical roles, cultural factors within the organization, opposition to changed systems and authoritative roles need to be considered for a successful implementation of CRM.(CRM Asia Solutions)
Critical Success Factor 9 – Security Management to Protect Data
Security management to protect customer database is one of the essential success factors in succeeding in direct marketing. Customer database is an invaluable asset to manufacturer. Internet has been an important source for getting to know about customers and will be a source of sales for future. Privacy is a big deal on Internet, as the manufacturer may have to manage customer information country-by-country since there are different privacy laws in different countries. Some companies may not transact with their direct customers through Internet but on specific software. Throughout the whole activities, there are a lot of sensitive and confidential data transmit between the manufacturer and customers that resist exploring to outsider in order to protect the benefits of the manufacturer and customers. Regardless, there is a need to setup security measurement and system such as firewall system and secure servers to protect any leakage of customer information.
Conclusion and Recommendation
“The most effective direct marketing takes place when there is a clear connection to reach the target market.” The ultimate user in this case may be one consuming the product or an entity involved in trade. In the direct marketing concept, there is no involvement of intermediaries at any level and therefore direct marketing involves an interactive communication with the ultimate user of the product. “Direct marketing is not synonymous with mass marketing.” There is a number of direct marketing tools like “direct sales force, catalogs, websites, email, direct mail, telemarketing, seminars, trade shows, and other “one-to-one” techniques” which can be put to use by the PC manufacture for communicating and selling to the customers. “Some of these direct marketing methods have grown dramatically, especially with the growth of marketing over the Internet.”
This study identified several key success factors and the necessary steps or elements for a successful introduction of direct marketing. These key success factors can be leveraged by the PC manufactures to build an effective brand, communicate effectively with the ultimate user (be a business or a consumer), and deliver quality products to them.
This study finds that Internet has enabled the happening of a resolution in direct marketing, which increases the scope for the personal computer manufacturers to shift to direct marketing to targeted audience. Since Internet enables people to have services in the areas of information, entertainment, shopping and individual and group communication, use of Internet as a direct marketing tool will enable the PC manufacturers to achieve impressive sales growth once they shift to direct marketing approach in the future. Looking at the phenomenal growth of Internet, there may not be the necessity for any other marketing tool for the PC manufacturers to enhance their sales. Another distinct advantage of direct marketing through Internet is that it eliminates geographical barriers in selling. The future marketing of PC manufacturers can be much effective through Internet as a marketing tool, as “The Internet makes direct marketing easier, more targeted, more flexible, more responsive, more affordable, and potentially more profitable than ever.”
An example of the success of direct marketing of the PC manufacturers can be witnessed in the sale of Dell PCs through using “Twitter” as a marketing tool. The company has an estimated sale of $ 6.5 million for the year 2008 through 100 of its employees twittering online. Though the proportion of this sales to the total volume of sales of Dell, Twitter has been considered as a vibrant channel by the company with remarkable return on investment and the company expects a gradual growth in their sales through twittering.
PC manufacturers need to be ready to face the challenges, obstacles during the transformation. It is critical for manufacturer to have a proper plan to mitigate and resolve the problems they face. The critical success factors and recommendation shared in this dissertation provides a guideline to deal with specific challenges.
There is no simple way for any PC manufacturer to move into direct marketing. A perfect direct marketing model may never be achieved. The manufacturer needs to constantly analyse, monitor, develop, implement, and review the solutions in order to cope with the changes in the market and consumers.
In view of the distinct advantages occurring to the PC manufacturers through direct marketing as evidenced by the success of manufacturers like Dell and HP, this research recommends the adoption of direct marketing strategies. In order to be successful in their direct marketing efforts the manufacturers have to take into consideration the key success factors and barriers identified by this research.
The following are some of the areas where further studies can be undertaken with respect to the direct marketing strategies. An empirical study on the improvements in the financial performance of PC manufacturers after they adopt direct marketing strategies would throw light on the effectiveness of direct marketing strategies in improving sales of PC manufacturers. Research on the customer perceptions on dealing with PC manufacturers directly through a quantitative survey would help the manufacturers to improve their sales and service.
“AMA Board Approves New Marketing Definition”, Marketing News, 1985.
Auld, Malcolm (1997) Direct marketing make easy. Sydney NSW: HarperBusiness.
Baker, M.J., 2003. The Marketing Book. London: Butterworth-Heinemann.
Brassington, F. & Pettitt, S., 2003. Principles of Marketing 3rd Edition. London: Prentice Hall.
Bendix, Bruce, Goodman, John B., and Nunes, Paul F, Accenture. (2001). New channel opportunities: The channel conflict strategy mix. Accenture. Web.
Blackwell RD, Miniard PW & Engel JF (2001), Consumer Behaviour, 9th. Edition, New York: South-Western Thompson Learning
Bly, Robert W. (c1998) Business to business direct marketing : proven direct response methods to generate more leads and sales. Lincolnwood: NTC Business Books.
BPTrends (2009). Web.
Dedrick, Jason; Kraemer, Kenneth L. (2005) The Impacts of IT on Firm and Industry Structure: The Personal Computer Industry Centre. Irvine: University of California. Paper 357
Dell, Michael; Fredman, Catherine (c2006) Direct from Dell : strategies that revolutionized an industry. New York: Collins Business Essentials.
Dedrick, J. & Kraemer, K.L., 2002. The Impacts of Information Technology, the Internet, and Electronic Commerce on Firm and Industry Structure: The Personal Computer Industry. CRITO: Center for Research on Information Technology and Organizations.
Driver, Brent; Evans, Zach (2004) Channel Conflict: Historical Perceptions, Management Implications, and so much more.
Fill, C., 2002. Marketing Communications – Contexts, Strategies and Applications, 3rd Edition. UK: Prentice Hall.
Goodman, S., 2003. Aframework for implementation of (internet) marketing by the Wine Business. Australian Wine Marketing Conference Collaquium.
Gray, Paul; Jurison, Jaak (1995) Productivity in the Office and the Factory. USA: Boyd & Fraser publishing company. p.41
Grönroos,C., (1990) Service Management and Marketing: Managing the Moments of Truth in Service Competition, Lexington, Massachusetts: Lexington books.
Gronsroos, C., 2004. The relationship marketing process: communication, interaction, dialogue, value. Journal of Business & Industrial Marketing, 19(2), p.99-113.
Gummesson, E., 1997. Relationship marketing as a paradigm shift: some conclusions from the 30R Approach. Management Decisions, 35(4), p.267-72.
Hoovers online (2004) Company report and industry averages. Web.
Jarvis, W. & Goodman, S., 2003. To Niche or not to Niche? The Australian & New Zealand Grapegrower & Winemaker, 477, p.108-13.
Jay, Ros (1998) Profitable direct marketing. Singapore: International Thomson Pub.
Jeff, Grill (2009). Web.
Kotler, P., 1991. Philip Kotler Explores the New Marketing Paradigm. MSI Review, Spring, p.45.
Kotler, P., 2006. Marketing Management, 12th Edition. Englewood Cliffs NJ: Prentice Hall.
Kotler, P. & Armstrong, G., 2000. Marketing – An Introduction 5th Edition. Upper Saddle River NJ: Prentice Hall.
Kurtz, D.L., 2008. Contemporary Marketing. Stamford Connecticut: Cengage Learning.
Laura, McDonald (1999) Managing Channel Conflict, Mortgage Banking.
Magretta, Joan, ‘The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell.’ Harvard Business Review (1998)
McCabe, Laurie (1998) Dell’s E-Services Strategy – The Next Direct Frontier’, Summit Strategy, Inc. pp1
McCarthy, E.J., 1960. Basic Marketing – A Managerial Approach. Illinois: Irwin.
Mullin, Roddy (2002) Direct Marketing: A step-by-step guide to effective planning and targeting. London: Kogan Page.
Murphy, Debra (2009) Is Your Value Proposition Helping or Hurting You? Web.
Robert, Mary Lou; Berger, Paul D. (c1999) Direct marketing management. Upper Saddle river, N.J: Prentice Hall.
Rust, T.R. & Kannan, P.K., 2003. E-Service: A New Paradigm for Business in the Electronic Environment. Communications of the ACM, 46(6), p.37-42.
Rust, R.T. & Thompson, D.V., 2004. How does Marketing Strategy Change in a Service-based World? Implications and Direcctions for Research. Web.
Sambamurthy, V., Bharadwaj, A. & Grover, V., 2003. Shaping Agility through Digital Options: Reconceptualizing the Role of Information Technology in Contemporary Firms. MIS Quaterly, 27(2), p.237-63.
Sawhney, M. & Parikh, D., 2001. Where Value Lives in a Networked World. Harvard Business Review, 79(1), p.79-86.
Shiffman, Denise (2006). Web.
Stone, Merlin; Bond, Alison; Blake, Elizabeth (2003) The definitive guide to direct and interactive marketing: how to select, reach and retain the right customers. Harlow: Financial Times Prentice Hall.
Tapp, Alan (c2000) Principles of direct and database marketing. Harlow: Financial Times Prentice Hall.
The Free Library, 2009. PC Market Rebound Will Drive Double-Digit Growth Through 2014, According to IDC. Web.
Wells, W., Burnett, J. & Moriarty, S., 2000. Advertising: Principles and Practice. New Jersey: Prentice Hall.
Xie, J. & Shugan, S.M., 2001. Electronic Tickets, Smart Cards, and Online Prepayments: When and How to Advance Sell. Marketing Science, 20(3), p.210-43.
Zipkin, P., 2001. The Limits of Mass Customization. Sloan Management Review, 42(3), p.81-87. Web.