Magazine article Marketing

Looking beyond the Telephone

Magazine article Marketing

Looking beyond the Telephone

Article excerpt

Over the past five years there has been a small revolution in consumer marketing that has redefined the meaning and connotations of the word `direct'. Today, around 25% of TV commercials carry phone response mechanisms, which equates to nearly 800m [pounds sterling] of TV advertising expenditure. The telemarketing industry has grown from virtually a cottage industry to a multimillion pound sector complete with its own trail of mergers, acquisitions and self-made millionaires.

Consumers, too, are getting the habit. To them the word `direct' now means a certain way of doing business, with specific quality expectations such as easy access, high speed service and good value for money. The process of unbundling the traditional retail-based route to the consumer has even created a new word, `disinter-mediarisation'.

Leaving such jargon aside, what's behind the changes? Why are direct advertising and telemarketing getting so big, so fast? And, perhaps most importantly, where are they going?

Telemarketing has thrived because of its ability to meet today's needs. Tomorrow's may be better served by interactive digital television.

The distribution revolution

First, though, it is important to establish that the rapid recent growth of telemarketing is not being driven by advertising. Because telephone numbers appear on advertising, it is easy to assume that advertising is driving the change process. Nothing could be further from the truth. The rise in direct marketing and telemarketing is being driven by fundamental changes in distribution strategy, especially in the service sector where companies are beginning to see and reap the benefits of serving the consumer on a one-to-one basis.

There are good reasons for consumers and producers to go direct. From the consumer perspective, it can mean a powerful combination of better service at a low cost. At its best, `better service' can be defined as immediate problem solution, 24-hour access, no queuing, and a lower-cost service. For producers, going direct offers a route to higher competitiveness by delivering to consumers exactly what they want at a price they can afford.

There are a number of success stories in the distribution revolution. Direct Line got the ball rolling in the early 80s by taking insurance direct to the consumer. First Direct, the bank, was developed by Midland and is now the envy of the clearing banks and building societies. Virgin Direct has had great success in investment areas such as PEPs and pensions.

Each of these companies has set the scene in its target sector. In each case, existing players relied too heavily on the `pinstripe culture' of tradition, risk aversion and poor consumer focus that still dominates many financial services organisations. These new players used new distribution strategies to challenge the status quo.

A number of companies have now followed, partly because they have no choice now that a new direct structure is emerging in their industry. We have seen direct offerings from Eagle Star, Guardian Direct, Norwich Union, and National Savings Virtual Shops, among others. The banks are showing interest too, most notably Barclays, which is now offering PC banking and experimenting with digital TV banking, while Midland has a share in British Interactive Broadcasting.

Servicing the industry

The growth of the service sector within the economy has been a key factor in this distribution revolution. Services have unique characteristics which make them suitable for one-to-one interactive delivery.

Services are intangible processes rather than tangible products. Services cannot be delivered without direct one-to-one interaction between the provider and the purchaser of the service in question. Without this meeting there can be no service provision. Examples include banking, credit cards, loans, investments, insurance, air, rail and sea travel- and now new business areas such as Internet service provision. …

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