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From the editor
E. SCHULTZ, PhD Professor, Medill School of Journalism Northwestern University DON
From the Editor Eflciency versus Efectiveness To many direct marketers, one of the most puzzling marketplace conditions is why the entire business world hasn’t accepted or, better yet, embraced the concept of direct marketing. Most all direct marketers believe their approach is the “future of marketing.” Yet, many consumer product manufacturing companies have been not only slow to accept the practice of direct marketing, some have simply rejected the approach out of hand. That’s a bit disconcerting, since many direct marketers and direct marketing organizations are now considering-and some even using-image and/ or broadscale media advertising just like packagegoods companies to build lists and generate inquiries. Indeed, it seems as though, since packagegoods companies haven’t accepted direct marketing, direct marketers have decided to adopt or adapt package-goods approaches. That’s a strange turn of events. At industry meetings, one hears many reasons why package-goods companies have flirted with but never quite started to develop a long-term relationship with direct marketing. Those reasons range from lack of sufficient product margin to concerns
about the up-front costs of developing a database to the reluctance to give u p traditional marketing techniques such as network television advertising and massive FSI coupon drops. All are likely valid. Some recent platform speaking appearances before package-goods marketers started me thinking in a whole new way about package-goods marketers and direct marketing. I believe one of the major reasons package-goods marketers have not embraced or accepted direct marketing is a matter of efficiency versus effectiveness. Package-goods advertisers have been trained throughout their business careers to divorce advertising and marketing communications from sales. The argument goes something like this: Few consumers are directly in the market for a package-good product at any one time. In addition, the purchase decision on a package-good product is often made long after the advertising exposure. Therefore, it is difficult to draw a direct relationship between the two. In addition, since the package-good marketer generally sells through some sort of retail distribution system, it is difficult to control retailer outof-stocks, competitive displays, shelf space allocation and the like. Therefore, because of the many intervening marketing variables, package-goods markets generally believe it is difficult if not impossible to relate advertising directly to sales. The result: package-goods advertisers and their agencies long ago decided not to measure sales as a result of advertising but to measure a surrogate instead, communication effects. In some cases, since com-
Q 1990 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/90/0 10004-02$04.00
4
JOURNAL OF DIRECT MARKETING
VOLUME 4 NUMBER I WINTER 1990
munication effects are also hard to measure, many have dropped that approach too and now measure just the delivery of sales messages.
portion to message delivery that it is simply rejected as being ridiculous. RECONCILING TWO GOALS
MEASUREMENT AND EFFICIENCY
With this background, it’s easy to see how media advertising has slipped into the efficiency business. To justify an advertising budget, you must measure something. I f you can’t or don’t want to measure sales or even communication effects, the next best thing is to measure the cost of sending out those sales messages. And, that’s where package-goods marketers are today. Measuring the cost of sending out sales messages. If all sales messages are about the same (common themes or commercials), and it doesn’t really matter who sees or hears them (women 18 to 49, for example), then the lowestcost way to get those messages out is likcly the best. That’s efficiency. To package-goods advertisers, accustomed to thinking, planning, and buying boxcar media numbers, the delivery systems for direct marketing seem terribly small. While direct marketers might consider a list or a database of o n e million names large, it’s a drop in the proverbial bucket to a package goods advertiser. That’s also why cost-per-response numbers in the multi-dollar range seem so out of line to the package goods marketers. The entire business is built o n efficiency. Eficiency in terms of getting the messages delivered. And, since the package goods marketer is generally not held liable for the results or effects of that mass media advertising (remember, the package-goods advertiser agreed long ago not to try to tie sales to advertising), then any type o r kind of effectiveness measure is either meaningless or involves a cost so out of pro-
JOURNAL OF DIRECT MARKETING
So, there’s my argument. O n e of the major reasons package-goods advertisers have rejected direct marketing is simply efficiency versus effectiveness. Package-goods advertisers look at efficiency. Direct marketers value effectiveness. Two different goals. Two different scales. The question is: can they ever come together? 1 believe they will for two reasons: 1. The package-goods advcrtiser has to find something better than efficiency for future measures of his marketing communication efforts. Today, research o n package-goods scanner sales data is demonstrating that the effects of advertising can be separated. Package-goods advertisers are starting to learn just what they get for their advertising investment, beyond simply delivering sales messages. As that work continues, the move for package-goods marketers will likely be from efficiency to eff‘ectiveness. 2. Direct marketers are starting to investigate and define the results beyond just response. Those results are the communication effects which are delivered and which remain with customers and prospects even if they don’t immediately respond to the direct marketing effort.As these responses are more clearly understood, direct marketers may well be able to develop better measures of the total effect of their efforts and predict future response with some accuracy. As these two streams of research come together, it may well be that both efficiency and effectiveness will become the standard measures of both packagegoods and direct marketers. At least then maybe rn both will be speaking the same language.
VOLUME 4 NUMBER I WINTER 1990 5
From the Editor Eflciency versus Efectiveness To many direct marketers, one of the most puzzling marketplace conditions is why the entire business world hasn’t accepted or, better yet, embraced the concept of direct marketing. Most all direct marketers believe their approach is the “future of marketing.” Yet, many consumer product manufacturing companies have been not only slow to accept the practice of direct marketing, some have simply rejected the approach out of hand. That’s a bit disconcerting, since many direct marketers and direct marketing organizations are now considering-and some even using-image and/ or broadscale media advertising just like packagegoods companies to build lists and generate inquiries. Indeed, it seems as though, since packagegoods companies haven’t accepted direct marketing, direct marketers have decided to adopt or adapt package-goods approaches. That’s a strange turn of events. At industry meetings, one hears many reasons why package-goods companies have flirted with but never quite started to develop a long-term relationship with direct marketing. Those reasons range from lack of sufficient product margin to concerns
about the up-front costs of developing a database to the reluctance to give u p traditional marketing techniques such as network television advertising and massive FSI coupon drops. All are likely valid. Some recent platform speaking appearances before package-goods marketers started me thinking in a whole new way about package-goods marketers and direct marketing. I believe one of the major reasons package-goods marketers have not embraced or accepted direct marketing is a matter of efficiency versus effectiveness. Package-goods advertisers have been trained throughout their business careers to divorce advertising and marketing communications from sales. The argument goes something like this: Few consumers are directly in the market for a package-good product at any one time. In addition, the purchase decision on a package-good product is often made long after the advertising exposure. Therefore, it is difficult to draw a direct relationship between the two. In addition, since the package-good marketer generally sells through some sort of retail distribution system, it is difficult to control retailer outof-stocks, competitive displays, shelf space allocation and the like. Therefore, because of the many intervening marketing variables, package-goods markets generally believe it is difficult if not impossible to relate advertising directly to sales. The result: package-goods advertisers and their agencies long ago decided not to measure sales as a result of advertising but to measure a surrogate instead, communication effects. In some cases, since com-
Q 1990 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/90/0 10004-02$04.00
4
JOURNAL OF DIRECT MARKETING
VOLUME 4 NUMBER I WINTER 1990
munication effects are also hard to measure, many have dropped that approach too and now measure just the delivery of sales messages.
portion to message delivery that it is simply rejected as being ridiculous. RECONCILING TWO GOALS
MEASUREMENT AND EFFICIENCY
With this background, it’s easy to see how media advertising has slipped into the efficiency business. To justify an advertising budget, you must measure something. I f you can’t or don’t want to measure sales or even communication effects, the next best thing is to measure the cost of sending out those sales messages. And, that’s where package-goods marketers are today. Measuring the cost of sending out sales messages. If all sales messages are about the same (common themes or commercials), and it doesn’t really matter who sees or hears them (women 18 to 49, for example), then the lowestcost way to get those messages out is likcly the best. That’s efficiency. To package-goods advertisers, accustomed to thinking, planning, and buying boxcar media numbers, the delivery systems for direct marketing seem terribly small. While direct marketers might consider a list or a database of o n e million names large, it’s a drop in the proverbial bucket to a package goods advertiser. That’s also why cost-per-response numbers in the multi-dollar range seem so out of line to the package goods marketers. The entire business is built o n efficiency. Eficiency in terms of getting the messages delivered. And, since the package goods marketer is generally not held liable for the results or effects of that mass media advertising (remember, the package-goods advertiser agreed long ago not to try to tie sales to advertising), then any type o r kind of effectiveness measure is either meaningless or involves a cost so out of pro-
JOURNAL OF DIRECT MARKETING
So, there’s my argument. O n e of the major reasons package-goods advertisers have rejected direct marketing is simply efficiency versus effectiveness. Package-goods advertisers look at efficiency. Direct marketers value effectiveness. Two different goals. Two different scales. The question is: can they ever come together? 1 believe they will for two reasons: 1. The package-goods advcrtiser has to find something better than efficiency for future measures of his marketing communication efforts. Today, research o n package-goods scanner sales data is demonstrating that the effects of advertising can be separated. Package-goods advertisers are starting to learn just what they get for their advertising investment, beyond simply delivering sales messages. As that work continues, the move for package-goods marketers will likely be from efficiency to eff‘ectiveness. 2. Direct marketers are starting to investigate and define the results beyond just response. Those results are the communication effects which are delivered and which remain with customers and prospects even if they don’t immediately respond to the direct marketing effort.As these responses are more clearly understood, direct marketers may well be able to develop better measures of the total effect of their efforts and predict future response with some accuracy. As these two streams of research come together, it may well be that both efficiency and effectiveness will become the standard measures of both packagegoods and direct marketers. At least then maybe rn both will be speaking the same language.
VOLUME 4 NUMBER I WINTER 1990 5