Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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direct marketing 160
APPLICATION AREAS AND FURTHER READINGS
Advertising
Simon, J. L., and Arndt, J. (1980). ‘The Shape of the Advertising Response Function,’
Journal of Advertising Research, 20(4), August, 11–28.
Direct Marketing
Thomas, J. S., Reinartz, W., and Kumar, V. (2004). ‘Getting the Most out of All your
Customers,’ Harvard Business Review, 82(7–8), July–August, 116–123.
Consumer Behavior
Meyer, Robert, and Johnson, Eric J. (1995). ‘Empirical Generalizations in the Mod-
eling of Consumer Choice,’ Marketing Science, 14(3), Part 2 of 2: Special Issue on
Empirical Generalizations in Marketing, G180–G189.
BIBLIOGRAPHY
Sraffa, P. (1926). ‘The Laws of Returns under Competitive Conditions,’ Economic
Journal, December, 535–550.
direct mail marketing see direct marketing
direct marketing
(also called direct response marketing)
DESCRIPTION
Marketing that is aimed directly at a consumer at any location and which
intends to elicit and obtain a measurable response from the consumer.
KEY INSIGHTS
As a result of the increasing use of specialized databases by marketers
in the direct marketing industry, direct marketing applications involving
brochures, letters, coupons, print ads, and the like continue to expand.
Yet, direct marketing can involve virtually any medium provided it
includes an element of communication asking the consumer to take
some specific action (e.g. visit a website, call a telephone number, etc.).
As such, in contrast to many other marketing efforts, a major appeal of
direct marketing to a firm is the relatively greater ease by which the
firm can measure directly the consumer response to any given direct
marketing campaign. Firms can be said to use an integrated direct market-
ing approach when they explicity coordinate the use of multiple direct
marketing methods to increase response rates in an effort to achieve
even greater marketing effectiveness and firm profitability. Such meth-
ods may include: e-mail marketing —sending electronic messages contain-
ing marketing material from one computer to one or more consumer
computers on a network; fax marketing—using facsimile equipment to
electronically transfer written or graphic marketing material over tele-
phone lines to consumer locations; direct mail marketing, mail marketing,
or postal marketing—using the mail or postal system to send marketing
material directly to one or more consumers; telemarketing—using the
telephone as an interactive medium for communicating directly with
consumers; voice mail marketing—using telecommunications equipment
and telephone networks as a one-way medium for communicating indir-
ectly with consumers by leaving voice messages on centralized voice
161 direct-to-consumer marketing
mail systems or individual telephone answering machines; and door-to-
door marketing—using marketing personnel to make in-person visits at
consumers’ residences.
KEY WORDS Consumer response, information
IMPLICATIONS
Marketers seeking greater measurability of the effectiveness of their
marketing efforts may benefit from greater use of direct marketing
approaches. While the use of direct marketing by a firm depends in
part on the characteristics of the firms’ offerings, marketers must also be
sensitive to consumer preferences and attitudes to the approach, which
may include negative attitudes if consumers perceive the approach as
being both intrusive and wasteful as with some firms’ large-scale direct
mail campaigns.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Nash, E. L., and Jackson, D. (2000). Direct Marketing: Strategy, Planning, Execution. New
York: McGraw-Hill.
Roman, Ernan (1988). Integrated Direct Marketing. New York: McGraw-Hill Book
Company.
Marketing Management
Nowak, G. J., and Phelps, J. (1997). ‘Direct Marketing and the Use of Individual-
Level Consumer Information: Determining How and When “Privacy” Matters,’
Journal of Direct Marketing, 11(4), Fall, 94–109.
Stone, B. (1996). Successful Direct Marketing Methods. Chicago: NTC Business Books.
Marketing Research
Ling, C., and Li, C. (1998). ‘Data Mining for Direct Marketing: Problems and Solu-
tions,’ in Proceedings of the Fourth International Conference on Knowledge Discovery and
Data Mining (KDD-98). New York: AAAI Press.
Marketing Modeling
Allenby, G. M., Leone, R. P., and Jen, L. (1999). ‘A Dynamic Model of Purchase Timing
with Application to Direct Marketing,’ Journal of the American Statistical Association,
94, 365–374.
Online Marketing
Walle, A. H. (1996). ‘Tourism and the Internet: Opportunities for Direct Marketing,’
Journal of Travel Research, 35(1), 72–77.
BIBLIOGRAPHY
Tapp, A. (1998). Principles of Direct and Database Marketing. London: Financial Times
Pitman Publishing.
direct response marketing see direct marketing
direct-to-consumer marketing
DESCRIPTION
Marketing by a manufacturer or other organization that involves direct com-
munications with consumers, particularly in markets where the relationship
between such organizations and consumers is typically indirect.
Dirichlet model 162
KEY INSIGHTS
While the scope of direct-to-consumer marketing is broad, manufac-
turers operating in markets where consumers traditionally rely on the
advice of professional intermediaries in particular (e.g. physicians) may
find benefit in using direct-to-consumer marketing methods to increase
awareness, preference, purchase, and use of their offerings. Direct-to-
consumer marketing is therefore able to educate consumers about the
firm’s offerings to a greater extent than is possible or likely through
intermediaries. At the same time, the approach may involve oversight by
legal or regulatory bodies concerned also with the net effect of its influ-
ence, such as where there may be concern that the approach may also
lead to higher prices or over-prescription of certain medical devices, for
example.
KEY WORDS Direct communication
IMPLICATIONS
In being able to communicate directly to consumers, direct-to-consumer
marketing enables firms to increase awareness and interest in its branded
offerings in relation to perceptions of the offering’s benefits—something
that may not be as effective or controllable when performed through
intermediaries. Such knowledge may then lead consumers to enquire
about, prefer, or specify directly the branded offerings when interacting
with other intermediaries.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Holmer, A. F. (1999). ‘Direct-to-Consumer Prescription Drug Advertising Builds
Bridges between Patients and Physicians,’ Journal of the American Medical Associa-
tion, 281(4), 380–381.
Hollon, M. F. (1999). ‘Direct-to-Consumer Marketing of Prescription Drugs: Creating
Consumer Demand,’ Journal of the American Medical Association, 281(4), 382–384.
Wolfe, S. M. (2002). ‘Direct-to-Consumer Advertising: Education or Emotion Promo-
tion?’ New England Journal of Medicine, 346(7), 524–525.
Lee, T. H., and Brennan, T. A. (2002). ‘Direct-to-Consumer Marketing of High-
Technology Screening Tests,’ New England Journal of Medicine, 346, 529–531.
BIBLIOGRAPHY
Fintor, L. (200). ‘Direct-to-Consumer Marketing: How Has It Fared?’ Journal of the
National Cancer Institute, 94(5), 329–331.
Dirichlet model
DESCRIPTION
A modeling approach for gaining insight into habitual, near-steady state
consumer behaviors.
KEY INSIGHTS
A Dirichlet modeling approach (named after a prominent nineteenth-
century German mathematician) describes and characterizes consumer
buying behavior using five relatively simple assumptions regarding pur-
chase incidence and brand choice for the market being examined:
163 diseconomies of scale
(1) each buyer or buying unit has a steady as-if-random buying probability
(i.e. these probabilities are Poisson distributed across the market);
(2) there is a smooth (gamma) distribution of light, medium, and heavy
buyers; (3) each buyer uses a portfolio of brands with steady probabilities
and these probabilities are represented by a multinomial distribution
across those in the market; (4) individuals’ buying probabilities follow
a smooth beta distribution across the market; and (5) brand choice is
independent of purchase incidence. These assumptions enable analysis
and prediction of a wide range of brand performance measures such
as penetration, purchase frequency, and loyalty. There are a number of
generalizations stemming from research involving the Dirichlet model-
ing approach, and one of the most notable is an effect termed ‘double
jeopardy.’ (See double jeopardy effect.)
KEY WORDS Loyalty, brand choice
IMPLICATIONS
Marketers concerned with the study of loyalty and brand choice through
the development and use of sophisticated marketing models may benefit
from a greater understanding of the Dirichlet modeling approach as
it can assist the marketer with identifying many buying patterns with
minimal inputs. As its applicability has been demonstrated across a range
of product markets, marketers wishing to adopt a modeling approach
that is not only simple and easy to operationalize but relatively robust
may find the Dirichlet modeling approach to be particularly beneficial.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Stern, P., and Hammond, Kathy (2004). ‘The Relationship between Customer Loy-
alty and Purchase Incidence,’ Marketing Letters, 15(1), 5–19.
Marketing Modeling
Fader, Peter S., and Schmittlein, David C. (1993). ‘Excess Behavioral Loyalty for
High-Share Brands: Deviations from the Dirichlet Model for Repeat Purchasing,’
Journal of Marketing Research, 30(4), November, 478–493.
Uncles, Mark, Ehrenberg, A. S. C., and Hammond, Kathy (1995). ‘Patterns of Buyer
Behavior: Regularities, Models, and Extensions,’ Marketing Science, 14(3), G71–G78.
Marketing Research
Ehrenberg, A. S. C., Uncles, M. D., and Goodhardt, G. J. (2004). ‘Understanding
Brand Performance Measures: Using Dirichlet Benchmarks,’ Journal of Business
Research, 57(12), 1307–1325.
BIBLIOGRAPHY
Goodhardt, G. J., Ehrenberg, A. S. C., and Chatfield, C. (1984). ‘The Dirichlet: A
Comprehensive Model of Buying Behaviour,’ Journal of the Royal Statistical Society,
Series A (General), 147(5), 621–655.
discriminant validity see validity
diseconomies of scale
DESCRIPTION
Increasesin unit product costs resulting from an increase in production output.
disintermediation 164
KEY INSIGHTS
In contrast to economies of scale in a production process (see economies
of scale), diseconomies of scale may arise when an organization’s size and
scale of output, perhaps beyond a certain point, result in inefficiencies
rather than efficiencies that affect the firm’s costs. As the scale of a
firm’s operations increases, factors leading to greater inefficiencies may
be related to the increased cost and effort needed for effective com-
munication and employee management as well as the decreased ability
of the firm to respond quickly and flexibly to changes in the external
environment.
KEY WORDS Production output, cost(s), scale
IMPLICATIONS
Marketers seeking to reduce unit production costs for goods or services
through economies of scale in any process, whether research and devel-
opment or customer service operations, should be cognizant of how
the increased scale of the firm’s operations may also lead to increases
in the firm’s unit production costs. In particular, marketing managers
should be aware of costs incurred as a result of the increased difficulty in
organization-wide communication as well as effective and timely organ-
izational decision making.
APPLICATION AREAS AND FURTHER READINGS
New Product Development
Zenger, Todd R. (1994). ‘Explaining Organizational Diseconomies of Scale in R&D:
Agency Problems and the Allocation of Engineering Talent, Ideas, and Effort by
Firm Size,’ Management Science, 40(6), June, 708–729.
Services Marketing
Katrishen, F. A., and Scordis, N. A. (1998). ‘Economies of Scale in Services: A Study
of Multinational Insurers,’ Journal of International Business Studies , 29(2), S. 305–324.
BIBLIOGRAPHY
Stigler, George J. (1958). ‘The Economies of Scale,’ Journal of Law and Economics,1,
October, 54–71.
disintermediation
DESCRIPTION
The process of removing or eliminating intermediaries from a supply chain in
the accomplishment of a transaction.
KEY INSIGHTS
In relation to traditional supply chains comprising distributors, whole-
salers, brokers, or agents, the process of disintermediation enables the
supplier of an offering to bypass such intermediaries and engage in
transactions directly with the end-customer. Factors leading to disinter-
mediation in many industries such as airline ticketing, where consumers
can purchase airline tickets directly from an airline instead of having
to buy from a travel agent, include decreases in the costs incurred by
firms in providing services directly to consumers as well as increases in
165 disruptive technology
the transparency of markets (e.g. knowledge of supplier prices)—both of
which are associated with advances in the use and scope of e-commerce,
for example.
KEY WORDS Intermediaries, supply chain
IMPLICATIONS
While developments in many product markets (e.g. personal computers,
travel services) include that of increased disintermediation activity, mar-
keters should recognize that disintermediation is not an absolute and
inevitable trend for every product market. In particular, marketers should
seek to understand how and to what extent intermediaries add value in
the exchange process and compare the costs and benefits of intermediary-
based approaches with that of disintermediation as part of a critical
evaluation of the firm’s marketing strategies. Firms must recognize as
well the limitations imposed by the legal and regulatory environments
in some country markets, where such restrictions on disintermediation
are in place to guard against possible adverse market competition even
though there may be benefits of disintermediation to consumers.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Achrol, Ravi S., and Kotler, Philip (1999). ‘Marketing in the Network Economy,’
Journal of Marketing, 63, Fundamental Issues and Directions for Marketing, 146–
163.
International Marketing
Sheth, Jagdish N., and Sharma, Arun (2005). ‘International E-marketing: Opportu-
nities and Issues,’ International Marketing Review, 22(6), 611–622.
Prasad, V. Kanti, Ramamurthy, K., and Naidu, G. M. (2001). ‘The Influence of
Internet-Marketing Integration on Marketing Competencies and Export Perfor-
mance,’ Journal of International Marketing, 9(4), Winter, 82–110.
Ritchie, B., and Brindley, C. S. (2001). ‘Disintermediation, Disintegration and Risk
in the Global Supply Chain,’ Management Decision, 38(8), 575–583.
Online Marketing
Aldin, N., and Stahre, F. (2003). ‘Electronic Commerce, Marketing Channels and
Logistics Platforms: A Wholesaler Perspective,’ European Journal of Operational
Research, 144, 270–279.
BIBLIOGRAPHY
Ryan, C. (2000). ‘How Disintermediation is Changing the Rules of Marketing, Sales
and Distribution,’ Interactive Marketing (London), 1(4), 368–374.
disruptive innovation see disruptive technology
disruptive technology
(also known as disruptive innovation)
DESCRIPTION
A new technology or technological innovation that has the effect of radically
transforming a market involving an existing or dominant technology.
disruptive technology 166
KEY INSIGHTS
While there may be few technologies that are intrinsically disruptive,
there are certainly countless examples of markets that have been trans-
formed by disruptive innovations (e.g. automobiles replacing the horse
for transport; PCs replacing minicomputers; digital photography replac-
ing chemically based photography). As such, disruptive innovations may
be viewed as a narrower term capturing the same notion as disruptive
technology but one that also recognizes how strategy is influential in
its impact. It is also recognized that disruptive innovations can encroach
on markets in different ways, such as where a disruption encroaches
on a market from its low end or where a disruptive innovation trans-
forms a market through its initial appeal to a new or emerging market
segment.
KEY WORDS Technology, innovation, market transformation
IMPLICATIONS
Disruptive technologies and innovations can clearly have a dramatic
effect on a product market, but marketers must acknowledge that such
disruptions may be difficult to recognize given their significance takes
time to become established. As such, marketers should continually scan
the marketing environment for disruptive influences, where such efforts
may involve proactive efforts (e.g. joint investments with innovative
suppliers and/or customers) to understand better not only how various
innovations are influencing the value provided by a firm’s offerings to its
customers but also how such innovations may be able to meet current
and future customer wants and needs in ways that the firm’s offerings do
not.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Newbert, S., Kirchhoff, B., and Walsh, S. (2002). ‘Differentiating Market Strategies
for Disruptive Technologies,’ IEEE Transactions on Engineering Management, 49(4),
341–351.
Sandberg, B. (2002). ‘Creating the Market for Disruptive Innovation: Market Pro-
activeness at the Launch Stage,’ Journal of Targeting, Measurement and Analysis for
Marketing, 11(2), 184–196.
Marketing Research
Danneels, E. (2004). ‘Disruptive Technology Reconsidered: A Critique and Research
Agenda,’ Journal of Product Innovation Management, 21, 246–258.
Garcia, R., and Calantone, R. (2002). ‘Critical Look at Technological Innovation
Typology and Innovativeness Terminology: A Literature Review,’ Journal of Product
Innovation Management, 19(2), March, 110–132.
BIBLIOGRAPHY
Bower, Joseph L., and Christensen, Clayton M. (1995). ‘Disruptive Technolo-
gies: Catching the Wave,’ Harvard Business Review, 73(1), January–February, 43–
53.
Christensen, C. (1997). The Innovator’s Dilemma. Boston: Harvard Business School
Press.
Christensen, C. M., and Rayor, M. E. (2003). The Innovator’s Solution: Creating and
Sustaining Successful Growth. Boston: Harvard Business School Press.
167 distribution strategies
Tushman, M. L., and Anderson, P. (1986). ‘Technological Discontinuities and Orga-
nizational Environments,’ Administrative Science Quarterly, 31, 439–465.
dissonance-reducingbuyer behavior see consumer buyer behavior
distinctiveness effect see von Restorff effect
distribution strategies
DESCRIPTION
Approachestothedistributionofa firm’sofferingswhicharedrivenbystrategic
considerations and which have strategic implications for a firm.
KEY INSIGHTS
There are three general distribution approaches open to a firm. These
are: exclusive distribution, where a firm gives a relatively small number of
dealers an exclusive right to distribute the firm’s offerings within the
dealers’ territories; selective distribution, where a firm chooses to distribute
its offerings selectively through multiple (though not all possible) distrib-
utors; and intensive distribution, where a firm aims to distribute the firm’s
offerings in as many places or outlets as possible through an extremely
wide range of distributors. The choice of a particular distribution strategy
depends on many factors, of course, including the product characteristics.
Exclusive distribution, for example, is consistent with the characteris-
tics of exclusive products such as luxury watches. On the other hand,
the distribution of Coca-Cola—a frequently purchased and relatively
inexpensive product—clearly benefits from an intensive distribution
strategy.
KEY WORDS Distribution intensity
IMPLICATIONS
Marketers must clearly understand the characteristics of their offerings
(e.g. market segment appeal) as well as consumer buyer behavior to deter-
mine the most suitable distribution strategy. At the same time, marketers
must give consideration to competitors’ distribution strategies, which, for
an increasing number of consumer products, involves intensive distribu-
tion through a combination of online retail distribution and traditional
retail outlet distribution.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Frazier, Gary L., and Lassar, Walfried M. (1996). ‘Determinants of Distribution
Intensity,’ Journal of Marketing, 60, October, 39–51.
Premkumar, G. P. (2003). ‘Alternate Distribution Strategies for Digital Music,’ Com-
munications of the ACM, 46(9), 89–95.
Relationship Marketing
Weitz, Barton E., and Jap, Sandy D. (1995). ‘Relationship Marketing and Distribu-
tion Channels,’ Journal of the Academy of Marketing Science, 23, 305–320.
Retail Marketing
Fernie, John (1992). ‘Distribution Strategies of European Retailers,’ European Journal
of Marketing, 26(8–9), 35–47.
division of labor effect 168
Online Marketing
Ranchhod, A., and Gurau, C. (1999). ‘Internet-Enabled Distribution Strategies,’
Journal of Information Technology, 14, 333–346.
BIBLIOGRAPHY
Kotler, Philip, and Armstrong, Gary (2006). Principles of Marketing. 11th edn. Upper
Saddle River, NJ: Pearson Education, Inc.
divergent validity see validity
diversification see product-market investment strategies
diversity marketing see multicultural marketing
divestment see decline strategies
division of labor effect
DESCRIPTION
The tendency for increased efficiency and productivity as a result of decom-
posing the steps of a complex production process and dividing the tasks and
responsibilities across multiple workers, where individual workers repeatedly
engage in the same specialized tasks.
KEY INSIGHTS
A significant driver of increases in efficiency and productivity with a
division of labor approach to production processes is the need for workers
to only perfect particular sets of skills rather than many skills in the
accomplishment of their tasks. Such an approach may lead to higher
quality as specialized knowledge can be developed while at the same time
a lower-cost workforce might be possible as a result of requiring workers
with less overall skill. A recognized concern over the approach, however,
is that overly simple and repetitive tasks may be detrimental to workers.
KEY WORDS Specialization, production processes
IMPLICATIONS
Marketers involved in establishing and managing complex marketing
processes such as those supporting new product introductions may ben-
efit in applying a division of labor approach to the extent that the
approach leads to greater efficiencies as well as cost reductions and
quality increases. Ultimately, marketers must consider how and to what
extent division of labor within as well as outside the organization may
lead to such benefits.
APPLICATION AREAS AND FURTHER READINGS
Innovation
Arora, Ashish, Fosfuri, Andrea, and Gambardella, Alfonso (2001). Markets for Tech-
nology: The Economics of Innovation and Corporate Strategy. Cambridge, Mass.: MIT
Press.
Marketing Management
Achrol, Ravi S. (1991). ‘Evolution of the Marketing Organization: New Forms for
Turbulent Environments,’ Journal of Marketing, 55(4), October, 77–93.
169 domino effect
Relationship Marketing
Sheth, J. N., and Parvatiyar, A. (1995). ‘The Evolution of Relationship Marketing,’
International Business Review, 4(4), December, 397–418.
BIBLIOGRAPHY
Smith, Adam (1776). An Inquiry into the Nature and Causes of the Wealth of Nations.
Boston: Adamant Media Corporation.
dog see product portfolio analysis
domino effect
DESCRIPTION
The effect of an action or other change in state where it precipitates a sequence
or chain of similar actions or changes.
KEY INSIGHTS
In a domino effect, the action or change precipitating subsequent
changes may potentially be small in and of itself and thus have a
potential for a much larger overall effect, as when the effect of one
person’s applause in the middle of a theatrical performance acts to
initiate the applause of nearby individuals and subsequently most of the
audience.
KEY WORDS Change, action, reaction
IMPLICATIONS
While anticipating possible domino effects in the marketing of products
and services may be difficult, marketers should nevertheless not underes-
timate the potential for small actions to produce relatively large overall
effects, either positive or negative. For example, a negative domino effect
would be observed when one consumer’s voice of dissatisfaction for
waiting in a long check-out line in a supermarket leads to numerous
consumers also in the line also voicing their dissatisfaction.
APPLICATION AREAS AND FURTHER READINGS
Services Marketing
Halstead, D., Morash E. A., and Ozment, J. (1996). ‘Comparing Objective Ser-
vice Failures and Subjective Complaints: An Investigation of Domino and Halo
Effects,’ Journal of Business Research, 36(2), June, 107–115.
Customer Satisfaction
Chong, Bessie, and Wong, Michael (2005). ‘Crafting an Effective Customer Reten-
tion Strategy: A Review of Halo Effect on Customer Satisfaction in Online
Auctions,’ International Journal of Management and Enterprise Development, 2(1), 12–
26.
Marketing Strategy
Tucker, James J., and Tucci, Louis A. (1994). ‘Why Traditional Measures of Earnings
Performance May Lead to Failed Strategic Marketing Decisions: A Focus on Core
Operations,’ Journal of Consumer Marketing, 11(3), 4–17.
BIBLIOGRAPHY
Byrne, N. M. (2004). ‘The Domino Effect,’ Limras Marketfacts Quarterly, 23(4), 68–
70.