Abstract
The purpose of the study was to determine the extent of utilization of direct marketing channels by manufacturing companies in Anambra State. The study adopted a descriptive survey design. Seven specific purposes were developed in line with the major purpose of the study. The study answered seven research questions and tested seven hypotheses at 0.05 level of significance. The population of the study consisted of 341 managers. This was made up of 108 marketing managers, 99 advertising managers and
134 sales managers in the 140 registered manufacturing companies in Anambra State. There was no sampling as the entire population was studied. The choice of these managers was informed by the fact that they are directly involved in the utilization of direct marketing channels in their companies. The questionnaire was structured on a 5- point rating scale and was validated by three experts from the Department of Vocational Teacher Education, University of Nigeria, Nsukka. Their observations and suggestions were used to improve the quality of the final draft of the instrument used for the study. Cronbach Alpha reliability coefficient of 0.92 was obtained for the entire items in the instrument. The 7 clusters had Cronbach alpha coefficients of 0.89, 0.87, 0.91, 0.95,
0.96, 0.87 and 0.89 respectively. A total of 332 copies of the 341 questionnaire administered were retrieved representing about 97% retrieval. The data collected were
analysed using mean and standard deviation for answering the seven research questions while t-test statistic and analysis of variance (ANOVA) were used in testing the seven
null hypotheses at 0.05 level of significance and 330 degree of freedom (df) for the t-test statistics. The major findings of the study were (1) personal selling was utilized to a
great extent in serving customers (2) direct-mail, telemarketing, catalogues, direct- response marketing, customer database marketing and websites were utilized only to a
little extent. It was concluded that direct marketing channels were poorly utilized. Based on the findings and conclusions, it was recommended that manufacturing companies need
to adopt direct marketing techniques as this has been found to promote profits and assure maximum returns on investment.
CHAPTER ONE
INTRODUCTION
Background of the Study
Manufacturing companies are companies that produce goods that are used or needed by consumers or other producers. Thus, according to the United States Department of Commerce (USDC, 2006), manufacturing is the process of making or producing goods for individual or business use. Succinctly, Randolf (2007) defines manufacturing as the process or business of producing goods in factories. Manufacturing involves converting materials into a form that can satisfy human needs or desires. According to Anyanwu (2004), a manufacturing company is involved in the transformation or changing of the basic materials extracted by primary producers into forms acceptable to final consumers. Anyanwu’s examples of manufactured goods include television, cars, clothes, aeroplanes, soaps, electronic gadgets, processed foods, steel bans etc.
Manufacturing companies in Anambra State include companies that produce industrial goods and those that produce consumer goods for sale. Industrial goods are goods purchased by business buyers (producers) for purposes of production. Consumer goods are goods purchased by end-users (consumers) for purposes of consumption. Some companies are located in urban towns while others are in the rural areas. Some companies are small while others are medium or large in size. Small-scale companies have over N1.5 million but not more than N50 million excluding cost of land and or 11-100 workers. Medium-scale
companies have over N50 million but not more than N200 million, including cost of land and 101-300 workers. Any company that has a capital of more than N200 million, including cost of land and or more than 300 workers in its employ is classified as large-scale (National Council on Industry, in Eneh, 2005). These companies are involved in the production of paints, aluminum materials, industrial chemicals, foot wears, electronic cables, building materials, clothes, plastics, processed foods, cosmetics, etc.
Every manufacturing company is in business to make profit. The level of this profit made depends largely on the company’s marketing ability and strategy. Finance, production, accounting and other business functions may not be necessary if there is no sufficient demand for the company’s products. The basic function of marketing is to create this demand by attracting and retaining customers at a profit. Marketing attracts and retains customers by creating and delivering value to the customers. In other words marketing attempts to present or show case companies’ products as actual solutions to the customers’ problems.
The American Marketing Association (2004) defines marketing as an organizational function and a set of processes for creating, communicating and delivering value to the customers and for managing customer relationships in ways that benefit the organization and its stakeholders. According to Gronroos (2005), this definition brings to light the objectives of marketing which are to establish, develop, and communicate long-term customer relationships so that the objectives of the organization, its stakeholders and those of the customers are met. Profit
objective is critical to every business organization. Houston (1986) long recognized that companies achieve their profit and other objectives by satisfying their customers. Direct marketing is one of the major channels utilized by companies to satisfy their customers and to establish long-term relationship with them.
Kotler and Keller (2006) define direct marketing as the use of customer- direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen. These authors see direct marketing process as an interactive dialogue that goes on between the company and its customers. Similarly, the American Direct Marketing Association (2008) defines direct marketing as an interactive form of marketing using one or more advertising media to effect a measurable response or transaction at any location with this activity stored on data bases. In the context of this study, the researcher defines direct marketing as a type of marketing that utilizes marketing communications media to interact with, and sell goods to the customer directly without any intermediary playing a role. Direct marketing thus attempts to acquire and retain customers by contacting them directly without the use of intermediaries (middlemen) such as wholesalers, retailers or agents.
Manufacturing companies utilize a number of direct marketing channels to reach and serve individual customers and prospects. The researcher defines a direct marketing channel as a medium of interaction or communication between the producer or seller and the consumer. He sees utilization as the use of
something for a given purpose. Jobber (2004) lists direct marketing channels to include personal selling, direct-mail, telemarketing, catalogues, direct-response marketing, database marketing and internet (online) marketing. These channels are briefly explained one after the other.
Personal selling is the marketing task that involves face-to-face contact with a customer (Osuala, 1998). Unlike advertising, promotion, and other forms of non-personal communications, personal selling permits a direct interaction between buyer and seller. The two-way communication means that the seller can identify the specific needs and problems of the buyer and tailor the sales presentations in the light of this knowledge.
Direct-mail, according to Kotler and Keller (2006), involves sending an offer, announcement, reminder, or other items to a person. Some direct marketers mail audiotapes, videotapes, computer diskettes, etc. to customers and prospective customers. Direct-mail is a popular medium because it permits target market selectivity, can be personalized, is flexible and allows early testing and response measurement. One of the major attractions of direct-mail is that the costs are easily calculated.
Telemarketing has been described by Jobber (2004) as a marketing communication system where trained specialists use telecommunications and information technologies to conduct marketing and sales activities. Telemarketing is a powerful direct-response method of marketing in that the manufacturer makes his offer direct to the prospect. Patten (2005) noted that research is often best
done on the phone. A large number of people can be contacted and direct answers quickly obtained. Telemarketing helps companies increase revenue, reduce selling costs, and improve customer satisfaction.
Catalogue marketing, according to Dowling (2003), is the sale of products through catalogues distributed to agents and customers, usually by mail or at stores if the catalogue marketer is a store owner. A wide range of products such as household goods, cameras, furniture, jewellery, toys, mobile phones etc is sold through catalogues. A customer can select at home, visit a catalogue shop where only a restricted selection of goods is on display and make a purchase. Many companies place their catalogues on the website so that it is readily available to customers.
Direct-response marketing according to Wikipedia (2005) is a form of marketing designed to solicit a direct response which is specific and quantifiable. Murphy (2001) explains direct-response marketing as an interactive television advertising that relies on digital technology and connection to a telephone line. The delivery of the response is direct between the viewer and the advertiser, that is, the customer responds to the marketer directly. Direct-response advertising appears in the prime media such as television, newspapers and magazines, but differs from standard advertising as it is designed to elicit a direct response such as an order, enquiry, or request for a visit. Often, a freetone number is included in the advertisement or, for the print media, a response coupon is used.
Database marketing is a form of direct marketing using databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes (Hillstrom, 2006). At the heart of much direct marketing activity is the marketing database, since direct marketing depends on customer information for its effectiveness (Jobber,
2004). Information such as the type of purchase, frequency of purchase, purchase value, recency of purchase and responsiveness to promotional offers are important considerations.
Internet (online) business, according to Osuala (2004), is the use of electronic means and platforms to conduct a company’s business. E-marketing, thus describes company efforts to inform buyers, communicate, promote, and sell its products and services over the internet. The nature of e-commerce allows consumers to research and purchase products and services direct at their own convenience. Also, through personalization of softwares, organisations can establish close relationships with customers and develop customer-loyalty easier than through the traditional channels. Marketing professionals use the web to create new ways of interacting with customers and delivering services.
The ultimate objective for adopting a direct marketing approach, according to Patten (2005) is to make more profits. Kotler (2003) similarly noted that the two cardinal objectives of a seller are to satisfy his customers as well as make profit. Profit motive is thus the hallmark of every business. Profit is the ultimate
goal of every manufacturer. A manufacturing company that does not maximize profit is in a vicious circle. Its closure is imminent.
According to Stan and Tom (1990) company profitability and longevity depend, to a large extent, on an effective relationship between the company and its customers. William and Raymond (2001) found out that the use of direct marketing is a powerful strategy for companies to build that needed relationship aimed at making profits.
Relationship with existing customers is very critical. A research conducted by Rosemberg and Czepeil (2001) revealed that the cost of attracting a new customer is six times higher than the costs of retaining old ones. It is this long- term relationship that promotes customer-satisfaction, loyalty, retention and patronage that culminate in profits.
Most manufacturing companies in Nigeria depend extensively on middlemen to distribute their goods instead of adopting the direct-marketing approach that has been found to promote profits (Nzewi, 2007). As a result these companies often do not maximize profits because they do not interact directly with their customers so as to know the needs and desires of these customers before going into production of goods. The result is that most of their goods do not find market because the companies are ‘out of sync’ with the customers they are in business to serve.
Statement of the Problem
The high rate at which manufacturing companies in Nigeria (Anambra State in particular) close down every year has become a source of worry to many people. A recent survey conducted by Eneh (2005) revealed, inter alia, that three out of four manufacturing companies in Nigeria fail every year, while nine out of ten prospective entrepreneurs do not venture into the business. This view was corroborated by Nzewi (2007) who classified the state of Nigerian manufacturing companies as 30 per cent closed down, 60 per cent ailing and only 10 per cent operating at sustainable level.
The above discoveries showed that many manufacturing companies in Nigeria are dead and those that could be said to be alive are comatose. This unfortunate scenario was attributed largely to poor profits (if any) made by these companies. This was true as no company would close down if the company maximizes profits. Among the major reasons advanced by the above authors for the poor profit level of these companies which culminated in their closure was the obsolete and unfashionable distribution policy of dependence on middlemen instead of the direct approach. Jobber (2004) and Kotler and Keller (2006) long noted that dependence on middlemen tend to distance companies from the customers they serve and hence deny the companies profitable direct interactions and relationships with the customers.
According to Stan and Tom (1990), the level of profit made by a manufacturing company depends, to a large extent, on an effective relationship
between the company and its customers. The use of direct marketing has been found to be a powerful strategy for companies to build that necessary relationship (William and Raymond, 2001). According to them, it is this relationship that promotes customer satisfaction, loyalty, retention and patronage that culminate in profits. Regrettably, most manufacturing companies in Anambra State depend solely on marketing middlemen to distribute their goods instead of adopting the direct marketing approach that has been found to promote profits.
Manufacturing companies that adopt the direct marketing approach have been found to maximize profits. For instance, WEFA (2000) an McCarthy (2002) noted that direct marketing in the United States of America generates about 700 billion dollars in annual sales in business-to-business markets and 840 billion dollars in sales to the ultimate consumers. Similarly, the European Marketing Pocket Book (2003) showed that annual expenditure on direct marketing in Europe approximates 550 billion Euros. Regrettably, it was discovered that the bane of many manufacturing companies in Nigeria was their dependence on middlemen such as wholesalers, retailers, distributors, agents, brokers, etc. to sell their goods instead of utilizing the direct marketing approach that has been found to promote profits. Osuala (1998) stated that direct selling in Nigeria accounts for only about 5 per cent of manufacturers’ total sales of consumer and industrial goods. In particular, he lamented that the total retail sales from Mail Order houses does not exceed 1 per cent in good times.
For the manufacturing companies in Anambra State to operate at optimum profit, they need to adopt the contemporary direct marketing approach. According to Patten (2005) the ultimate objective for adopting a direct marketing approach is to make more profits. The extent to which these companies were adopting this direct marketing approach had not been found. This study was therefore geared towards finding it.
Purpose of the Study
The purpose of the study was to determine the extent of utilization of direct marketing channels by manufacturing companies in Anambra State.
Specifically, the study sought to determine:
1. the extent to which manufacturing companies in Anambra State utilize personal selling in serving their customers.
2. the extent to which manufacturing companies utilize direct-mail channel to reach their customers in the State.
3. the extent to which manufacturing companies utilize tele-marketing channel to communicate with their customers in the State.
4. the extent to which manufacturing companies utilize catalogues to reach their customers in the State.
5. the extent to which manufacturing companies utilize direct-response marketing to collect information from their customers in the State.
6. the extent to which manufacturing companies utilize customer-database to individualise their offerings in the State.
7. the extent to which manufacturing companies utilize websites in serving their customers in the State .
Significance of the Study
The findings of this study would be of immense benefit to the manufacturing companies in Anambra State. The companies would benefit by having their profits increased. Interacting directly with customers and prospects was found to promote profits.
Marketing managers, advertising managers and sales managers would equally benefit from the findings of the study. These managers would benefit by sending their marketing information directly to only the customers and prospects that need the information. Enormous cost is saved when messages are sent to only those that need them.
Consumers would greatly benefit from the findings of the study. Direct marketing enables consumers to experience the joy in home-shopping. Consumers would be able to order goods for themselves and at their own convenience.
Marketing students would benefit from the findings of the study. The study would provide the students with extensive literature on direct marketing.
Research Questions
The following research questions were formulated to guide the study:
1. To what extent do manufacturing companies in Anambra State utilize personal selling in serving their customers?
2. To what extent do manufacturing companies utilize direct-mail channel to reach their customers in the State?
3. To what extent do manufacturing companies utilize telemarketing channel to communicate with their customers in the State?
4. To what extent do manufacturing companies utilize catalogues to reach their customers in the State?
5. To what extent do manufacturing companies utilize direct-response marketing to collect information from their customers in the State?
6. To what extent do manufacturing companies utilize customer-database to individualise their offerings in the State?
7. To what extent do manufacturing companies utilize websites in serving their customers in the State?
Hypotheses
The following null hypotheses were tested at 0.05 level of significance.
Ho1: There is no significant difference in the mean responses of marketing managers and sales managers with regard to the utilization of personal selling in serving customers.
Ho2: There is no significant difference in the mean responses of sales managers from rural manufacturing companies and those from urban manufacturing companies on the utilization of direct-mail channel to reach customers.
Ho3: There is no significant difference in the mean responses of advertising managers and marketing managers on the utilization of telemarketing channel to communicate with customers.
Ho4: There is no significant difference in the mean responses of the small, medium, and large-scale manufacturing companies on the utilization of catalogues to reach customers.
Ho5: There is no significant difference in the mean responses of marketing, advertising and sales managers on the utilization of direct-response marketing to collect information from their customers.
Ho6: There is no significant difference in the mean responses of the small, medium, and large-scale manufacturing companies on the utilization of customer database to individualize their offerings
Ho7: There is no significant difference in the mean responses of marketing, advertising and sales managers on the utilization of internet in serving customers.
Delimitation
This study was delimited to registered manufacturing companies based in Anambra State. No attempt was made to cover manufacturing companies in other parts of the federation.
This material content is developed to serve as a GUIDE for students to conduct academic research
UTILIZATION OF DIRECT MARKETING CHANNELS BY MANUFACTURING COMPANIES IN ANAMBRA STATE NIGERIA
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