4.4.2 Product related factors influencing effectiveness
The nature of the product that is being marketed, and the type of direct marketing used, also influence both the incentive and ability of firms to develop effective systems of self-regulating direct marketing.
Direct marketing is used to market an extremely wide range of products, with vastly different economic lives (both consumables and consumer durables) and relative importance to consumers (both products that are essential to the welfare of consumers, and products that are ‘discretionary’). In addition, direct marketing involves a wide range of techniques that can impose vastly different external costs on consumers and the wider community.
In general, the incentive to self-regulate direct marketing will be greatest in those cases where the particular technique of direct marketing results in:
significant economic inefficiencies, by distorting consumer choice between relatively high value products that are consumed by most individuals in the community, and are closely substitutable in consumption or production; or
significant inequities, by compromising social values that are strongly held by most individuals in the community.
In particular, the incentive to self-regulate will be greater where the direct marketing firm:
does not have high brand recognition and therefore relies on the consumer confidence engendered by ADMA affiliation;
seeks to differentiate itself from other firms in the industry on the basis of its commitment to quality products, consumer satisfaction, and good business practices;
is a supplier of products to other organisations employing direct marketing techniques and wants, or needs to, establish its reputation with those organisations.
However, the incentive for firms to self-regulate direct marketing will be reduced to some extent:
if the firms producing highly substitutable products do not themselves use direct marketing techniques; or
if the firm already enjoys high brand recognition and consumer trust.
The types of direct marketing techniques used, and the types of products marketed, also influence the extent to which firms are able to develop and operate an effective system of self-regulation. For example, certain types of direct marketing techniques such as Internet marketing are easier to monitor than other techniques such as telemarketing “cold calling”.
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