Page 1 of 8

A Study of International Direct Marketing Environment

Mr. Gopaldas Harinath

MBA, Vidya Dayini College of IT & Management, Hyderabad

Abstract

The changing demographics of working class and their working hours force the marketing

companies to take up Direct Marketing approaches to reach the customers. Even the hassles of traffics

congestion, parking headaches, lines at checkout counters further make the customers to opt for purchases

through Direct Marketing. This paper uses the PEST analysis, to investigate the business environment of

International Direct Marketing and understand its effect on the International direct marketer. In the study,

political environment includes the factors like Law, Regulations and Government Policies and how they

are acting as facilitators and / or hindering the progress of Direct Marketing activity. Similarly, economic

factors considered are macro-level economic indicators, such as GDP, Purchasing Power Parity (PPP) and

Wealth Distribution. Social factors considered are consumer behavior and cross-cultural communication.

Technological factors considered in the study are availability of infrastructure in the country and the

breadth of consumers use the technology. The study presents the consequences of each element of PEST

environment and at the end their implications for the direct marketers are explored.

INTRODUCTION

Direct Marketing is defined as the use of

consumer-direct (CD) channels to reach and

deliver goods and services to customers without

using marketing middlemen (Kotler and Keller,

2006). The Direct Marketing is pursued by

marketers initially with the idea of bringing

down the cost of reaching to customers without

any middlemen. But today, it is aimed at not only

to bring down the cost but also for the

convenience of the customers. Direct Marketing

is not just a phenomenon in developed countries

but it is a happening activity around the globe

with view to effectively reaching out to the

customers of every nook and corner of the globe.

The level of Direct Marketing activities varies

significantly from country to country because of

various factors. These factors can be considered

with respect to Political, Economic, Social and

Technological (PEST) environments. The

variables in PEST environment suggest the apt

Direct Marketing method specific to a country

and as the marketers will be operating

internationally, the variations in the PEST

environment will present challenges to them.

POLITICAL ENVIRONMENT:

The political system and the socio- cultural back drop of the nation are the basis for

the policies and regulations adopted by any

government. The Direct Marketing is closely

linked with free-market system and

entrepreneurship. This offers individuals an

opportunity to start an independent enterprise

and achieve financial independence with meager

amounts of investment and more personal

efforts. But the historical backdrop of the nation

and the political environment of the country as a

whole will stop having the free-markets as a

means of achieving economic growth and

political stability.

At this juncture, it is interesting to note

the stand of China in the years of 1998 and 2005

on Direct Selling approach. In 1998 it banned

Direct Selling saying direct marketers are

creating “weird cults, triads, superstitious groups

and hooliganism” (Cateora and Graham, 2007,

October 2017

Journal for Studies in Management and Planning ISSN: 2395-0463

Available at http://edupediapublications.org/journals/index.php/JSMaP/ Volume 03 Issue 11

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 393

Page 2 of 8

P.508). And in 2005, in a total turn around, it

lifted the ban there by recreating an environment

encouraging the firms engaged in Direct

Marketing. The policy shift opened new avenues

for many young entrepreneurs and face-shifting

firms in a totalitarian regime like China.

Individual laws may also have an impact on

direct marketers as they move from country to

country. Laws affecting information availability

and access to consumers are of concern.

Information Availability

The most important necessitate of any

direct marketers is the database of consumer in a

given market, which contains details like Name,

Phone Number, Addresses. Such database may

also contain further details like Lifestyle,

Shopping habits and financial data and

demographics of them, which will enable the

direct marketer to act more sharply at them.

Thus, such data will reduce much of the cost of

marketer.

The policies and regulations of the

nations are constraining the firms to access to

such vital data. Different views on the issue of

privacy, as exemplified by the USA and the

Europe, have led to widely divergent policy

approaches to establishing and enforcing privacy

rights. The US approach to privacy is largely one

of self regulation, with sectoral legislation and

limited privacy rights granted to the consumer.

Because of historical circumstance, the US

privacy laws are based on efforts to prevent harm

from taking place. The Fair Credit Reporting Act

(FCRA) of 1992 was an effort to prevent

inaccurate information from being used to

evaluate individuals who were applying for

credit. This was followed by many other privacy

laws, culminating in the Gramm-Leach Bliley

Act in 1999, which provides limited protection

against the sale of private financial information.

Access to consumers

Laws can limit the access of

telemarketers to all or parts of the market within

a country. One controversial example of this is

the US “Do-not-Call-List” (DNC) established by

the Federal Trade Commission (FTC) in March

of 2003. According to this law, consumers can

register their names on a national DNC and

telemarketers are not permitted to call anyone on

this list. While this afforded many Americans a

dinnertime free of telemarketing calls, it had

some profound positive and negative effects on

the Direct Marketing industry making the DNC

rather controversial. On the positive, the DNC

rule did force many unethical firms to close their

doors while more legitimate firms had to find

new methods of contacting consumers.

Many countries have also enacted laws

that allow a “cooling off period” where a

consumer is given several days, seven for most

of Europe, in which to withdraw their purchases

with no monetary penalties. In Japan, the Door- to-Door Sales Law allows for an eight-day

“cooling off” period for products valued at more

than ¥3,000 (about $25 US) during which a sales

contract may be cancelled without penalty.

Exemptions include consumable goods if the

product has been used, as well as automobiles

(Ponder, 2006b).

Ability to Recruit and Expand

Much of the rapid expansion of Direct

Marketing is fueled by the ability to recruit part- time salespeople who are seeking to add to their

income. One method of quickly expanding a

network is multilevel marketing. This technique

is used by companies such as Avon, Amway,

Tupperware, and Nu Skin. Salespeople, in these

companies, can make money either through

October 2017

Journal for Studies in Management and Planning ISSN: 2395-0463

Available at http://edupediapublications.org/journals/index.php/JSMaP/ Volume 03 Issue 11

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 394

Page 3 of 8

commissions from selling product or from selling

distributorships to other individuals. Each person

in the chain receives a cut of the commissions

obtain from their recruits, on down the line.

Economic Environment

The global economy has been portrayed

as both “flat” (Friedman, 2005) and “spiky.” The

former characterization, made in Tom

Friedman’s bestselling book, The World is Flat

suggests that “ten flatteners” have leveled the

playing field in global commerce so that, for

example, software engineers in Bangalore can

write code as well as Americans in Silicon

Valley. These “flatteners” include large historical

changes, such as the end of communism and the

creation of the internet, as well as developments

of lesser importance, like “open source” software

and supply-chain management. In contrast, using

some striking visual imagery in the October 2005

issue of The Atlantic Monthly, Richard Florida

asserts that geography still makes a difference in

economic development and innovation. He

points out, using quantifiable indicators such as

number of patents, light emissions, and scientific

citations, that substantial economic activity is

concentrated in a comparatively small number of

locations around the globe.

Developed economies

Developed economies have the highest

per-capita expenditures in the world making

them very attractive to vendors. As a result,

developed countries also have the largest

numbers of marketers offering a dizzying array

of products. This can make it very hard for a

marketer to be seen or selected by consumers,

thereby requiring fairly significant expenditures

of advertising dollars and a sophisticated

approach to the consumer. In addition, developed

economies are well serviced by a rather high

density of retail establishments offering

consumers the ability to see, feel, touch, and take

home the product all in one-trip. This is instant

gratification that Direct Marketing just cannot

match.

The top two Direct Marketing countries

in total sales are developed economies, with the

USA at $29.6 billion and Japan at $27 billion.

Other developed countries in the top ten of

Direct Marketing sales include the UK ($3

billion), Italy ($3 billion), Germany ($2.9

billion), and France ($1.7 billion). Developed

and the prosperous parts of developing nations

account for less than 15 percent of the world’s

population (World Federation of Direct Selling

Association (www.wfdsa.org/)).

Developing economies

People in developing economies

represent over 85 percent of the world’s

population. However, they have much less

individual wealth to spend on products making

them less attractive to marketers on a per-person

basis. However, as stated previously, Direct

Marketing by nature is not limited to a location

so can make a large population of a country like

China or India profitable through large quantities

of small transactions. In addition, the lower per

capita GDP makes developing countries less

attractive to traditional marketers reducing the

level of competition in these countries.

Developing economies lack the retail

infrastructure present in developed economies.

As a result, Direct Marketing has great

opportunities to distribute a much wider array of

products. “Latin America doesn’t have a strong

retail infrastructure,” said Jane Garrard, Vice

Journal for Studies in Management and Planning ISSN: 2395-0463

Available at http://edupediapublications.org/journals/index.php/JSMaP/ Volume 03 Issue 11

October 2017

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 395