eCommerce vs. Direct Response: What’s the Difference?
Nov 17, 2021 3 minute Read
At the very least, you’ve heard of both e-commerce and direct response marketing. They are often spoken about as two totally separate entities. As if a merchant can decide to choose the e-commerce route or the direct response route. But is there really such a great difference between the two? And do you, as a merchant, need to run with just one or can you use both?
In short, e-commerce and direct response marketing are different yet connected. You can be an ecommerce merchant that uses a direct response marketing tactic. Let’s get into some of the more defining distinctions and some of the benefits direct response marketing has over traditional e-commerce.
Defining eCommerce and Direct Response
It’s important to grasp exactly what these two are so you can implement a better marketing strategy for your brand based on your business or sales goals.
What is e-commerce?
Don’t be so fast to skip this section! You probably do know what e-commerce is—you’re a online merchant, after all. But did you know e-commerce refers to the entire process of buying and selling from start to finish? It seems that most people attribute e-commerce with online retail. And it is. But it’s more than that, too.
It can also mean the software and service used to manage e-commerce transactions. In contrast to online retail, e-commerce is synonymous with an electronic commerce platform in this sense.
A common misconception is that e-commerce businesses only sell physical products. Rather, the term encompasses the sale of services and subscriptions, as well. E-commerce is the backbone of online business, providing a critical foundation for growth and innovation.
What is Direct Response?
Direct response marketing is a style of marketing that focuses on the direct relationship between the business and its customers. The hallmark of direct response advertising is a measurable, direct response from the consumer.
This style goes back as far as the invention of the printing press, but it didn’t become a distinct profession until more recently. As technology changed and consumers became more sophisticated, marketers found that a more focused approach was needed to reach the consumer. This led to a shift from mass-marketing techniques to what we now call “direct response.”
As its name implies, it stimulates a direct response from customers with a clear CTA (call to action) for the order to buy now. Direct mail, email, phone numbers, direct response ads, and referrals from a friend are all popular and trending methods for direct response marketing. You can target existing customers and potential customers both offline and online. As long as you can create the sense of urgency, it doesn’t matter the format. This strategy can work as a great sales funnel and boost conversion rates.
The most popular types of direct response were originally mail orders and phone calls, but that’s changed with the advent of the internet. While those are still incredibly useful for direct response sales today, email and online chat are two newer ways to reach into customers’ wallets.
What is an example of Direct Response?
A simple yet effective direct response example is the “subscribe to receive our e-newsletter”. The customer enters their email, then they get exclusive discounts only received by subscribers.
This leads into the next example: coupons. “Use this coupon at checkout” is another common form of direct response that can be used in a wide variety of situations. Newsletter, social media post, e-commerce site popup (even when upselling), and advertisement are all examples of where this tactic is effectively used.
The general idea is to get the customer to take a specific action. Buy this product. Use this coupon. Sign up for this email. Download this free book. One single action for the user to perform.
How do Direct Response and e-commerce differ?
Direct response generally covers a single offer or product. It’s not a showcase of products for customers to browse and select, it’s a push for one customer to buy one product or use one personalized offer.
On the other hand, e-commerce is a full store (even if you only sell one item). You’re a business casting a wide net to capture as large of a relevant audience as possible. E-commerce showcases products and allows brands to connect with consumers for the long-term.
E-commerce can often be considered a form of direct marketing because of the lack of intermediaries (sometimes). Sellers can directly target a specific demographic or sell a particular product to a customer who has shown interest. So while these two differ, they also overlap.
Advantages of Using Direct Response Tactics
The overall purpose of direct response is to generate leads and sales, which is an advantage in-and-of itself. But there’s even more to direct response than that.
Direct Response is Measurable
Most forms of direct response marketing is designed to be measurable (even in real-time). Let’s take an email marketing campaign as an example of a digital marketing direct response campaign. If you target a group of people who have signed up for your newsletter but have never purchased a product, you can give a unique discount code to use at checkout. With all of this set up, you can easily track how many people have opened the email, how many have copied the code, and how many have made a purchase.
Because each message is so specifically targeted, competitors will likely fail to copy exactly what you’re doing if they discover it at all. Consumers will feel more connected with your brand, which gives you a competitive advantage.
This level of precise segmentation is not just a way for you to improve sales and attract customers, it actively reaches out to those interested in your service. Even if it’s a Facebook ad campaign, it can specifically target a group like day traders on MetaTrader who average $10k per month and want to automate their routine to convert it into hands-off passive income. Your campaign is specific, your product is specific, and thus it’s difficult for other businesses to replicate what you’re doing.
Cost-Effective and Cost-Saving Marketing
The advantages of direct response marketing are efficiency and economy. You are able to manage your customer database more effectively than the majority of businesses, which allows you to market to your customers on an individual basis. Your costs will be lower than they would be if you were using other types of marketing which is great for small businesses that have a tight marketing budget.
Direct response marketing uses market testing to determine which advertising methods are most efficient. Using these methods, businesses are able to effectively communicate their value propositions to target audiences at a low cost per thousand (CPM). This means that if the company sends out 10,000 postcards or emails advertising its product, it can test whether or not those methods are working effectively and make adjustments as needed. When the cost is low per thousand advertising impressions delivered, it’s easier for businesses to test different ways of reaching consumers.
Of course, one of the key elements of direct response is getting the consumer to reach into their wallet and buy whatever it is you’re selling. Thus, you get an immediate return on investment as opposed to traditional marketing methods which aim to improve brand awareness and increase brand loyalty.
Lower Payment Processing Fees
It’s true that direct response payment processing is cheaper than ecommerce payment processing, but it’s not because the merchant doesn’t have to pay interchange fees. In fact, the merchant pays interchange fees in both cases. In a direct response environment, the customer pays the interchange fee directly to the credit card company, whereas in an ecommerce environment, the merchant pays it to his acquirer. The difference is that in a direct response environment, the merchant passes on to the customer the cost of processing the transaction in order to get paid sooner; and in an ecommerce environment, he does not.
Scale Your Online Business by Combining Direct Response Marketing Strategies
E-commerce businesses can use direct response tactics to generate instant ROIs, target segments that may be straggling, or even to get rid of some overstock. It’s important to keep in mind that direct response is specific: one group, one product, one offer.
When operating your online business, you need a payment solution that can handle your transaction volume. And if you start implementing direct response tactics, you should expect that volume to spike with each successful campaign.
Use a processor designed to handle your business. Our merchant account sales team is waiting for your call to get you set up with a shopping cart, processor, and account designed for your industry. Get in touch with us today and start scaling.