Tuesday 2 November 2010



a. Overview

In the previous chapter, a background of the company used in the study was provided. This chapter is devoted to present the results of data analysis and to test the research hypotheses. The chapter begins with the presentation of the findings from secondary sources. Further, the data gathered from primary research done by the researcher will also be analysed.

b. Secondary Data Analysis

The research shows that the spending of organisations towards direct marketing has been increasing. More and more organisations are now using direct marketing strategies to sell their products. One of the most commonly used direct marketing tools is direct mail. Direct Mail represented 17.2% of total advertising budgets in the UK, worth almost £2billion in 2005. British Gas was found to be a top ten user of two direct marketing channels in October 2006. It was the 6th largest spender on door drops and 7th in terms of number of inserts sent out. In October 2007, it was just outside top ten, at number 14 in terms of direct mail volumes. However, it was 61 in terms of spending on the medium. British Gas spends £ 0.21 million on door drops in 2007. The following table provides with the highest spenders on door drops and their respective spending in October 2007. (Source: Nielsen Media, Cited at:

Name of Organisation

Spending (£ million)

1. Cancer Research UK


2. British Sky Broadcasting


3. Somerfield Stores


4. HIllarys Blinds


5. WM Morrison


6. British Gas


7. Lidl UK


8. Argos


9. Help the Aged


10. Orange


Table 5.1 Top-ten Spenders on Door-drops (Source: Nielsen Media Research, October, 2007)

The following bar-graph compares the spending of British Gas on door drops with the spending of some of the highest spenders on door drops in October 2007.

Leaflet inserts was also recognised as a important medium of direct marketing. According to Nielsen Media Research (2008), British Gas was once again a top ten user of inserts and stood at 8th position in terms of volume of inserts used. The following table gives the top ten user of inserts in terms of volume.

Name of Organisation

Volume of inserts (millions)

1. British Sky Broadcasting


2. Alliance & Leicester


3. Dell Computer Corporation


4. ING Direct


5. Orange


6. Purely Creative


7. Barclays Bank


8. British Gas


9. Halfords


10. P & O Princess Cruises


Table 5.2 Volume of Inserts

Source: Nelson Media Research, October 2007 (Cited at

The following bar-graph compares the volume of inserts used by British Gas and other top ten firms that used high volumes of leaflet inserts.

According to the UK’s Direct Marketing Association’s report, offline media direct mail and telemarketing are the best media to combine with email marketing. The report said that nearly 40 percent of direct marketers believed that combining email with direct mail was successful or very successful for them. The report also stated that more than 80 percent of direct marketers surveyed said they plan to increase their email budgets next year (

The Annual Reports of British Gas shows despite of an increase in the spending on direct marketing and increase in the volume of leaflet inserts, its number of customers has been continuously on a downward trend since 2003. It also shows that the organisation has been continuously losing its gas market share to its competitors and struggling to maintain its electricity market share. Moreover, its operating profit was on a continuous down trend despite slight improvements in the revenue. In its reports, this decrease in the number of customers was blamed on the rising prices and churn caused by competitors. The following graphs give a sneak view at its number of customers and the market share over the last six years.

Although, there was a continuous fall in the number of customers and in the market share for British Gas, the revenue for the organisation didn’t suffer. It shows a upward trend when compared for the last six years.

However, the operating profit for firm has been decreasing (as shown in the bar-graph below) except for the year 2007 when there was a sudden bounce in the operating profit.

c. Primary Research

Findings from manager interviews: The interviews conducted with the managers working in the direct marketing department of British Gas helped the researcher to come out with the following results in response of the questions asked.

Q1. When did British Gas adopt the direct marketing strategies?


British Gas adopted direct marketing strategies such as database marketing in the year 1992. Before this British Gas had monopoly in the gas market, but ‘in the year 1992 the commercial gas and electricity was deregulated’ and competition was introduced in the market (excerpt from Appendix IV). This led the private players to enter the market. Therefore, in order to secure its market share from its competitors, British Gas introduced direct marketing.

Q2. What are the direct marketing activities that British Gas uses to sell its products?


British Gas uses a number of direct marketing activities. The most important direct marketing activity has been its door drops and leaflets inserts. Some of the other widely used direct marketing activities of British Gas are direct mail, telemarketing, door drops, inserts, direct response television marketing, online marketing, face-to-face selling etc.

Q3. Does British Gas also use traditional marketing approaches?


Along with direct marketing, British Gas also uses a traditional marketing approach where the marketing mix is analysed before pitching into any product launch. For instance, its product are gas and electricity, its price depends on the price of oil, distribution is done by using the Transco networks, and promotion is carried out using various mediums.

Q4. What do you think are the biggest advantages of having a direct marketing approach?


According to the sales managers of British Gas, direct marketing offers a number of advantages. However, the biggest advantages of direct marketing are considered to be its ability to target customers effectively and the response rates are better and measurable. Other advantages include the ability of direct marketing to get a direct response, to get more attention and possibility of personalisation.

Q5. What are the challenges faced during direct marketing campaigns?


Direct marketing campaigns faces a number of challenges. According to a direct sales team manager, ‘legislations related to data protection are one of the biggest challenges faced by direct marketing campaigns. These legislations help the customers remove themselves from customer databases and therefore they become out of reach of direct marketing campaigns’ (excerpt from Appendix IV). Other major challenges faced by direct marketing are requirement of heavy investment, low response rates, and bad reputation that the direct marketing has earned.

Q6. How important is information and information management in the direct marketing?


According to the managers interviewed, information is the basic necessity of direct marketing. They believe that the whole success of direct marketing depends on the availability of accurate and relevant information. The availability of accurate and relevant information helps the direct marketers to target the right customer with the right product and at the right time. That is why, nowadays most direct marketers either have separate department or employ an external agency for the acquisition of customer information such as their tastes, preferences, requirements, interests, beliefs, purchasing power etc.

Another important issue recognised in the interviews was of information management. Managers believed that information management is also very critical because direct marketers may have information available to them, but choosing the relevant information and using them effectively to target the customers is important. Moreover, availability of huge quantity of unnecessary information might create information burden on direct marketers. Therefore, separating the important information from the not so important is essential. Further, information management is also critical because of the legal implications. The Data Protection Act, 1998 has set some requirements for the organisations that handle customer information. Therefore direct marketers have to abide by this law and manage the customer information properly.

Q7. How much have technology influenced the growth of direct marketing?


According to the managers, technology has been one of the major factors behind the rapid growth of direct marketing. They believe that technology has given birth to some of the new channels of direct marketing like interactive television, podcasts, mobile marketing etc which gives them an opportunity to reach customers around the globe. Moreover, technology has also made investments in direct marketing considerably lower and more cost effective. It was also recognised through the interviews that technology has made information management much easier and simpler as information can be easily stored and retrieved. This has further helped in the growth of direct marketing. Technology has also made measuring the response rates from direct marketing campaigns easier.

Q8. What are the social responsibilities that need to be addressed during direct marketing campaigns?


The managers believe that addressing the social responsibilities during direct marketing campaign is important. It was recognised that the main issues that need to be addressed are the privacy of the consumer, environmental protection, and usage of information. This is important for a number of reasons. Firstly, because of the increasing pressure from the industry regulators such as Direct Marketing Association, OFGEM, etc. Secondly, because of the legal implications associated with these social responsibilities. Finally, because of the corporate social responsibilities of the organisation as a whole and the corporate image of the organisation that it has to sustain.

Q9. Over the years, how has direct marketing approaches affected the performance of British Gas?


According to the managers, direct marketing approaches have been very successful for British Gas. The managers believe that although British Gas has been losing customers, they would call its direct marketing very successful. They believe that their decreasing market share has been due to a number of reasons such as frequent price rises and negative publicity by media. However, direct marketing helped them in minimising the adverse effects of such factors and minimise their loss of customer base. The managers also believe that loss in market share is also due to the direct marketing activities of their competitors.

Q10. What feedback have you received from the customers in response to your direct marketing campaigns?


Direct marketers from British Gas received a mixed response from the customers. ‘Some customers gave a very positive feedback, whereas a larger number of people were unhappy with the direct marketing activities of British Gas and this resulted in a number of complaints from the customers’ (excerpt from Appendix I). The majority of complaints were regarding the infringement of physical and information privacy. Others complaints were regarding mis-selling practices.

Q11. How have you accommodated such feedback into your campaigns?


The feedback was accommodated by British Gas by using a number of ways. In order to protect the physical and information privacy of the customers, a ‘no caller list’ was created where customers can put there names and enrol to be excluded from direct marketing activities of British Gas. Further, the customers could also contact the company to remove themselves from direct marketing customer databases. To reduce the complaints from customers, the direct marketers were given training to improve their practices and strict regulations were introduced within the direct marketing to ensure best practice of direct marketing activities.

Findings from employee questionnaire: A survey carried out among the employees working in various direct marketing functions of British Gas in the London area, helped the researcher to come out with the following statistics and draw conclusions from them.

1. Which of the following factors have contributed the most to the growth of direct marketing in the Gas and Electricity suppliers industry?


  1. Deregulation of the Gas and Electricity Suppliers Industry

  1. Declining effectiveness of traditional media in the industry

  1. Increasing competition and need for better targeting

  1. Changing demographics and lifestyles

  1. Increasing number of sophisticated customers

  1. Developments in communications technology

  1. Availability of improved databases


The survey conducted on the employees of British Gas showed that the availability of improved databases, increasing competition and need for better targeting were the biggest contributors to the growth of direct marketing in the Gas and Electricity suppliers industry, whereas the changing demographics and lifestyles and increasing number of sophisticated customers were considered the least contributors to the growth of direct marketing.

2. What of the following is the biggest advantage that direct marketing enjoys over traditional marketing media?


  1. Better targeting

  1. Direct response

  1. Better response rates

  1. Seeks more attention

  1. Flexibility

  1. Personalisation

  1. Better customer retention

  1. Builds customer loyalty


The survey shows that the employees believe that the better response rates and direct response are the biggest advantages that direct marketing enjoys over the traditional marketing media. However, the building of customer loyalty was considered least important advantage, by the employees surveyed.

3. Which of the following is the most important requirement for a direct marketing employee?


  1. Information database
  2. Adequate promotional literature
  3. Efficient action team
  4. Training


The survey conducted on the employees working in direct marketing for British Gas shows that information database is the most important requirement for successful direct marketing, whereas the ‘efficient action team’ was considered the least important requirement.

4. Which of the following are the limitations of direct marketing?

  1. No caller signs

  1. Avoidance by target consumers

  1. Excessive legislations and regulations

  1. Increasing data protection

  1. Requires more investment


The survey shows that the ‘do not call’ lists is the biggest limitation that direct marketing faces followed by increasing data protection. Other significant limitations faced by direct marketing are ‘avoidance by target consumers’ and limitations offered by excessive legislations and regulations.

Findings from customer survey: A survey was also conducted among the consumers in the London area, in order to understand their reactions toward direct marketing activities. The survey provided gave the following results.

1. Which age group do you belong to?


The consumer survey included a majority (46 %) of consumer belonging to the 26-40 age group. 32 % consumers belonged to the 41-65 age group and 14 % belonged to 18-25 age group, while 8 % consumers belonged to 66 and over age group. Therefore the survey attempted at providing reasonable represntation of different age groups living in the London area.

2. Are you a British Gas Customer?

Results: Out of the consumers surveyed 78 % were British Gas customers and 22 % were non-British Gas customers.

3. If, yes, how did you become a British Gas customer?


The customer survey showed that approximately 56 % customers joined British Gas for their gas and electricity supply through direct marketing channels such as tele-marketing, direct mail, door-to-door sales etc. However, only 13 % customers became British Gas customers by traditional marketing channels, while 31 % were British Gas customers by default.

4. Have you ever purchased a product or service from a direct marketing agent?


Around 69 % of the customer surveyed have purchased from direct marketing atleast once in their life and only 31 % customers didn’t ever purchase from a direct marketing agent.

5. Direct marketing is good for the consumers. Do you

A. Strongly agree

B. Somewhat agree

C. Neither agree nor disagree

D. Somewhat disagree

E. Strongly disagree


The customer survey showed that around 48 % of respondents believed that direct marketing is neither beneficial nor harmful and had a fairly neutral view on direct marketing, whereas 38 % believed that direct marketing is not good for them. Only 14 % of the respondents believed that direct marketing is good for them.

6. Which of the following categories best describes your last experience purchasing a product from a direct marketing agent?

  1. Very pleasant
  2. Somewhat pleasant
  3. Neither pleasant nor unpleasant
  4. Somewhat unpleasant
  5. Very unpleasant


The customer survey also revealed that direct marketing does not necessarily leads to more customer satisfaction as around 44 % respondents described their experience with direct marketing purchase as ‘neither pleasant nor unpleasant’. In fact, around 41 % described their purchase experience as either somewhat unpleasant or very unpleasant. Therefore direct marketing does not lead to more customer satisfaction.

7. Direct marketing strategies by companies’ misuses customer information to meet their sales goals. Do you

A. Strongly agree

B. Somewhat agree

C. Neither agree nor disagree

D. Somewhat disagree

E. Strongly disagree


Further, the survey also revealed that around 36 % somewhat agreed or strongly agreed that their information is misused by direct marketers to meet their sales goal, whereas around 42 % respondents had a neutral opinion on the issue and 22 % respondents either strongly or somewhat disagreed on the issue.

8. Direct marketing approaches infringe the privacy of the consumer. Do you

A. Strongly agree

B. Somewhat agree

C. Neither agree nor disagree

D. Somewhat disagree

E. Strongly disagree


Around 48 % of the respondents either strongly agreed or somewhat agreed that direct marketing infringes their privacy, whereas 24 % respondents were neutral on the issue. Around 28 % respondents strongly disagreed or somewhat disagreed to the infringement of privacy by direct marketing.

9. Which of the following advantages is the biggest advantage of direct marketing?


  1. Availability of wider range of products
  2. Better ability to compare prices
  3. Comfortable and convenience
  4. Personalised approach


In the survey on customers, it was revealed that the comfort and convience of purchasing by direct marketing channels is considered the biggest advantage (33 %). This was followed by the better ability to compare prices as the secong biggest advantage (31 %).

10. Which of the following advantages is the biggest disadvantage of direct marketing?


A. Infringement of information privacy

B. Infringement of physical/interaction privacy

C. Environmental degradation

D. Over-use of customer lists

E. Misuse and abuse of customer information


Finally, the customer survey revealed that the infringement of information privacy is considered as the biggest disadvantage of direct marketing activities of organisations. Infringement of physical/interaction privacy is considered as the second biggest disadvantage of direct marketing.

d. Detailed Analysis

The importance of direct marketing has been increasing continuously. More and more resources are being allocated by organisations including British Gas. The spending on direct marketing has been increasing for British Gas continuously as shown earlier. However, the data above also shows that British Gas has been still loosing customers. Their gas and electricity market share has also been decreasing. Although, its revenue increased slightly, its operating profit was also continuously on a downward trend. According to the management the main reasons behind loosing customers was its frequent price hikes and the ‘churn’ caused by the competitors. It also believed that the direct marketing activities has been an important area for the organisation and has acted as a ‘saviour’ as it helped in minimising the loss in customer base and re-acquisation of lost customers.

The employees and the manager also believed that direct marketing is an important area for British Gas and offers a lot of advantages. The better and measurable response rates and the better ability to target was considered as primary advantages of direct marketing by them. An important finding was the significance of imformation. Both managers and employees alike stressed on the availability of accurate and relevant information as a important requirement for successful direct marketing.

The consumer survey also revealed a number of interesting results. The survey showed that around 68 % have purchased a product from direct marketing mediums. This shows that direct marketing is very successful in the acquisation of customers The overall survey showed that majority of consumers had a fairly neutral view on direct marketing. However, the majority of age group 18-25 believed that direct marketing is good for them whereas majority of other age groups either had a neutral view or believed that direct marketing is not beneficial to them. A similar trend was seen on the issue of privacy. The majority age group 18-25 believed that direct marketing does not infringes on their privacy while majority of other age groups had either a neutral opinion or believed that it does intrudes on their privacy. Another important finding of the survey was the customer satisfaction levels of the customers who have used direct marketing for purchase of products. Only 10 % of customers surveyed described their experience as either ‘very pleasant’ or ‘somewhat pleasant’. The other 90 % described their experience as either ‘neither pleasant nor unpleasant’, ‘somewhat unpleasant’ or ‘very unpleasant’. Therefore the consumer survey shows direct marketing is not considered very important by majority of consumers as majority of them a fairly neutral view on it.