DMers are spending less on systems, campaigns, and staff
The money isn't there anymore.
That's the overwhelming message from Direct's annual database practices survey.
DMers are spending less, on everything from systems to staff. And they're expecting a lower return on investment.
Of those polled, 15% will allocate less to develop or maintain databases in 2009. That's triple the level seen last year, and it holds true of both business-to-business and business-to-consumer marketers.
How times have changed. In last year's survey, not a single consumer marketer planned to cut its database budget.
Moreover, only 40% expect to increase investments, compared with over 50% last year.
The biggest drop is in the B-to-B sector.
That restraint is evident in campaign budgets as well — 14% anticipate cuts, up from 3% in the previous year. Still, more than half of the consumer marketers queried expect to lay out more, a slight gain.
How can that be when revenue and profits are falling? Perhaps these firms are trying to save money by outsourcing. A fifth of our respondents plan to outsource their databases, with consumer firms leading the way.
And this means head-count reductions. Almost 20% of the firms polled have cut database or CRM staffs, and that percentage has doubled over last year.
Is anyone hiring? Yes, but the percentage has fallen from 29% to 12%. B-to-B companies are more likely to lay people off.
Employees aren't taking the only hit. The median amount spent on system upgrades has fallen from $19,300 last year to $17,500.
Yet these cutbacks may explain why 72% believe their database investments will pay for themselves. That's roughly the same as last year, only now more respondents feel it'll happen quickly: In our last survey, 42% expected to recoup their money within 12 months; this year, that figure stands at 58%.
But enough good news. The most alarming sign is that only 6% anticipate significant revenue increases, down from 20%. Eight percent of consumer marketers expect it. But 38% did last year.
What's more, only 39% foresee any increase at all, compared with 62% in the previous survey. On the contrary, 21% predict a decrease, and that's up from 6%.
The result? Marketers are taking a defensive posture. They've shifted their focus from revenue and brand awareness to profit. This is especially apparent among B-to-B respondents.
In addition, fewer are tracking their customers' lifetime value — the percentage fell from 46% to 39%. Again, the drop was greater among B-to-B marketers.
Not that DMers have given up entirely on best practices. Two-thirds personalize marketing materials. And for half of those, the resulting lift covers the campaign's expenses. Even better, personalization boosts customer value for roughly the same percentage.
That may be why personalization budgets are holding steady (sort of). Only 15% say they will drop. But that figure is higher than it was last time. And the number predicting an increase? That's fallen from 37% to 22%.
METHODOLOGY
This survey was conducted by Penton Media Custom Research, an in-house firm. It was e-mailed to 32,220 Direct magazine and Newsline subscribers. Respondents were asked what they knew about their company's database marketing practices.
Results are based on 207 questionnaires returned by qualified participants.
In some cases, subscribers who responded “don't know” or “unsure” to certain questions were eliminated from vote totals. The minimum number of responses to such questions was maintained to ensure stable data.
