While the overall communication spending picture is stagnant, expenditures on direct response marketing and alternative efforts – including branded entertainment and word-of-mouth campaigns – will increase during the next few years, according to equity firm Veronis Suhler Stevenson.
Communications spending amounted to $882.61 billion in 2008, a 2.3% increase from 2007. But it’s forecast as falling to $873.73 billion in 2009. Granted this is only a 1% decline, but as it’s the first decline seen in four decades, it’s significant.
In contrast, direct marketing spending rose by 3.2%, to $106.53 billion, despite pullbacks in direct mail and telemarketing by the automobile and financial services industries. Direct marketing will rise by a forecast 5.6% compound annual growth rate between 2008 and 2013, according to Veronis Suhler.
The equity firm attributed measureable marketing’s growth to brands shifting budgets out of traditional media into direct marketing strategies that provide stronger return-on-investment metrics.
Alternative advertising spending hit $77.68 billion in 2008, and will grow by a compound rate of 12.3% through 2013. In comparison, traditional advertising is seen as experiencing a 3.3% during this period. Much of alternative advertising’s gains will be in online advertising and digital out-of-home spending. By 2013, Veronis Suhler predicts alternative media will make up 29.7% of total advertising and marketing spending, up from 18.2% in 2008.
Within direct marketing, direct mail remained the largest direct marketing category in 2008, with spending of $35.44 billion, up 2.9%t. According to Veronis Suhler, reverse mortgage companies were among the biggest users of direct mail in 2008, increasing their mailings to both new and current customers.
Spending on telesales, the second-largest category, fell 1.7%, $30.45 billion, while expenditures on the number-three category, print catalogs, rose 3.4% to $21.54 billion. Business-to-business catalog spending posted a 5.1% growth rate, more than double the consumer growth rate.
E-mail marketing reached $11.91 billion, up 19.3%, the highest growth rate of any segment within the direct marketing segment.The figure includes spending with third-party vendors for company-sponsored e-mail messages, Web site marketing, e-mail campaigns, and display ads embedded in third-party e-mails. It excludes in-house Web site development and keyword searches and e-custom publishing.
Spending on direct response television (primarily including long-form response programs or infomercials) was up 3.6% to $5.08 billion. The Veronis Suhler report notes that during 2008 several widely touted products, including Snuggie wearable blanket and Sham-Wow chamois cloth, helped pull direct response commercials further into the mainstream. Health and fitness brands are the heaviest users of DRTV, both infomercials and short-form spots, accounting for almost 25% of new ads in both categories, according to Veronis Suhler. Other top brand categories include household, beauty and entertainment.
Expenditures on other direct marketing (including magazines, newspaper and radio direct response marketing, and list management spending) increased 1.3% to nearly $2.1 billion.
As for other advertising sectors, Veronis Suhler found that in 2008:
Spending on total business-to-business promotions fell by 6.3%, 2008 to $30.30 billion, as companies trimmed spending on promotional products and travel incentives in the face of economic turmoil, particularly in the financial sector.
Spending on consumer promotions increased 0.7%, to $46.12 billion, fueled by an uptick in point of purchase and coupons, which mitigated declines in promotional licensing and premiums, as brands are seeking to connect with consumers at the point of decision.
Branded entertainment spending climbed 12%, to $24.97 billion, fueled by double-digit gains in all three categories -- event sponsorship and marketing, paid product placement, and advergaming and webisodes, with brands seeking to engage with target audiences, particularly the youth market, using media immune to ad-skipping technology.
Outsourced custom publishing expenditures fell 25.7%, to $3.55 billion, due to a reduced reliance on outsourcing and shifts to less expensive electronic publications.
Public relations and word-of-mouth marketing increased by 7.1%, reaching $5.20 billion, sparked by a double-digit gain in word-of-mouth marketing as brands sought to incorporate social media and other offline tactics to reach influential decision makers, while public relations spending was fueled by companies seeking to improve their corporate images and harness new technology to reach target audiences.
