THE AGE OF ACCOUNTABILITY has arrived.
Marketers will spend $961.9 billion on communications this year. And return on investment will play a big role in how these dollars are allocated, according to a new forecast from merchant bank Veronis Suhler Stevenson.
What's more, Veronis Suhler states, this need for ROI will lead to more robust spending on direct marketing.
Total advertising spending rose by 4.3% to $197.6 billion in 2005 and is expected to climb 6.4% to $210.3 billion this year.
But DM spending jumped 7.1% in 2005 to $144.9. And it will increase by 6.6% to $154.47 billion this year and by 6% annually through 2010.
“Despite the rising costs associated with direct mail (postage increases) and telemarketing (costs of complying with the National Do Not Call Registry), marketers are expected to continue to employ direct marketing tactics because of their ability to measure ROI and target specific audiences,” the bank reports.
Internet advertising led the field in growth in 2005, going up by 30.8% to $11.09 billion. In contrast, spending on ad space in consumer magazines rose by a relatively flat 3.6% last year to $23.4 billion.
And who's the leader in moving to online media? Business-to-business firms.
In 2005 marketers spent $10.7 billion on B-to-B media, and of that, $1.87 billion was earmarked for online channels, a 27% gain over 2004. This reflects “the medium's ability to offer relatively low prices, generate leads and measure ROI,” Veronis Suhler notes.
The report goes on to state: “Print advertising, still the core revenue stream of many B-to-B media companies, continues to experience weakness as marketers divert funds to media outlets that provide a more immediate and measurable ROI.”
The bank didn't mention ROI as a major factor in B-to-B promotions. But measurability plays a role in consumer marketing. Overall spending in this category was up 3% to $42.75 billion last year. Marketers and retailers have been collecting data on the effectiveness of point-of-purchase displays, and retailers are investing in radio-frequency identification systems to assist in this endeavor.
Within branded entertainment — a category that includes event marketing and sponsorship as well as product placement — spending rose 16% to $48.67 billion in 2005. Event marketing, the largest segment in this category, increased by 17.6% to $27.94 billion. And why? Because it's most likely to foster consumer interactions that allow measurable ROI, according to Veronis Suhler.
This is consistent with the overall trend.
“Advertisers as well as institutional clients increasingly are requiring stronger ROI measurements that aid them in justifying costs,” the study notes. “[They] are focused more than ever on measurement and ROI, as they have become sensitive to consumer complaints about increased ad clutter due to marketers using all available opportunities to reach ever-more elusive audiences.”
