Live From DMA: DM Expenditures Surpass General Advertising: Study
(Direct Newsline) If direct marketers needed a reason to puff out their chests, new economic figures have provided it: At $173.2 billion in expenditures predicted for 2007, DM will make up more than half of all U.S. advertising spending, according to new Direct Marketing Association research. Total advertising spending is forecast as $340.4 billion for this year.
“Marketers are moving dollars into direct marketing because of higher [return on investment] relative to other forms of advertising,” said Peter Johnson, the DMA’s research strategy and platforms vice president, in a statement.
The ROI is considerable: That $173.2 billion in DM spending will generate more than $2 trillion in sales this year, a return of $11.69 for every dollar spent. If the DMA’s projections prove out, DM’s portion of advertising spending will continue to grow, reaching $182.1 billion in 2008, compared with $173.7 billion for general advertising.
Much of that growth is coming from online channels. Commercial e-mail expenditures is slated to rise 24.8% during 2007-2008. Granted, e-mail’s growth is in part due to its comparatively small size. Marketers will spend around $600 million on it in 2008, compared with $47 billion in telemarketing, $36.4 billion for non-catalog direct mail and $22 billion on catalogs.
But non e-mail Internet marketing, which at an anticipated $23 billion will be solidly in the middle of the pack when it comes to expenditures, should increase by 19.7%.
Postal rate increases have had a “stalling effect” on the spending gains formerly seen in catalog and non-catalog direct mail, Johnson said.
But marketing money is flowing online because that’s where the ROI is. In 2008, commercial e-mail will pull in $45.65 for every dollar spent, while non-e-mail Internet marketing will generate $20.19 per dollar. In comparison, non-catalog direct mail will have a $15.60:$1 return, direct response newspaper ads will generate $16.86 for every dollar allotted, and telephone marketing will pull in $8.61 per dollar.
Johnson does not expect the disparity between online and offline returns to last. As dollar flow toward electronic channels, returns will drop. He expects ROI from online channels to mirror others within five to 10 years.
Industries leading the current spending boom include manufacturing and other transportation equipment; air transportation; electric, gas and sanitary service; financial banks and credit institutions; education services; retail trade, non-store and other retailers; and healthcare services, all of which should see low-double-digit percentage increases in 2008.
Not that there aren’t laggards. A handful of sectors, including petroleum and coal products; apparel and leather products; financial, real estate and leasing services; lumber and wood products; furniture and fixtures; textile mill products and information products are seen as cutting back their DM spending. The anticipated spending drop in several of these industries reflects the troubles of the housing market.
Even beyond the housing market, marketers are guarded about the U.S. economy’s future. For the first time, the DMA asked direct marketers whether they expected a recession. Four percent said one was very likely, followed by 32% indicating one was somewhat likely. Only 14% said one was somewhat unlikely, and a scant 1% said recession was very unlikely.
