Talk about turnarounds: Within a few years, online marketing has moved from being considered a separate entity, bound for the spinoff-and-IPO track, to an integrated means of feeding offline activity.
Direct marketers are increasingly using the Web for non-sales functions, including lead generation for offline channels, loyalty marketing, and building or enhancing databases, according to Direct’s 2003 online practices survey. And fewer firms are relying on their sites for billing and order taking, at least among companies that sell to businesses.
For example, the number of mixed-focus companies selling via the Web dropped by 6% — to 53%. (Mixed-focus firms market to both businesses and consumers.) And only 37% of pure business-to-business players are doing it, a 5% decline from last year.
Consumer marketers are still selling online, the number dropping a mere two percentage points from 79% to 77%. But they’ve increased their non-purchase activities. Nearly 80% use their sites to disseminate information, up from 63% last year. Thirty-seven percent use them to generate direct mail leads, compared with 32% in 2002. And 36% use them to provide telemarketing leads, a 14% increase.
And there has been a double-digit jump in the number of consumer firms doing e-mail marketing.
Meanwhile, B-to-B firms advanced or held steady in most of these areas. For example, 41% are sending e-mail newsletters and promotions as part of their CRM efforts, compared with 36% last year. And the percentage of those using the Web to provide information (90%), generate direct mail (42%), e-mail (58%), or telemarketing leads (60%) or build a database (37%) mirrored last year’s levels.
The results were similar when broken out by revenue.
Among firms with sales of more than $5 million, 57% indicated they took orders on their sites, down from 63% last year. Likewise, 46% of those with revenue under $5 million did so, compared with exactly half in 2002.
The one exception to this was among companies that devoted at least 10% of their marketing budgets to online activities. Fifty-eight percent of these firms use their sites to take orders, a figure virtually unchanged from last year.
Among those that earmark smaller percentages of their marketing budgets for online media, this fell from 52% to 35%.
One reason for this lack of enthusiasm for the Web as a sales tool may lie in one word: profitability.
Slightly fewer readers reported that these sales were profitable (67% vs. 69% a year ago) and a few more said they were unprofitable (15% compared with 14%).
These slight slips and rises occurred regardless of each firm’s customer focus. But differences surfaced when companies were asked whether their Web sales were more profitable than those generated through other channels.
Only 42% of those achieving profitability said the Web had outpaced other media — roughly the same as last year. In addition, 12% said they were less profitable and 23% indicated they were equally profitable.
Broken down by segment, 52% of the consumer firms and 37% of B-to-B marketers said the Web was their most profitable channel. But 13% of the consumer companies said it was less profitable, a 6% leap over 2002.
And 8% of the B-to-B and 17% of the mixed-focus respondents said the same thing. Firms with lower revenue overall were more likely to say that online sales contributed less to the bottom line (12%) than those with higher revenue (11%). Both of these figures were high than last year’s.
Not surprisingly, respondents reporting a decline in online profitability were less likely to devote resources to the channel. Increasing numbers of consumer and B-to-B firms anticipate either slight or significant spending reductions, while fewer expect increases of any stripe. Mixed-focus firms, which reported the highest jumps in online order profitability, were most likely to increase their online budgets for the remainder of 2003 — 11% compared with 9% last year.
In general, respondents are more bullish about 2004. A majority anticipate higher online marketing budgets in the upcoming year and fewer foresee cuts.
Mixed-focus firms were the biggest optimists, with nearly half counting on higher budgets (up from 37% last year). Sixty-five percent of all consumer marketers said their spending would rise, compared with 62% a year ago. B-to-B marketers dissented, with only 52% indicating their allocations would grow, down from 55%.
Viewed by revenue, 51% of companies that generate less than $5 million a year are counting on online marketing budget increases, the same percentage as last year. But larger firms were more enthusiastic: Sixty-three percent expect hikes, up from 54%.
The sectors that anticipate more spending next year have already begun to prepare for it. Hiring activity is up among consumer and mixed-focus respondents, while fewer B-to-B firms have added employees.
And the respondents focused on building their business aren’t relying as heavily on e-mail lists for prospecting. Only 21% indicated they rent such files from outsiders, down from 24% last year. Mixed-focus firms were most likely to have cut back. Only 21% said they’ve done this, compared with 28% last year. Eighteen percent of all consumer firms use them, down from 20%, as did 25% of B-to-B marketers, a drop from 27% in 2002.
High-revenue firms were the most likely to use outside e-mail lists. But that may not be saying much — only 36% of all respondents use them (down from 45% a year ago). Smaller firms reported a huge drop in their e-mail list use, with only 12% indicating they’re mailing, compared with 39% in 2002.
Among companies that do use e-mail, 25% rely on third-party vendors to append e-mail addresses to lists of existing customers, and 27% obtain these addresses through affiliate programs.
Companies have gotten a little sloppier about obtaining consent before e-mailing their customers. Only 47% get either single- or double-opt-in permission before sending messages, down from 50% last year. If there is any good news in this, it’s that single-opt-in use is declining (from 41% to 36%) while double-opt-in permission policies rose from 9% to 11%. Twenty-two percent use opt-out only, while 23% don’t have a formal permission method at all.
Of course, permission standards vary based on the market served. Among consumer marketers, 58% use either single- or double-opt-in methods, compared with 59% for mixed-focus companies.
Only 39% of B-to-B marketers use at least one of these methods. More B-to-B respondents reported not having any formal opt-out mechanism (26%) than either consumer (14%) or mixed-focus (21%) marketers.
Methodology
This survey was conducted for Direct by Primedia Business Market Research, an in-house research firm. It was e-mailed to 3,752 Direct subscribers who indicated their job function was in corporate or general management at companies that use electronic commerce. Participants were chosen on an nth-name basis from all subscribers.
An initial copy of the survey, offering a chance to win one of four $50 Amazon.com gift certificates, was sent out July 1, 2003. Two follow-up e-mails, along with the sweepstakes offering, were sent to non-respondents.
Results are based on surveys that were returned by 287 qualified participants.
Respondents identified themselves as corporate or general management (76%); sales/marketing/-telemarketing executives (12%); advertising/promotion managers (4%); and circulation/list/media managers (1%). The remaining 7% identified themselves as fulfillment, operations or production managers, development directors, owners, VARs/integrators/developers, or consultants.
The median annual revenue specified was $1.6 million. Current-year revenue reported by survey participants was as follows: under $1 million (45%); $1 million to $2.5 million (13%); $2.5 million to $5 million (7%); $5 million to $10 million (5%); $10 million to $25 million (7%); $25 million to $100 million (10%); $100 million to $500 million (5%); $500 million to $1 billion (2%); and more than $1 billion (5%).
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