Direct marketing is sitting pretty again: Spending is up, and sales driven by direct techniques are outpacing U.S. sales overall and are projected to continue to do so.¶ Companies will spend more than $161 billion on direct marketing this year, according to a recently released report from the Direct Marketing Association. The study, "U.S. Direct Marketing Today: Economic Impact 2005," conducted by Global Insight, also estimates that direct marketing will account for 10.3% of total U.S. GDP in 2005.
Peter Johnson, senior economist at the DMA, said this is the first time that figure has reached double digits. "We've never had that before," he said. "We know direct marketing is bigger this year."
Sales driven by direct marketing are projected to grow by 6.4% compounded annually through 2009; by comparison, overall U.S. sales are projected to grow 4.8% in the same period.
Almost half of all ad spending
Direct marketing also represents a more significant piece of the advertising pie. Direct marketing ad expenditures now account for 47.9% of total advertising spending. "It's been growing steadily over the last few years," Johnson said. "In the next couple of years, I'd expect direct marketing to be more than half."
The most popular direct marketing channels this year are direct mail ($49.8 billion) and telephone marketing ($47 billion), according to the report.
Other recent studies bolster that optimistic outlook.
A survey published in August by Harte-Hanks and conducted by CSO Insights, revealed three out of five companies planned to spend more on e-mail, Web design and data quality this year, and more than one in two planned to increase spending on search marketing.
The DMA came out with another study in June, its inaugural "Customer Prospecting and Retention Report," which supports the increased spending picture. Sixty percent of b-to-b marketers surveyed said they planned to increase spending on outbound telemarketing in the next year, 59% said they would increase e-mail spending and 53% indicated they would increase direct mail spending.
"More and more b-to-b companies have recognized there's more room for experimentation and discovery because the whole b-to-b marketing space is evolving," Johnson said. "There's less emphasis exclusively on direct sales forces and more emphasis on integrating sales forces with direct marketing techniques, technologies and additional channels.
CDW Corp. uses a combination of catalog, direct mail, e-mail, search and telephone marketing, with performance in each channel dictating spending. "The allocation of spend will be fluid," said Fred Neil, VP-strategic marketing/decision support at CDW.
"We are constantly evaluating the effectiveness of our promotions, and we make channel decisions based on the performance in each communication."
The increased focus on increasing ROI has become de rigueur with marketers, and direct marketing ROI is typically high. According to the DMA, $1 invested in direct marketing returns $11.49 in revenue on average.
"Our report shows over the last five years the ROI in direct marketing has been growing steadily," Johnson said.
ROI resonates with c-suite
Impressive ROI statistics resonate with C-suite executives, who will back programs if they know the payoff is there. "That's the kind of thing a CFO looks at and says, `I invested money here and got that,"' said Will Metzger, senior VP-group account director at Grey Direct.
Metzger was hired in mid-September to lead the agency's new b-to-b/technology practice. "Even in an organization where we're being told that budgets are flat going into next year, they are still open to programs where we can prove incremental revenue," he said. Grey Direct has about 10 b-to-b direct clients, including Adobe Systems, Bellsouth Corp., Oracle Corp. and Xerox Corp.
CDW is boosting its emphasis on ROI. "We're doing a great deal more in that area, spending more time and resources to understand our customer segments and customer behavior," Neil said. "A lot of it has to do with increased costs like paper and postage, so you have to be much more effective in marketing efforts to achieve the ROI."
B-to-b direct marketers today are empowered with more tools, technologies and channels at their disposal to maximize marketing campaigns.
"Thanks to innovations and the ability to get marketing data and analyze it better, we're getting better at b-to-b marketing," Johnson said.
In the database realm alone, there have been several new products and services introduced this year.
Experian launched B2B Marketing Triggers, a service that uses credit and marketing data to help marketers improve response rates in their campaigns by pointing them to targets most likely to respond to offers. Information from Experian's National Business Database helps clients identify changes in business information.
Data provider Dun & Bradstreet announced several new products through its D&B Sales & Marketing Solutions division. The most recent product launched is Integration Manager, a software program that brings multiple customer views into a common customer directory. Enterprise software provider Oracle has deployed Integration Manager to automate and speed up its data integration process.
"The tools and innovation we've developed in the past few years help our customers derive more insight into their database and provide higher quality prospects within a target market," said Debra Brown, leader of Sales & Marketing Solutions at D&B.
InfoUSA announced in July that it is gearing up to offer a new business service, infoGenie, that will combine data from the company's SalesGenie product with data from business Web sites that will be collected by infoUSA. Detailed business information-such as executive names, titles and financial information-will be among the information available when infoGenie rolls out in 2006, according to the company. M