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BtoB

Direct response gets largest share of b-to-b marketing

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Almost half (42.9%) of b-to-b marketers' total budgets go to direct response communications, while 16.1% is allocated to brand advertising and 13.7% to trade shows, according to the Direct Marketing Association's first benchmarking survey focused exclusively on the b-to-b space.

"Regardless of how you segment the budget, direct response takes the most budgetary allocation, more than twice as much as any other form of marketing," said Yoram Wurmser, research manager-research and market intelligence at the DMA.

Within direct response, direct mail receives the largest budget share (27.5%), followed by online marketing (18.8%). Trade shows and catalogs garner 15.9% and 15.7%, respectively. Telemarketing nets 12.1% and new media—RSS, blogs and the like—just 1.5%.

Among other findings, 65% of resources are devoted to new customer acquisition and 35% to retention. Citing conventional wisdom, Wurmser said it is more expensive to acquire new customers.

"However, the proportions are not the same when it comes to sources of revenue.

"Generally speaking, direct marketers have found that you're more likely to get more of your revenue from existing customers," said Peter Johnson, VP-senior economist for research and market intelligence at the DMA. "You get an imbalance where the promotional [investment] is skewed in terms of acquisition but the revenue payoff is ultimately skewed in favor of retention."

Johnson added that "every marketer has to ask themselves: `Is my allocation of budget between acquisition and retention where it should be?' "

"The question should be if so much of your revenue comes from existing customers, why spend anything on acquisition?" he said. "But in the real world, customers do go away. You're always losing customers and they have to be replaced by new customers. You'll probably spend more on acquisition than you would like in an ideal world, but it's not an ideal world," Johnson said.

Ruth Stevens, president of direct marketing consultancy Emarketing Strategy, said she was disappointed but not surprised that companies are not investing more on retention marketing.

"That's where your profits come from, and you need to spend accordingly," she said. "Marketing communicators, I think, get attracted to the glamour of prospecting when, in fact, the revenue comes from current customer marketing."

Michael Lintell, director of the future of mail stream at the corporate strategy group of Pitney Bowes, said that one of the reasons more marketing resources are directed toward acquisition is heightened focus on growth in organizations.

Lintell said companies often switch their focus to retaining a customer via channels that cost less for retaining that customer. "E-mail is a lot cheaper than direct mail but tends to be less effective [for acquisition]," Lintell said.

The results of the study were first presented at the DMA's annual Direct Marketing to Business Conference in Orlando, Fla., last month. The survey was conducted online in January and February, and drew 299 respondents.

This report is intended to be the first in a new program of b-to-b research the DMA is undertaking.

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