Direct Marketing Association President-CEO H. Robert Wientzen mixes a healthy dose of realism with a dash of optimism when discussing the issues and challenges direct marketers grapple with in todayâs sagging economy.
The lack of significant prospecting efforts and slower-than-expected growth rates are chief among his concerns. His forecasts for recovery have been adjusted and readjusted over the past 12 months, but he continues to maintain that b-to-b will lead the way out of the downturn.
Wientzen spoke to BtoB last month in advance of the DMAâs 85th Annual Conference and Exposition, taking place Oct. 19-23 in San Francisco.
BtoB: When do you think b-to-b direct marketing will emerge from the current downturn?
Wientzen: Iâve been telling people that I thought weâd start to see things turn around in October or November. Iâm less confident today than a month ago about that.
Certainly by the beginning of next year, weâll begin to see the recovery for business-to-business. Even if the consumer side is still lagging, I think the b-to-b side will improve. Weâll start to see inventories replenished, and manufacturing will start to pick up. The b-to-b side will move ahead of the consumer side.
The big issue that remains to be seen with b-to-b is the impact of technology and the selling of technology with b-to-b tools. If we donât have a healthy technology sector, growth will be affected. â¦ If the technology sector is in a funk, thatâll take a very big bite out of b-to-b sales volume as a whole. Iâm hoping weâll start to see it turn around and all of b-to-b will pick up by January. Hopefully, technology is going to improve.
The general forecast we continue to hold to is that b-to-b is going to continue to do better than b-to-c. We expect to see an 8.3% increase in aggregate [revenue] through 2006. Thatâs down from a little over 11% growth in the heyday. Still, thatâs better than b-to-c, which weâre forecasting at 7.9%
BtoB: Which areas of the b-to-b direct marketing industry, if any, are expected to grow at a faster pace?
Wientzen: According to the DMAâs "Economic Impact" study, business-to-business marketers in the insurance industry and pharmaceutical market are leading the way in direct response spending growth. Weâre seeing the most significant growth in the pharmaceutical area, due mainly to recent deregulation of advertising, which has opened the door for direct response print and television ads.
BtoB: Which areas of b-to-b direct marketing have been the hardest hit by the economic slump?
Wientzen: While several industries have been hit hard by the recent economic slump, the printing industry, industrial products and the travel industry have been hit hardest, according to our "Economic Impact" study. Tighter economic restraints have led to cutbacks in the amount of business travel allowed to employees, while the printing industry has felt the pinch from marketers who cut their prospecting budgets.
BtoB: What is your current forecast for the industry as a whole, and does that differ from b-to-b direct marketing specifically? If so, why?
Wientzen: While b-to-b continues to grow at a higher rate than b-to-c, the growth rates for both have slowed over the past year-and-a-half. My sense of it is the gap between b-to-b and b-to-c will widen.
The fact that the economy is being carried on the backs of consumers right now has been helping us. Consumer confidence has taken a harder hit, while more b-to-b marketers have turned to direct marketing as a result of its low cost, accountability and ability to target a marketing piece to a specific audience.
The good newsâif there is anyâis that, relatively speaking, the direct channel continues to grow and to do considerably better than the traditional retail channel. Thatâs true in almost every corner we look in. While our rate of growth is slowing, weâre still seeing growth. Most sectors in retail are not growing at all, and some are declining.
BtoB: What are the biggest challenges facing b-to-b direct marketers right now? Are they distinctly different from b-to-c marketer challenges?
Wientzen: I think the biggest challenge is this issue of prospecting. The real issue is cost. We are not adequately increasing response rates to offset increasing costs. Obviously, a big increase in cost has been the postal situation.
Response rates arenât going up. We have to figure out how to do more efficient prospecting and get our overall response rates up. If costs go up and you donât increase your response rates, something has to be cut. Itâs particularly relevant on prospecting. Usually, prospecting doesnât pay for itself. Thatâs why it gets cut.
Targeting is a huge issue for b-to-b marketers. How do I find the right person to receive my offer? How do I get it to the right person? That has always been a challenge for b-to-b marketers, and itâs a bigger problem for b-to-b [than b-to-c].
BtoB: How should b-to-b direct marketers prepare to meet those challenges?
Wientzen: One [answer] is better market segmentation and better understanding of the marketplace. Secondly, use what has collectively been called CRM. Employ all the CRM tools that allow you to understand your customers and your market much better.
While itâs difficult and often expensive, [b-to-b marketers] should examine the possibility of enhancing their databases and their data mining tools to allow them to understand their customer base better.