DM sales outpace economic growth

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The promise of one-to-one communication with customers continues to drive marketers, as spending on direct marketing advertising materials reached $191.6 billion in 2000, up 8.5% from a year earlier, according to a study by the Direct Marketing Association.

In its "Economic Impact: U.S. Direct Marketing Today," the DMA forecast continued growth over the next few years. It said sales spurred by direct marketing would grow 9.6% annually through 2005, while advertising spending will increase at a 7.1% annual clip.

Electronic commerce will be a key driver behind direct marketing for the foreseeable future, said H. Robert Wientzen, president-CEO of the New York-based trade group.

"Traditional direct marketers are going to continue to do well, though [only] relatively well,’’ Wientzen said. "Our growth rate continues to outpace the economy. However, the rate of increase has diminished.’’

In fact, some were less than thrilled by the numbers. Gary Hennerberg, direct marketing consultant with Hennerberg Group Inc., Grapevine, Texas, noted 2000 figures included the torrid first quarter of the year, when Internet start-ups were flush with marketing dollars and the economy was going great guns.

"It is very possible that as an industry we were up 20% to 25% in the first quarter, and that after everything slowed down we dropped to 8.5% for the entire year,’’ Hennerberg said. "2000 was actually a mixed year.’’

B-to-b direct marketing continued to boast solid growth. Sales totaled $792.8 billion in 2000, up 12.1% from 1999.

The use of the Internet for trade benefits b-to-b companies because their buyers are technically advanced, Wientzen said. B-to-b business models—with higher-dollar average sales than consumer purchases—can justify Internet development, and networked commerce allows companies to consider reducing sales forces.

"The movement toward driving sales efficiency and reducing sales forces has been talked about for 10 to 15 years, but electronic commerce is meeting the pre-established desire to reduce the number of sales people,’’ Wientzen said. The use of Internet technologies to provide detailed product information is helping to make b-to-b electronic commerce an alternative to field sales, he said.

Hennerberg, who has advised such b-to-b companies as Dow Chemical Co., Hydro Dynamics Inc. and Beckett Corp., agreed. "If you’re the sales force, direct marketing is a foe,’’ he said.

Telemarketing No. 1

Despite the power of the Internet, telephone marketing continues to be the favorite tool of b-to-b direct marketers.

Telemarketing accounted for $354.7 billion, or 44.7% of all b-to-b direct marketing sales in 2000. Direct mail was second at $201.9 billion, or 25.5% of all sales. Interactive direct marketing came in at just $37.2 billion but is expected to be the fastest growing segment over the next few years, with projected annual growth of 26.1% through 2005.

By industry, the leading investor in b-to-b direct marketing in 2000 was business services, which spent $11.3 billion. Communications was second at $8 billion, followed by wholesale trade at $7.9.

The DMA study was conducted by the WEFA Group, which is part of Thomson Financial. M

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