Direct Marketing Is Not So Recession-Proof After All

Hundreds of Companies Hit Negative Territory in 1st Quarter

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A correction has been appended to this article

NEW YORK ( -- Everyone knows that in a down economy, the most accountable media, such as direct marketing, still thrive. But after an 18-quarter tear of positive results, direct marketers are suddenly seeing revenue go south.

The Direct Marketing Association's Quarterly Business Review shows that in the first three months of this year, some 372 direct marketers, agencies and suppliers hit negative territory, with an index of 48, down from 55 in the same quarter of last year. (The review is based on an index of 50 to represent zero change in growth.)

"You have to be an ostrich to not be worried about this," David Sable, vice chairman and chief operating officer at Wunderman, told Ad Age at the DM Days New York Conference last week. "The question is: When will [the slowdown] hit everybody? Because eventually it will."

Reading the signs
Indeed, there doesn't seem to be a letup on the way for direct. The review forecast an overall index of 55 for the second quarter -- that's down 11 points from the comparable period last year -- yet the DMA called that result "encouraging."

"The economy is starting to slow down and everyone is slowing down," said Ramesh Ratan, exec VP-chief operating officer of the DMA. "The fact that this community held its own until now is an indication that it's still strong." (Interestingly, the public-relations industry, a far less measurable discipline than direct, reported a 7.5% revenue increase in the quarter, according to a study by that industry's trade organization, the Council of PR Firms.)

Hitting what has seemingly become the key talking point for everyone in the industry, Mr. Ratan said direct is a "really good space" to be in since this is where marketers are reallocating their ad dollars. The survey showed marketers plan to increase their investments in online, search and analytics efforts. However, Mr. Ratan said current economic conditions have created trying times for areas such as direct mail, adding that increases in postage, paper and transportation haven't helped, either.

A lot of the blame is being laid at the feet of financial marketers who are shying away from mass mailings and relying on more highly targeted mail, e-mail and loyalty campaigns because of theĀ mortgage crisis and credit crunch. Said Steve Cone, chief marketing officer at Epsilon: "The focus is now on making sure they keep their existing customers as engaged as possible in this type of economic climate, communicating with them regularly and giving them an incentive to doing more business with us and less with anybody else through some kind of loyalty program."

Analytics increase
While concerned, Wunderman's Mr. Sable said the recession hasn't yet affected his agency, which works with Microsoft and Citi, and that he has reasonable expectations for 2008 and is in no way "white-flagging it."

Gary Laben, CEO of Knowledgebase Marketing, said from a services standpoint he is seeing a huge increase in the analytics, reporting and insights parts of the business. "It's our largest growth area and is defying all negative economic outlooks," he said. "It's better than anticipated and we did not expect it to be as robust."

Mr. Laben said most of his clients are in the high-tech, telecom, and health- and life-insurance industries, and he has not seen a slowdown in their marketing activities. But he said there has been a general slowdown in the area of data compiling among financial marketers. "Our prospect data business is clearly a supplier to that segment and we have seen that business be affected," he said.

Mr. Cone said he hasn't actually seen a slowdown from the financial marketers the agency works with, which include Citi and Capital One, but there is a more-concerted effort to pull away from mass mailings and move toward more-targeted efforts with a heavier reliance on e-mail and loyalty programs.

"They're sticking closer to home with existing customers or really qualified prospects," he said, "and not carpet-bombing through direct mail or TV, radio or print as much as they have in the recent past."

~~~ This article originally stated that direct marketers have seen 18 months of positive results. It has been corrected to say that direct marketers have experienced 18 quarters of positive results.
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