DMA forecast: Direct spending for '02 falls short of expectations

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Despite predictions that a tough economy would spur investment in easily measurable methods of reaching consumers, spending on direct marketing in 2002 has fallen well below expectations, according to figures to be released later this week by the Direct Marketing Association at its annual conference.

Initial predictions by the DMA suggested marketers would spend $206 billion on direct marketing this year, but the figure is now expected to be closer to $193 billion, up only 3.4% from 2001 and almost 7% below the initial estimate. The figure is slightly higher than the $189.9 billion spent in 2000. "Overall, the industry has continued to grow at a lower forecast than we expected," said DMA President-CEO H. Robert Wientzen.

The study found direct-response ad spending is expected to compound at a rate of 5.8% annually over the next five years, down from last year's projected growth rate of 6.5%. Such figures are a sharp contrast to the industry's customary growth rates of more than 10% per year.

The survey said sales attributed to direct marketing, including catalog sales at retailers such as L.L. Bean, and Internet sellers such as Dell Computer Corp., would continue to show strong increases, rising to more than $2 trillion. Mr. Wientzen said increases in sales figures vs. flatness of direct-marketing expenditures are due in part to technologies that have increased direct "effectiveness" in drumming up sales.

soft confidence

But Mr. Wientzen attributed most of the industry's woes to the economy and softening consumer confidence. "Companies are struggling to do better than last year," he said.

David Doft, advertising and marketing services analyst with CIBC World Markets, said there has been a shift to broadcast TV at the expense of other media. He also noted that a number of underlying businesses that rely on direct marketing have been struggling. Credit-card issuers, for example, have begun to experience portfolio woes, with too many "sub-quality accounts," leading them to reduce direct "prospecting."

DMA executives declined to discuss the number of participants expected at its 85th conference. But the San Francisco Visitors and Convention Bureau said the organization expected 10,000 participants.

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