Interactive Looms Large in Budgets

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The 100 Leading National Advertisers have seen the future of brand building ... and it isn't solely in traditional marketing methods.

Instead, spending increases are focusing-and will continue to do so-on marketing disciplines such as sales promotion, direct marketing and, especially, the small but fast-growing category of interactive media, all at traditional advertising's expense.

According to an Advertising Age survey of 100 senior-level marketing decision makers at the leading advertisers, traditional advertising is the only category in which spending has declined in the past three years.

Though marketers still devote the bulk of their expenditures to traditional advertising today, the allocation of their budgets has shifted. Three years ago, 62.8% of marketing budgets went to traditional media such as broadcast TV, cable, newspapers, magazines, radio and outdoor. Today, that's down 4.1% to 58.7%.

Picking up the slack: Sales promotion today receives 25.8% of marketing dollars compared with 24.7% in 1991, and direct marketing gets 12.8%, up from 11.4%.

Spending on the emerging options in interactive media account for the smallest piece of the marketing pie, but that slice has grown more rapidly than any other category.

The allocation for interactive media has more than doubled since 1991, to 2.7% of marketing budgets, up from 1.1% three years ago.

"Interactive media is a segment set to boom," says Michael Krauss, partner at OmniTech Consulting, the research company that conducted the survey for Advertising Age. "[It's] real, it's here and it's growing."

The survey has a margin of error of 10%.

The respondents, chosen at random from Ad Age's annual 100 Leading National Advertisers issue and interviewed by telephone in September, indicated spending on the fledgling new category will continue to grow.

When asked to forecast how marketing budgets will be allocated three years from now, one in four said they expect to spend more on traditional advertising and one in five expect to spend more on sales promotion. Slightly more than half plan to spend more on direct marketing, and three-fourths of respondents said they expect to spend more on interactive media.

The spending increase in interactive already is coming from traditional advertising's purse, and it appears likely to continue doing so.

"The data suggest there's a market share slugfest soon to emerge between interactive advertising and traditional advertising," Mr. Krauss says. "The battle may not be there yet, but it's looming closer."

According to survey respondents, the interactive media category encompasses a hodgepodge of various high-tech and not-so-high-tech marketing techniques. It does not, at this point, have a clear definition among marketers, other than that each technique allows the user to interact in some way with the provider, be it online through a computer or, as in home shopping and infomercials, via the TV set and telephone.

More than half-57%-of respondents already are using some form of interactive media as a marketing tool, with online services cited most often. Slightly more than 31% of that group said they are using CD-ROM discs and 26.3% cited CD-ROM catalogs.

Infomercials are being used by 28.1% of that group.

While interactive media could hurt traditional forms of marketing, their effect on brand equity will be strong.

Nearly 70% of respondents said the expansion and proliferation of interactive media will have a positive effect on the value of their brands; 23% said it will have no effect; and 4% said it will have a negative effect (another 4% said they didn't know).

A full 98% of the marketers believe consumer usage of interactive media will increase in the next five years. And where consumers go, marketing dollars follow.

How will consumers access interactive media? Forty-three percent of survey respondents believe the wave of the interactive future is through the TV; 23% think it's in computers; and 29% feel it will be a combination of the two (5% said they don't know).

"The results point to interactive as being a very powerful medium, and one that should be watched and monitored, particularly by those in the advertising business," Mr. Krauss says. "There really is market upset potential here."

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