Bear Market

Direct marketers are spending a little more. They're focusing on existing customers and mailing to in-house lists. So things should be looking good, right?

Wrong. Fewer DMers anticipate margin increases this year, according to Direct's annual forecast survey.

Most of the decline is on the consumer side. Only a third expect higher margins, compared with nearly half in 2006. The number is even lower for business-to-business marketers, but at least it's the same as last year.

And fewer consumer firms saw revenue go up during the first nine months of this year. Here, too, B-to-B companies did better.

These results may reflect a temporary pessimism — the research was conducted in the aftermath of news reports about credit and housing woes. But they also could portend deeper problems. Do the math: If marketers are concentrating on their customers and getting lower margins, something's wrong.

The same split is reflected in spending. Both segments expect to set aside more for DM next year, but consumer firms may be inclined to decrease their outlays.

Why are B-to-B marketers so bullish? It could be because they devote 11% of their budgets to customer e-mail, compared with 4% for consumer firms. E-mail yields a much higher ROI than direct mail, separate research from the Direct Marketing Association indicates.

But direct mail remains the medium of choice. It gets a heftier chunk of the average retention budget — 23% this year — than anything else. And it's still the main prospecting medium for a majority of marketers.

In contrast, outlays for e-mail prospecting are in the single digits, perhaps because marketers don't want to be tagged as spammers. B-to-Bers are throwing slightly less moneyat it than they did last year.

What else are DMers spending on? They continue to invest in paid search terms and in search engine optimization. And they're putting funds into Web site development and maintenance. This could mean streamlining their e-commerce, or providing a smoother experience for visitors.

For the first time, Direct asked its readers to comment on mobile advertising. What are they doing? In two words, not much. A select few are allocating trace amounts of their budgets to it, but even that modest spending is flat.

Who's doing the creative? It's done in-house at four-fifths of all firms. In contrast, only 33% hire freelancers and 25% use outside agencies. Several firms use a mix.

Consumer companies are more likely to use outsiders. Overall, marketers allow agencies to handle 20% of their DM budgets.

On the privacy front, over half of those polled are both allowing customers to opt out of house-list mailings and asking them to opt in for e-mail solicitations. That number held steady from last year.

ANTICIPATED CHANGES IN 2008 SPENDING*

	Increase	Decrease	No Change
Advertising on other Web sites	51%	2%	47%
Affiliate marketing	38	5	57
Blow-ins or bind-ins	18	10	72
Card packs	11	11	79
Catalogs	29	14	57
Co-op mailings	42	2	56
Direct mail to customers	48	4	48
Direct mail to prospects	57	4	39
DR radio advertising	35	6	59
DR space advertising	34	13	53
DRTV advertising	32	10	59
E-mail to customers	62	1	38
E-mail to prospects	67	1	33
Freestanding inserts	38	8	54
Mobile	40	0	60
Package inserts	31	2	67
Point of purchase	26	2	72
Search engine marketing	61	4	35
Search engine optimization	60	2	39
Statement stuffers	26	3	71
Telemarketing (inbound, including 800 #s)	30	8	62
Telemarketing (outbound)	42	9	49
Web site development/maintenance	60	3	36
*Based on respondents using each method. Percentages may not total 100% due to rounding.

METHODOLOGY

This survey was conducted for Direct by Penton Research, an in-house firm. It was e-mailed to 10,940 Direct subscribers. Participants were chosen on an nth-name basis (a representative sample of all subscribers).

An initial copy of the survey, offering a chance to win one of four $50 Amazon.com gift certificates, was sent out Oct. 17. Two follow-up e-mails, along with the sweepstakes offer, went to non-respondents.

Results are based on surveys returned by qualified participants: sales, marketing or telemarketing executives (50%); corporate or general managers (28%); advertising or promotion managers (9%); and circulation, list or media managers (3%). The remaining 10% were fulfillment, operations or production managers, CIOs and consultants.

The median annual revenue of respondents' companies was $160.1 million. Current-year revenue was reported as follows: under $1 million (33%); $1 million to $2.5 million (5%); $2.5 million to $5 million (9%); $5 million to $10 million (4%); $10 million to $25 million (15%); $25 million to $100 million (13%); $100 million to $500 million (7%); $500 million to $1 billion (4%); and more than $1 billion (10%).

In some cases, subscribers who responded to certain questions with “don't know” or “unsure” were eliminated from vote totals. The minimum number of responses to such questions was maintained to ensure stable data.