ONLINE SNAPSHOT

The Johnny-come-latelies of the e-commerce world are catching up. Business-to-business marketers — although still trailing those in the consumer sector — are boosting e-spending, according to Direct's summer 2006 online marketing survey.

THE SHIFT IS ON

More than a third of B-to-B DMers say they're moving funds from traditional media to electronic alternatives, compared with just 26% a year ago.

Still, consumer firms typically have led the way in shifting DM dollars online, and this year has been no exception. Some 46% have done it, about the same as in 2005.

“Online marketing is becoming more accepted among B-to-B firms,” says Peter DeLegge, corporate Internet marketing communications manager at Motorola Inc. and author of a forthcoming book on B-to-B online marketing. “B-to-B marketers haven't had the giant budgets of consumer marketers, and they tend to be fairly conservative.”

So why the change now? “I think we're way past the early adopter phase,” DeLegge says. “Online marketing has proven its value. Spending isn't in line with the results we know online marketing can achieve.”

Others allocating more dollars to the e-space are marketers that previously spent less than 10% of their advertising budget online. Among this group, 24% plan substantial hikes in e-commerce investment for the rest of the year, compared with just 5% in 2005. Similarly, while the number of consumer DMers that report moving considerably more funds into e-commerce rose by 50%, the number of B-to-B marketers doing the same doubled. And all these segments say they'll raise e-spending next year at higher rates than overall industry growth.

Nearly two-thirds of all respondents claim they'll earmark more money for online campaigns in 2007, compared with just over half that said they'd do this last year.

Does this mean marketing budgets are rising? Not necessarily. Four in 10 DMers have shifted funds from traditional to online efforts. “Sometimes marketers are only given the choice of reallocating dollars from traditional marketing channels,” says DeLegge. “Sometimes new dollars aren't available.”

But those making the change are seeing it pay off. Direct readers report that 25% of their sales come online — a figure that jumps to more than 33% for consumer companies. B-to-Bers lag, with the Web generating only 22% of sales.

That's on par with the resources put toward the channel. But since nearly three in four marketers say Web orders are just as profitable as those from other sources — and in some cases even more so — that's not bad.

MORE CHANGES

Some of the other things DMers are spending money on is changing as well. For instance, they're buying more e-mail addresses. Nearly 39% append e-mail addresses to lists of existing customers, up from 22% a year ago. This aggressive growth comes from the consumer and B-to-B sectors alike. One in three business marketers use append services, as do 27% of those in the consumer end; both represent huge lifts from last year.

How else do marketers gather e-mail names? Nearly all try to harvest them from customers, and 30% get them from affiliate programs. But the use of rental names from outside lists has declined; only 21% do this, compared with 29% a year ago.

The prices of e-mail lists reflect this trend. According to Worldata's Spring 2006 List Price Index, e-mail list prices have fallen off considerably while the cost of donor and newsletter files has gone up.

According to the Boca Raton, FL firm's study, lower e-mail list prices reflect a growing supply of B-to-B and consumer files. Among Direct's readers, however, not only is demand for pure prospecting lists — compared with appends — down, but fewer companies are making their own files available. For the last several years, the number of respondents that rent their own lists has dropped. This year the figure was 2%, an all-time low.

Aside from e-mail appends, marketers are investing in manpower. Some 24% note they're doing more hiring in departments involved in Web marketing, with the biggest gains coming from companies that traditionally didn't spend as much online. Relatively small firms — those with annual revenue under $5 million — also followed the trend.

This mirrors what Jerry Bernhart, president of DM management recruitment firm Bernhart Associates Executive Search, has experienced. “I'm seeing more and more [opportunities for] e-commerce managers or positions relating to search engine marketing,” he says.

Bernhart agrees that a lot of the demand was coming from smaller firms.

“If they're $5 million companies now, they want to become $20 million companies. To get there they need stronger talent. As you get larger, it's my experience that e-commerce becomes a larger part of your revenue.”

These companies aren't hiring senior-level people. Most want employees with a few years of e-commerce experience under their belts who'd like to join a growing organization, he adds.

DeLegge's observations are similar.

“Often companies don't possess expertise in online marketing,” he says, adding that many managers responsible for Web efforts lack marketing skills but were chosen for their technical know-how.

Methodology

This survey was conducted for Direct by Prism Business Media Marketing Research, an in-house firm. It was e-mailed to 3,971 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 July 11. Two follow-up e-mails, along with the sweepstakes offer, were sent to non-respondents.

Results are based on surveys returned by 132 qualified participants: corporate or general managers (81%); sales, marketing or telemarketing executives (9%); advertising or promotion managers (2%); and circulation, list or media managers (1%). The remaining 7% were fulfillment, operations or production managers, CIOs or consultants.

Respondents' median annual revenue was $1.6 million. They reported current-year revenue as follows: under $1 million (44%); $1 million to $2.5 million (13%); $2.5 million to $5 million (6%); $5 million to $10 million (8%); $10 million to $25 million (5%); $25 million to $100 million (8%); $100 million to $500 million (5%); $500 million to $1 billion (2%); and more than $1 billion (8%). Numbers may not total 100% due to rounding.