Live From DMA08: DMA Forecast Sees Stronger 2009

In direct marketing there is financial strength -- at least, more so than for the economy at large. In 2009, U.S. sales will grow by 3.8%, to $30.96 trillion. But DM sales will jump by 4.5%, to just under $2.15 trillion, according to new research from the Direct Marketing Association.

Even better, while the return on investment for every non-DM advertising dollar spent in 2009 will remain at $5.24, just as it is this year and was in 2007, each DM dollar spent this year generated $11.63 in sales, and will pull in $11.74 in 2009, largely due to targeting efforts that exceed mass marketing approaches, according to Peter A. Johnson, the DMA’s senior economist and vice president in charge of strategy, analysis and planning.

The battered financial industry will be among the growth leaders, with a year-over-year sales jump of 9.2%, to $389.4 billion in 2009. Similarly, the information sector will increase by 6.2%, to $199.7 billion next year, and services will rise 4.8%, to $395.9 billion.

Among the channels, telephone marketing will represent the highest level of expenditures in 2009, at $42.5 billion. (As Johnson noted telemarketers’ fortunes, he recalled an old joke told by economists: At the current rate of economic failure, the only banks not subject to runs will be phone banks.) That said, this figure will be virtually flat with 2008’s level.

At $36.2 billion, non-catalog direct mail will continue to hold the number two spot, but this figure represents only a 2.9% growth rate. Non-e-mail Internet marketing, which at $28 billion is the next largest medium, is also one of the strongest: its 15.9% increase between 2008 and 2009 is surpassed only by the much smaller commercial e-mail channel. But despite commercial e-mail’s anticipated 20.7% growth, it will only account for $700 million in expenditures.

The more mature DR television medium will increase by 2.2%, $23.3 billion, and catalog direct mail will grow by 2.9%, to $21.9 billion.

The laggard channels include direct response radio, which will increase 1.8%, to $4.7 billion, direct response magazine advertising, which will tick upward by an anemic 1.7%, to $9.1 billion; and newspaper ads, which after falling 7.6% between 2007 and 2008 will slide another 2%, amounting to $12.7 billion in 2009.

“Dollars are leaving anything that resembles mass marketing,” Johnson said.

What will all this spending reap? In 2009, non-catalog direct mail will pull in $561.7 billion in 2009, up 2.6% from 2008, while telephone marketing will generate $359.4 billion, a tidy sum, but a slip from the $363.8 billion it accounted for in 2008.

Roughly $158.6 billion will come from catalog direct mail, a tick up from the $154.7 billion it will generate this year. Direct response TV will beam $156.7 billion into marketers’ pockets, up from $155.3 billion this year.

But the big winner will be non-e-mail Internet marketing, which will garner $559 billion next year – the largest of all the mediums, and also the second-fastest growing. At 16.1% over 2008’s level, sales generated from it are growing at a rate only slightly slower than the much smaller commercial e-mail medium, which will increase by 16.6% to $32.6 billion.

So is all rosy for the immediate future of direct marketing? Not necessarily: Like all responsible predictions, the DMA’s come with caveats. For instance, with nearly 70% of demand coming from the consumer sector, changes to employment levels will have an impact on this group’s ability to spend.

Here, the news is not as good as that regarding spending. According to Johnson, in September, net job loss totaled 150,000 positions, up from 75,000 per month earlier in the year. While the economy can withstand the higher level of monthly job loss through the end of the year, much beyond that, Johnson cautioned, would require a revision of his figures – downward.

Similarly, direct marketing is “heavily tied” to the housing industry’s fortunes, Johnson said. This year marks the first time since World War II that fewer than 1 million houses have been built.

And the outlook for retail marketers is not wonderful, to put it mildly. Retail is expected to grow by 1.2%, which is “of concern, if you do services to them,” Johnson added.

All this said, direct marketing will likely weather coming economic storms better, and come through sooner, than its retail counterpart. There are several reasons for this, according to Johnson. First, direct marketing tends to appeal to higher-value customers, and has the ability to focus on more lucrative targets. Second, it is made up of a much higher level of business to business customers, giving it a different feel than the overall economy.

Finally, direct marketing is a leading indicator – trends in the overall economy follow it, rather than the other way around. This means it is the first to take a hit during bad times, and the first to recover when times turn good.