Bellwether shows small DM growth in last quarter

by Claire Foss, Marketing Direct 01-May-07

Direct marketing spend grew only slightly in the first three months of 2007, according to the latest Bellwether Report.

The report, which is based on a survey of client marketers by the Institute of Practitioners in Advertising (IPA), recorded the weakest increase in DM spend for four quarters.

Although 15 per cent of companies surveyed boosted their DM budgets in Q1, a further 14 per cent reported a reduction. Seventy per cent said they made no change to their DM budgets. The net increase in DM spend for the period was 0.6%.

However marketers predicted strong growth in DM spend in the next year, with 34 per cent of companies reporting an increase in budgeted spend for 2007, against 12 per cent saying they would reduce DM budgets.

The net increase in planned DM spend for 2007 (21.6 per cent) signalled one of the strongest rates of expansion of all types of marketing covered by the Bellwether report.

Industry experts viewed the latest report as broadly positive for DM, despite static growth in the first quarter (see below). The IPA defines DM as direct mail, email, telemarketing, door-to-door and catalogues.

Online advertising continues to grow apace. Just over 19 per cent of clients reported a rise in online budgets for Q1, with the web on average comprising six per cent of marketing budgets. Stephen Duval, CRM manager at Toyota, said his company was moving spend from above-the-line into digital "whether that's banner advertising or search".

WHAT DOES THE LATEST BELLWETHER SAY ABOUT THE HEALTH OF DM?

- Jason Foo, deputy managing director, Chemistry Group

The report shows the buoyancy of the DM industry. Consumers are turning away from traditional communication methods and for marketers DM is a more accountable media. There is a substitution effect going on with traditional advertising falling at the expense of non-traditional media.

The growing spend and importance of these areas also reflect how the sectors and disciplines need to be redefined, with a move away from historic meanings such as 'above the line' and 'direct' to newer, broader definitions.

- Stephen Duval, CRM manager, Toyota

The DM spend within Toyota reflects the report - we have a small increase in DM spend planned for 2007, with a greater focus on our database. We invested heavily online last year so I don't think that will go up much this year. We saw online taking spend from DM last year but it's levelled off now.

Companies are much more confident about what digital can deliver and are willing to experiment to see what works. As with DM it's much easier to see a return on spend. Overall this Bellwether is good news for agencies and suppliers.

- Brian Wyatt, head of consulting, Acxiom

For this quarter, DM has not grown enormously but the outlook is positive and it has been growing strongly for several years. No single medium will provide a silver bullet. Online has come from nowhere and marketers have found it effective in bringing down cost per acquisition, for example, but DM is still crucial.

Digital is making direct marketers think more about response and ROI, and DM is benefiting from that. It's a multichannel future: people will use different media at different points in the buying process.