Direct Marketing Ad Expenditures Account for 53% of Total US Advertising Expenditures, DMA's 'Power of Direct Marketing' Report Unveils

October 13, 2008 — The Direct Marketing Association (DMA) today released The Power of Direct Marketing, an annual forecast of direct marketing’s economic impact on the US economy, including advertising expenditures and sales. First published in 1995, the report is released each year in conjunction with the DMA08 Conference and Exhibition, the Global Event for Integrated Marketing.

“In 2008 and 2009, expenditures on direct marketing media and processes will again outpace general advertising by a slight margin” said Peter A. Johnson, PhD, DMA’s vice president, strategy, analysis, and planning, and lead author of the report. “This means that in 2009, direct marketing will capture 53 percent of total advertising expenditures, continuing the long-term movement in advertising dollars to direct marketing from general advertising.”

“Despite the current uncertain economic times and sluggish, even declining periods in the latter part of 2008, direct marketers should realize 3.7 percent nominal annual growth in sales this year,” continued Dr. Johnson. “Direct marketing’s integration of multiple sales channels and highly targeted offers means that businesses utilizing direct marketing typically outperform their competitors, even when sailing into financial headwinds.”

“As the economy recovers in the latter part of next year, these advantages mean direct marketers will likely see sales growth of 4.5 percent next year,” Dr. Johnson said. “This improved revenue performance is forecast to help revive a US economy that desperately needs assistance.”

A special new feature of this year’s report is providing more granular industry data, stated Anne B. Frankel, senior manager, research and market intelligence.

“For the first time, this edition includes ad spending and DM-driven sales data for the 52 industry verticals broken down by media channel and by intended purpose of the offer. These new breakouts will allow direct marketers to more precisely pinpoint which channels and intended purposes within industry groups are growing — as well as those that are declining.”

Direct Marketing Ad Expenditures:

Slow Growth in 2008 and in 2009

The $176.9 billion in direct marketing advertising expenditures that marketers are predicted to make by the end of 2008 represents a modest three percent increase over the $171.7 billion actually spent in 2007. The slow growth in 2008 is due to the worsening impact of lower home sales, a meltdown in mortgage lending, lower furniture, appliance, and automobile sales, and higher energy prices.

However, looking forward to 2009, total direct marketing advertising expenditures are expected to increase 3.5 percent yielding $183.1 billion. Above average, double-digit spending growth will occur in commercial email and Internet marketing as businesses take advantage of the continued move toward electronic purchasing.

Direct Marketing Sales:

Slow Growth in 2008, Slightly Faster Growth in 2009

Direct marketers should expect a 3.7 percent revenue growth by the end of 2008, reaching $2,058 from an actual $1,985 billion in 2007.

Continuing to rise in 2009, sales generated from direct marketing are forecast to grow by 4.5 percent to $2,150 billion. Several broad sectors are expected to realize above-average direct marketing sales growth in 2009 including Financial Services, Information, Transportation, Services, and Wholesale Trade.

US Growth to Receive Boost from Direct Marketing in 2008-2009

“As in 2007, the overall US Gross Domestic Product (GDP) in 2008 will benefit from the growth generated by direct marketing,” said Johnson. In 2008, direct marketing advertising across all economic sectors is expected to add over $1.43 trillion of incremental final demand nation-wide, accounting for almost 10 percent of total US GDP.

Key Economic Impact Findings:

· Increased Employment: Although the overall picture for direct marketing employment is expected to be weak for both 2008 and 2009, direct marketing is still expected to perform better than employment in many other economic sectors. The total US employment, which is forecast to remain virtually unchanged in 2008 and 2009, will receive a net boost from total direct marketing driven employment, whose net growth of 0.3 percent in 2008 and 0.2 percent in 2009 will help compensate for job losses elsewhere in the national economy.

· Higher Return on Investment: For 2008, an investment of $1 in direct marketing advertising expenditures is predicted to return, on average, $11.63 in incremental revenue across all industries. This exceeds the $11.56 achieved in 2007 and is expected to improve further to $11.74 in 2009.

· Growth for Interactive Marketing: Expenditures in the newer online media will maintain significant growth in the coming year. Commercial email will continue to claim the top growth ranking for 2009, while Internet advertising will claim over 15 percent of all direct marketing advertising dollars in 2009.

DMA’s The Power of Direct Marketing Report was prepared in August 2008 using the economic model of US direct marketing activity updated every year for DMA by Global Insight. Incorporating the most recent data available on developments in all sectors of the US economy, it aims to help marketers plan expenditures, sales, ROI, and employment for the 16-month period through the end of 2009.

The report is available for download on DMA’s online bookstore. The cost is $345 for DMA members and $595 for non-members. To purchase, please click here.

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