Direct Marketing Sales Continue To Outpace Overall U.S. Sales Despite Industry Challenges

DMA reforecasts economic outlook; five-year forecast shows slowing growth

SAN FRANCISCO, October 21, 2002 - Despite unfavorable conditions in the U.S. economy, an updated report from the Direct Marketing Association (The DMA) found that ad spending and sales revenue attributed to U.S. direct and interactive marketing are forecast to grow at a slower pace than they have over the past decade. The report was unveiled today at The DMA's 85th Annual Conference & Exhibition in San Francisco.

"The DMA's re-projections reflect slower growth in ad expenditures over our 2001 projections," said H. Robert Wientzen, president & CEO, The DMA. "While these findings show slower growth in ad spending, the revenue outlooks remained unchanged."

According to The DMA's updated 2002 Economic Impact: U.S. Direct & Interactive Marketing Today, marketers this year are projected to spend $193 billion on direct response advertising, a 6.8 percent lower projection from last year's $206.1 billion. According to 2002 reprojections, direct response ad spending is forecast to compound 5.8 percent annually over the next five years, in comparison to last year's projected 6.5 percent annual growth rate through 2006.

Despite lower projected ad spending, direct marketing-driven sales are still projected to surpass $2 trillion in 2002. According to the most recent economic data, industry sales are projected to compound 8.3 percent annually over the next five years and hit $3 trillion in 2007. During that same period, the report estimates overall U.S. retail sales will grow just 5.5 percent annually.

"Despite increased direct response ad spending and revenue over the past year, direct and interactive marketers continue to feel the pinch of current economic conditions due to increased competition for consumers' dwindling dollars," Wientzen added. "As a result, the industry has increased its investment in more targeted and cost-effective marketing channels such as database marketing and interactive technologies to maximize profits."

Additional findings and analysis from The DMA's 2002 Economic Impact: U.S. Direct & Interactive Marketing Today include:

Overall direct marketing-driven sales are estimated to reach $2.17 trillion in 2003, up 8.2 percent over 2002 sales.
Overall ad spending for direct marketing is estimated to reach $204.8 billion in 2003, up 5.9 percent over 2002 expenditures ($107.4 billion in business-to-business (B-to-B) expenditures and $97.4 billion in consumer expenditures). Direct marketing ad expenditures still represent more than 55 percent of total U.S. ad expenditures.
Of the $2 trillion direct marketing-driven sales forecast for 2002, 54 percent, or $1.09 trillion, are attributed to consumer sales and 46 percent, or $913 billion, are attributed to B-to-B sales.
Consumer direct marketing sales are estimated to reach $1.2 trillion in 2003 - an increase of 7.2 percent over 2002 consumer sales. Consumer direct marketing sales compounded by 8.8 percent annually between 1997 and 2002, and are projected to compound 8.0 percent annually over the next five years.
B-to-B direct marketing sales continue to grow at almost double the growth rate of total U.S. B-to-B sales. B-to-B direct marketing sales are forecast to reach $998.4 billion in 2003, an increase of 9.3 percent over 2002 B-to-B sales. These sales increased annually 10.3 percent between 1997 and 2002 and are projected to compound 9.1 percent annually over the next five years.
While outbound telephone marketing expenditures, by a large margin, represent the largest category of direct marketing media spending - $75.3 billion and is estimated to grow at a rate of 5.8 percent annually to reach $99.7 billion in 2007 - direct response radio and direct response television (DRTV) (though ad dollars are generally lower) are forecast to become the fastest growing mediums. Direct response radio is projected to compound annually 6.7 percent, and DRTV is forecast to grow at a rate of 6.4 percent annually over the next five years.
Teleservices generates the most sales revenue compared to other direct marketing channels. This year, teleservices is projected to generate $710.1 billion in U.S. sales.
The growth in DRTV and direct response radio ad dollars are paying off and nearing double- digit sales growth - 9.4 percent compound annual growth in direct response radio, and 9.0 compound annual growth in DRTV over the next five years.

In 1992, The DMA commissioned The Wharton Economic Forecasting Associates (WEFA) to analyze the scope of direct marketing in the United States and develop an economic model for historical analysis and forecasting purposes. The recently updated 2002 DRI-WEFA model provides an accurate view of the impact that changes in economic conditions, government policies (including postal rates), industry structure (including the impact of the Internet), and key pricing strategies will have on the direct marketing industry.

The DMA's seventh edition of Economic Impact: U.S. Direct & Interactive Marketing Today breaks out data on direct marketing advertising expenditures, revenue, and employment for seven major media categories in 52 major industries.

The eight edition of the report will be available in the spring of 2003.

The DMA is the leading trade association for businesses interested in interactive and database marketing, with nearly 4,700 member companies from the United States and 53 other nations. Founded in 1917, its members include direct marketers from every business segment as well as the nonprofit and electronic marketing sectors. According to a DMA-commissioned study, direct and interactive marketing sales in the United States exceeded $2 trillion in 2002, including $118 billion in catalog sales and $30 billion in sales generated by the Internet. The DMA's Web site is www.the-dma.org, and its consumer Web site is www.shopthenet.org.

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