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DMA Predicts Continued Direct Marketing Growth in 2008: It’s about ROI

The beginning of the new year is a good time to examine the predictions for effective use of media. There is no better source than The DMA’s annual forecast of direct marketing’s economic impact on the U.S. economy, “The Power of Direct Marketing.” Despite a softening U.S. economy, the Direct Marketing Association (DMA) still predicts growth in direct marketing expenditure, sales, return on investment, and employment throughout 2008. The Direct Marketing Association recently released its annual forecast, which discusses direct marketing’s economic impact on the U.S. economy. While there are a number of media alternatives available to reach potential consumers, direct marketing prevails. DMA’s forecast indicated that direct marketing represents more than 50% of total advertising expenditures in the U.S. and is growing at a higher rate than total advertising spending in the U.S. economy as a whole.

Higher Returns from Direct Marketing

According to Dr. Peter Johnson, the DMA’s Research Strategy and Platforms Vice President and lead author of the report, "Marketers are moving dollars into direct marketing because of its higher ROI [return on investment] relative to other forms of advertising. This makes DM a more reliable engine for sustaining sales, incomes, and jobs at a time when the mortgage and energy markets are heightening economic uncertainty."

Direct Marketing Advertising Trends

U.S. marketers are expected to spend $173.2 billion on their direct marketing advertising in 2007, representing a modest 4.4% increase over the $166 billion that was actually spent in 2006. The 2006 figure did not achieve the levels that had originally been predicted due to a greater-than-anticipated decline in home sales, lower vehicle sales, and higher energy prices.

Looking forward, however, the growth rate for direct marketing expenditures in 2008 is expected to bounce back to 5.7%, or $183.1 billion. Above-average spending growth is expected in commercial e-mail, Internet marketing, DRTV (direct response television), and direct mail (including catalogues).

Direct Marketing Sales Trends

In evaluating direct marketing as a media option, it’s all about delivering results. According to DMA’s forecast, direct marketers expect a reasonably successful 2007, and should realize about 5.2% annual growth in sales. This figure is 1.5 percentage points lower than the growth recorded in 2006, largely due to the economic slowdown that continued through to the middle of 2007. In 2007, total U.S. direct marketing sales are projected to reach about $2.025 trillion.

The current 2008 revenue forecast for direct marketing is even more optimistic. The DMA’s report predicts a growth of 6.6% next year, with total U.S. direct marketing sales expected to surpass $2.158 trillion. The biggest improvements in 2008 direct marketing revenue growth are expected in financial services, transportation, and utilities. Conversely, natural resources, construction, and government revenues from direct marketing are forecasted to grow at the slowest rate in 2008.

The Most Important Statistic

Probably the most important piece of data in the entire report concerned economic impact. For 2007, an investment of $1 in direct marketing advertising expenditures is predicted to return an average of $11.69 in incremental revenue across all industries. The overriding message is that a direct approach is still the best way for marketers to deliver measurable results to their bottom line.

Source: The DMA’s annual forecast of direct marketing’s economic impact on the U.S. economy, “The Power of Direct Marketing”