SLOWLY but Surely

Posted on by Chief Marketer Staff

Boom or bust? It’s hard to say when you’re talking about insert media.

Some sources claim the use of blow-ins, package inserts and statement stuffers is growing as marketers seek a low-cost alternative to direct mail. But others feel that inserts aren’t living up to all the hype (even though the business now has its own conference, the Direct Marketing Association’s Insert Day).

Slowly but Surely

Posted on by Chief Marketer Staff

Not all direct marketers are ready to spend their way out of the economic malaise, but fewer will contribute to it during the upcoming months.

According to DIRECT’s annual survey of marketing practices, 48% plan to increase their marketing expenditures in 2003, compared with 42% from a year ago. Another third will hold their spending constant, compared with 27% in our 2001 survey.

Broken out by markets served, more business-to-business firms plan a hike (50%) than companies that primarily target consumers (44%). Among mixed-focus marketers, which offer their wares to both groups, 49% anticipate a boost in spending.

Most of the other respondents will maintain their DM budgets at current levels. Only 2% of the B-to-B firms, and 6% of the consumer and mixed-focus marketers, predicted spending reductions.

Among all respondents, 32% increased their DM revenue in 2002 over 2001, compared with 37% that indicated it was unchanged. Just over a quarter said it had dropped. In 2001, 43% increased their revenue over 2000’s amount, while 30% cut it back and 22% held it at the same level. ? More consumer than B-to-B firms increased their DM revenue (31% to 28%), while at 34% mixed-focus marketers’ gains outstripped them both. B-to-B marketers were more likely to have maintained their sales levels from last year (43%) than consumer (34%) or mixed-focus companies (32%).

But mixed-focus firms were also more likely to have reported revenue decreases, with 29% doing so, compared with 25% for consumer firms and 21% for B-to-B marketers.

Consumer-focused marketers were more likely to use DM to drive revenue than other marketers. Among those specifying which types of audiences they pitch, consumer marketers generated 63% of their revenue from DM, compared with 50% for mixed-focus and 40% for B-to-B firms.

The industry average of 40% includes those marketers that did not specify which audiences they target.

There hasn’t been a sharp change in the profitability of DM sales. Overall, a third said their margins on such sales had risen, compared with 35% last year. But 30% noted that their margins stayed at last year’s levels, compared with less than 25% in 2001.

Broken down by segment, 41% of the consumer firms reported margin increases, as opposed to 34% of the B-to-B and 29% of the mixed-focus firms. One-quarter of B-to-B respondents reported margin drops, compared with 19% of consumer and 28% of the mixed-focus marketers.

That may change slightly next year, as marketers continue to emphasize more-costly customer acquisition over retention marketing. In 2002 respondents dedicated 59% of their budgets to prospecting and 41% to retention, compared with 56% for new customer solicitation and 44% for CRM in 2001. But this may be partly because marketers have a variety of less-expensive methods of contacting customers, such as e-mail, postcards and less showy direct mail pieces.

B-to-B marketers devoted 67% of their budgets to prospecting, while consumer and mixed-focus firms assigned 56% and 54%, respectively, to new customer acquisition.

The turn toward prospecting is reflected in the number of customer contacts each made. In 2001 marketers reached out to their customers nearly once a week.

This year existing customers received just over 37 solicitations, including catalogs, mail, telephone calls and e-mail. While in 2001 71% marketed to their customers at least once a month, this year that dropped to 62%.

Consumer firms were most aggressive about contacting their customers, making an average of 42 attempts per year, followed by B-to-B (38 efforts) and mixed-focus marketers (35).

Marketers are also changing the channels they use to contact customers. Sixty-three percent of those sending e-mail to prospects intend to increase e-mail acquisition budgets, while 67% of those sending it to existing customers will spend more.

E-mail’s most ardent supporters come from consumer marketers. Nearly three-quarters of those currently using it to prospect plan to increase mailings in 2003, while none plan to decrease its use. Sixty-four percent of all B-to-B marketers have set aside more of their 2003 spending for e-mail, as have 60% of the mixed-focus firms.

This pattern was repeated among companies directing e-mail at existing customers. More than three-quarters of the consumer marketers that do e-mailings plan to step up their use of the medium, while 71% of the B-to-B and 60% of the mixed-focus firms will as well.

Standby channels, such as catalogs and non-catalog direct mail, also will see increases. As a whole, 42% of respondents are planning to raise their direct mail spending, and 41% have budgeted more for catalogs.

Direct mail’s growth cut across all categories, with 44% of consumer and B-to-B marketers planning to increase their budgets, along with 39% of all mixed-focus firms. Most of the respondents that aren’t increasing their use of direct mail will maintain current levels: Only 11% of the consumer firms and 10% of the mixed-focus marketers plan budget cutbacks.

Consumer firms were most bullish about their projected catalog use in 2003, with 54% indicating they would increase spending, followed by 40% of the B-to-B and 38% of the mixed-focus firms. But B-to-B marketers seem to have optimized their catalog use: Fifty-three percent of those using them are going to keep their current level of catalog spending constant, compared with 47% of the mixed-focus and 27% of the consumer marketers.

So which mediums are marketers pulling back from? One-third of those now using direct response television indicated they would be trimming their spending, as did 22% of those using DR radio or freestanding inserts, with the pullbacks being led by the mixed-focus firms.

Companies are stepping up their marketing e-mail use, possibly to the detriment of direct mail. Nearly half said their 2003 budget for e-mail to customers would increase, with another 22% saying it would stay the same. Only 2% said it would decrease, with the remainder either not using this channel or not giving an answer.

Planned use of direct mail to house lists further reflects the emphasis on customer acquisition. In-house list use fell from 86% last year to 76%. The drop in direct mail to house files was spread equally among all three types of companies.

During the economic slowdown, marketers may have turned to their cheaper

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