Cover Story : Media Usage Forecast 2009

Target Marketing's third annual survey on direct response media spending

Do you want the good news or bad news first? Since this is no time for denial, let’s tackle the challenges first. Where the projected increases and decreases in direct response media spend reported in Target Marketing’s Media Usage Forecast 2008 were rain clouds threatening an economic storm, 2009’s reversal of fortune for these figures could be foreshadowing the extent of the destruction. In 2007, 42 percent of respondents boasted a media budget increase; that number has dropped to 20 percent for 2009. Conversely, the percentage of respondents reporting a decreased budget nearly tripled between 2007 and 2009, coming in at 35 percent for the year ahead.

Now for the good news. Since 2006, the segment indicating direct response budgets were holding steady also has remained fairly level, hovering between 38 percent and 41 percent. Of course, a good chunk of these marketers might have been struggling with less than ideal financial resources for several years now, but let’s try to think positively.

Finally for the somewhat neutral news, those firms reporting they were not sure if their budgets would track up or down for the coming year started at 8 percent in 2007 but settled at 5 percent for the past two years. Either this segment is staying in denial about the status of its media spend or is less concerned about an annual projected spend compared to maximizing performance and ROI on an ongoing basis. Based on anecdotal evidence, I’m leaning toward the latter scenario. And after seeing the gains online media made this past year in companies’ marketing plans, it’s clear marketers are responding to avenues that allow for quick results and adjustment, as well as cost control.

Where e-mail has been marketers’ favorite ROI-producing medium for retention for the past three years, gaining a couple percentage points with each annual survey, direct mail suffered a strong blow on the acquisition front for 2009, being passed by e-mail for the first time as the favored ROI driver (see Chart 3 below). Direct mail dropped about 30 percent against 2008’s figure, settling at 23 percent of the vote this year compared to e-mail’s 28 percent score. Its loss was other media’s gain, as most players in the field enjoyed a small boost in preference. In particular, outbound telemarketing claimed the No. 3 position, pushing search engine marketing (SEM) out of the way.

Going back to retention and the media marketers rely on for ROI, the 2009 lineup is e-mail (39 percent), direct mail (21 percent) and outbound telemarketing (11 percent)—standings similar to 2008’s results but with direct mail chosen by 12 percent fewer respondents. That nearly 37 percent drop was divvied up yet again across most of the other media tracked in this survey.

Online Media Chip Away at Offline Media Loyalties
For 2009, 11 of the 15 media options are predicted to benefit from double-digit increases in marketers’ spending levels—that’s one less than reported last year. The medium now posting a smaller gain—but a gain, nonetheless—is catalogs, a channel weakened by postal rate hikes and confusion in response allocation.

More evidence that offline channels are losing ground to their younger online siblings are the double-digit decreases in spending attributed to catalogs, direct mail and direct response space advertisements. Online media did not post such drops. In addition, the only medium that witnessed an expected one-percentage-point drop in users between 2008 and 2009 was direct mail. And check out the media putting up gains in new users: insert media, podcasts, outbound telemarketing and webcasts.

While no digital channels scored as highly as e-mail for grabbing the lion’s share of marketers projecting spending increases (69 percent), they held the line on spending; media in this category include SEM and search engine optimization (SEO).

When taking into account projected budget increases and holds, the big winners for 2009 include e-mail, SEM, SEO, advertising on external Web sites and direct mail—no longer wielding the scepter, but still in the royal court.

E-mail Becoming More Important to Acquisition Efforts
Looking only at planned usage of media (see Chart 5 below), the year ahead belongs foremost to e-mail (84 percent), with direct mail trailing 13 percentage points behind and SEM coming in next at 23 percentage points off the lead. Direct mail was the only offline medium in the top five media that will be used for acquisition this year. Still, direct response space ads (No. 6), catalogs (No. 7) and insert media (No. 8) fared better than webcasts (No. 9) and telemarketing (No. 10).

Comparing which media marketers actually used in 2008 for acquisition activities versus those they reported they would use in 2008, the notable difference is more companies ended up investing in ads on external Web sites than in SEM or SEO efforts. Looking ahead to 2009, more marketers once again are predicting they will turn to SEM and SEO for acquisition before external Web site advertising.

The implications, as you can imagine, are e-mail inboxes packed a little tighter with messages fighting to be read and postal mailboxes and office in-baskets a little easier to sort through most days. With clutter on one side and rising costs on the other, the successful users of either medium will be refining their targets to achieve maximum ROI.

E-mail Holds Off Direct Mail; SEO With Surprise Win Over Telemarketing
Given that marketers can leverage their historical data with respect to retention, the gap between projected use of e-mail and direct mail is tighter than that reported for acquisition activities. Seventy-seven percent of respondents intend to use retention e-mail campaigns this year, compared to 69 percent for retention direct mail efforts. SEO earned a distant third-place rank (38 percent), and outbound telemarketing nabbed the fourth spot (36 percent) in a photo finish with ads on external sites (35 percent).

Looking back to marketers’ anticipated media use for 2008 compared to the actual usage just reported, fewer firms used e-mail, direct mail, SEM and SEO for retention than expected. On the other hand, direct response radio and direct response television picked up more users than anticipated.

Obviously, It’s the Economy
Even if you’ve been living in a cave for the past year, the news undoubtedly reached you that the country’s economy is in a life and death battle. The buzzword of 2009 probably will be “stimulus.”

So it comes as no surprise the overwhelming majority of survey respondents listed the poor economy as the reason for shifting media allocations. With slow sales, limited access to credit and staff cutbacks, marketing departments are struggling to make do with smaller budgets and/or less hands to keep programs running at optimal performance.

In addition, old foes remain in effect, challenging marketers to get creative. These include rising postage and print costs; regulation, both enacted and proposed; customers’ environmental concerns; and increased competition in the marketplace.

And then there’s opportunity, which comes in the form of more competitive rates across numerous media platforms; audience migration to new channels; technological developments that allow for program automation, better back-end metrics and better database management; market growth; product launches; and competitors’ mistakes.

While a handful of respondents indicated they were keeping their budgets flexible to accommodate any market fluctuations that occur over the next several months, the majority is resigned to doing more with less.

“Overall, we have to continue to get the message out but in creative ways that are budget-friendly,” said one respondent.

Methodology
Target Marketing conducted this survey in January 2009 by e-mailing a questionnaire to 22,699 of the magazine’s print subscribers who have opted in to receive e-mail from Target Marketing. This audience was further refined by suppressing lists services firms and creative services/advertising agencies to produce a list that was composed only
of marketers.

A total of three e-mail drops were made between Jan. 16 and Jan. 26. Survey results are based on the participation of 396 respondents (for a response rate of 1.7 percent, which represents a 16 percent increase compared to last year’s respondents). Of the respondents to this year’s survey, 44 percent describe their companies’ activities as B-to-C and 56 percent as B-to-B. Respondents’ job responsibilities include: corporate and general management (25 percent); sales and marketing management (57 percent); list/database/circulation management (4 percent); e-commerce management (2 percent); operations/fulfillment management (2 percent); and other (10 percent).

In addition, respondents reported their firms’ annual direct marketing expenditures as follows: less than $100,000 (45 percent); $100,000 to $499,999 (22 percent); $500,000 to $999,999 (9 percent); $1 million to $5 million (11 percent); more than $5 million (5 percent); and don’t know (8 percent).

• MORE ON
• DIRECT MAIL & POSTAL
• LISTS & INSERT MEDIA
• ONLINE MARKETING