Direct marketing leads ad industry out of slump
It's unofficial, of course, but it now seems apparent that the advertising world is getting ready to shrug off its recessionary blues and join in the upturn in spending taking place in the United States.
What comes as a surprise to some observers, though, is that direct-response marketing continues to outperform other areas of advertising in this economic recovery. As an advertising medium, it is exploding with growth and is expected to continue to do so.
Advertising is essentially a service business and is dependent to a large extent on the mood of the economy for budgets and planning. So the news that the economy has turned around was as welcome to the advertising community as a cool breeze on a hot summer day.
''The economic recovery has arrived sooner than expected, and it has been accompanied by a clear improvement in advertising spending,'' says Robert J. Coen, McCann-Erickson's widely respected senior vice-president and director of forecasting. Accordingly, in his Midyear Outlook Update, he has revised his forecast upward for a rise of 11 percent in 1983 advertising spending over 1982. He's now predicting that the combined expenditures for all categories of advertising will total $73.88 billion by the end of this year.
Of that total, Mr. Coen expects direct-mail advertising to account for $11.66 billion. That would represent a 13 percent increase for the direct-mail segment of advertising over its 1982 level of spending, making it second only to network radio in percentage increase for this year. But unlike radio, this year's expected rise in direct-mail spending comes on top of a more than 15 percent increase last year. In fact, Mr. Coen reports, ''It's because of last year's direct-mail increase that it seemed prudent to hold this year's forecast to 13 percent.''
Direct mail is only part of the direct-marketing picture. Direct response or direct marketing, as it's variously called, now includes coupon advertising in newspapers and magazines as well as those commercial spots on television and radio with a toll-free 800 telephone number. Direct response is used by businesses to generate sales leads and by retailers and catalog companies to sell a broad array of items directly to consumers, such as books and records, clothing and gourmet food, real estate and investment offerings.
In the distant past, most full-service advertising agencies spurned direct-marketing promotion as being too specialized, too complicated, or just plain unprofitable. So a group of agencies that concentrated on direct-marketing activity sprang up. The Standard Directory of Advertising Agencies (the agency red book) now lists over 100 agencies that specialize in direct response. Today, most of the larger full-service ad shops offer their clients direct-marketing help either through groups they've developed in-house or through successful direct-response agencies they have bought out.
What are the factors behind the direct-marketing boom and will they continue to fuel its explosive growth?
Ed Pfeiffer, vice-president of the Direct Marketing Assocation, which not too long ago dropped the word ''mail'' from its official name, says the rapid growth will continue.
''We polled our membership, and they indicated they expected an average 15 percent per year rise over the next five years,'' he says. ''That would mean more than doubling direct response during that period.''
''Accountability is a big factor in direct marketing,'' he points out. ''It's easy to test and see the results in direct marketing. You know who your customers are, where they are, and what they are buying.'' Mr. Pfeiffer also thinks the larger number of women in the executive ranks has put a premium on saving time as well as saving money. ''Catalogs and other direct-marketing aids make it easy for the working woman to save time and shop at home.''
''Direct response is booming, and I expect it to keep on booming,'' says David Scholes, senior vice-president of Rapp & Collins, Doyle Dayne Berhbach's wholly owned direct-marketing subsidiary. ''The classic users like Brooks Brothers, Burpee Seed, and L. L. Bean are going strong. In addition, new types of client prospects are calling to find out about direct marketing. It represents a new distribution channel for them. Take, for example, our client L'Eggs, the women's hosiery distributor. They're using direct response to expand into another area of distribution. And Johnson & Johnson baby care products is using direct marketing for its toy business.''
Time Inc. is another of those classic users of direct mail. ''We've been using it since Day 1 for our subscription solicitation,'' says David Roberts, who is in charge of circulation promotion for the seven major magazines published by Time. ''We've been sucessful in making low-cost packages work for us. It takes some application, but after 60 years we probably know better than most what works and what doesn't.
''When you talk about the whole field of direct marketing, I think the prediction of doubling the dollar volume over the next five years may be conservative,'' Mr. Roberts said. ''Especially when you consider cable and the other new direct-marketing technologies now being tested.''