Direct Marketing's Growth Rate to Cushion Cooling US Economy, DMA's 2006 'Power of Direct Marketing' Reports
October 17, 2006 — Despite a US economy that shows signs of decline in some key areas, growth is predicted in direct marketing (DM) expenditures, sales, ROI, and employment through 2007, as reported in The Power of Direct Marketing, the Direct Marketing Association’s (DMA) annual forecast of direct marketing’s economic impact on the US economy, including advertising expenditures and sales. The 2006 edition of the DMA report, which has been ongoing since 1995, was released today.
DM Advertising Expenditures:
Strong Growth in 2006, Moderate Growth in 2007
The $166.5 billion in DM advertising expenditures marketers are predicted to lay out in 2006 represents a solid 6 percent gain over 2005 spending. According to the report, marketing expenditures this year were part of a strong rebound from Hurricanes Katrina and Rita, after these storms postponed expenditures in many economic sectors from late 2005 into the first half of 2006.
The growth rate in DM expenditure through 2007 is expected to moderate further to 5.2 percent, translating to $175.2 billion in direct marketing spending for 2007, according to DMA’s report.
The report predicts also that the advertising media most affected by 2007’s forecast moderating expenditure will be the direct mail, DR television, and catalog channels.
Direct Marketing Sales:
Very Positive 2006, Solid 2007
After an extremely positive 2006, in which marketers will likely record a growth in revenues reaching 7.4 percent, a slightly slower growth is anticipated for 2007. DM-driven sales are forecasted to grow at 6.5 percent, to $2.064 trillion.
The biggest improvements in revenue growth among marketers are predicted to be in the transportation sector, with a 9.7 percent growth in 2007 over 2006. By contrast, modest increases in retail and manufacturing will account for most of 2007’s slowing growth, while one or two marketing verticals may experience actual declines in sales.
Nation-Wide Direct Marketing Balance Sheet:
DM Helps Cushion US Against Possible 2007 Economic Downturn
“Despite a moderating growth in DM expenditure and sales, direct marketing will still help to drive the US economy as a whole,” said Dr. Peter Johnson, DMA’s vice president, research and market intelligence, and lead author of the report. “Total US sales are forecasted to grow by 3.9 percent through the end of 2007, while direct marketing-driven sales are expected to grow at a faster rate, by 6.5 percent. So with direct marketing’s relatively superior growth rate into 2007, direct marketing will help bolster the rest of the economy.”
A special new feature of this year’s report is its focus on predicting marketer performance. According to The Power of Direct Marketing, direct marketing will likely provide a significant cushion to the US economy in 2007. Worrisome developments in the housing, automotive, and energy sectors are expected to limit total sales in the US economy to a modest 3.9 percent growth in 2007 compared to 6 percent growth in 2006.
Overall US Gross Domestic Product (GDP) in 2006 will benefit from strong growth generated by direct marketing, and DM advertising across all economic sectors is expected to contribute more than $1.37 trillion of incremental final demand nationwide, accounting for 10.3 percent of total US GDP.
According to Anne B. Frankel, DMA’s senior manager, research and market intelligence, “The report’s one-year forecasts will enable direct marketers to more easily pinpoint those verticals and channels that are declining – as well as those that are growing.”
Key Economic Impact Findings
Among the DMA study’s findings are the following:
· High Return on Investment: ROI is expected to grow over the forecast period. For 2006 an investment of $1 in DM ad expenditures is predicted to return, on average, $11.65 in incremental revenue across all industries. This improves upon the $11.50 achieved in 2005 and is expected to improve further to $11.79 in 2007. In contrast, a dollar spent on non-DM advertising in 2006 is projected to return $5.29 in sales, on average.
· DM Employment Supports Total US Employment: The overall picture for direct marketing employment appears better for 2007 than in 2006. A slight increase in advertiser employment will be complemented by a somewhat larger increase in seller employment, resulting in a 2.6 percent overall growth in DM jobs in 2007. Total US employment, forecasted to increase by only 0.6 percent in 2007, will receive support from the stronger performance of direct marketing.
· Successful Internet Marketing Contributes to DM’s Solid Growth: While all DM channels likely will post higher sales totals through 2007, much of DM’s solid growth can be attributed to successful Internet marketing.
DMA’s The Power of Direct Forecast was prepared in August 2006 using the econometric model of US direct marketing activity updated every year for DMA by Global Insight. Incorporating the most recent data available on developments in all sectors of US industry, it aims to help marketers plan expenditures, sales, ROI, and employment for the 16-month period through end of 2007.
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