• by Jack Loechner , Staff Writer @mp_research, December 19, 2006

According to a new White Paper by the Winterberry Group, the Executive Summary concludes that the direct mail marketing industry enjoyed another year of robust growth in 2006 as total spending on U.S. direct mail services reached $60.6 billion, an increase of 7.5 percent from 2005 estimates. A number of factors-including the relative ease with which mailers absorbed a 5.4 percent postal rate hike and the lack of high-performing alternative channels-helped maintain this solid pace of growth, despite the emergence of several significant marketplace constraints, including increases in raw material and logistics costs.

The Winterberry Group projects that direct mail investment growth will continue to outpace growth in traditional "above-the-line" advertising, but will slow slightly in 2007 and beyond. The Paper projects overall spending on direct mail services will reach $73.6 billion by 2009, reflecting a compound annual growth of 6.8 percent per year for the 2005 to 2009 period.

The Paper identifies and projects the seven leading trends in 2006 that helped define the direct mail environment for production providers and marketers alike:

Strategic focus on return-on-investment feeds direct mail growth

• Production providers continue to suffer from margin compression due to rising external costs, increased human resources expense and continued client demand for price concessions
• Mailers maintain (or slightly increase) production volume, despite postal rate increase and heightened logistics costs
• Higher production costs, rising postal rates and declining incremental response heighten the importance of data quality and hygiene solutions
• Fueled primarily by the growing adoption of inserts as a marketing tool, statement printing market continues to grow at a slow (but steady) pace, despite widespread adoption of online bill payment
• Variable data production technologies improve significantly, though major marketers hesitate to fully embrace such tools as they weigh the benefits of enhanced targeting against those of better overall coverage
• Robust M&A market erodes provider "middle class," with aggressive consolidation expected.

The Winterberry Group includes the "Outlook for 2007" in the Whitepaper. Eight trends that are expected to predominate over the next 12 months, says the report, are:

Macro Direct Mail Industry Trends

• Complex, high-volume multichannel campaigns become the industry standard, driven by enhanced marketing database segmentation tools and widespread CRM adoption
• Forthcoming postal rate increase, combined with new delivery point validation regulations, drive the need for advanced data hygiene and postal optimization services
• Strategy and creative service providers move to integrate analytics and consumer targeting services with their existing portfolios, in order to counteract the threat of service commoditization in the agency space

Vertical Market-Specific Trends in Direct Mail

• Media-mix reallocation and the proliferation of new channel options threaten direct mail's budgetary primacy as the preferred below-the-line marketing vehicle
• Digital print applications, empowered by capability enhancements developed in 2006, grow dramatically throughout 2007
• Catalog marketers increase or maintain circulation but accelerate the reduction in average page count per book, reflecting the changing role of the catalog and offsetting rising mailing costs
• Inserts and color utilization play a more significant role in statements, as marketers move to leverage the format for marketing purposes
• Marketer consolidation (and corresponding service expansion) leads to the increased use of direct mail for branding and promotional purposes.

Vertical Market Trends in Direct Mail and the Impact on Production Service Providers is available for complimentary download via the Research page of Winterberry Group's Web site, here.