Sales Climb As Response Rates Fall For Direct Media, Email Generates Best ROI
That was the encouraging and sobering news coming out of last week's Direct Marketing Association (DMA) annual conference last week in Orlando, FL, which featured the release of the release of a quarterly business review indicating that all direct response media have emerged from the effects of the nation's economic slowdown.
The review projects lead generation will lead to $904 billion in sales, while traffic generation will contribute to $212.6 billion in 2003. While those sales are down more than 20 percent from last year, results of the DMA's third quarter business review indicate that sales results for direct response media have improved sequentially, with the third quarter showing the best results yet (see quarterly index below).
Direct Marketing Revenues, Profits Begin To Rebound
Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
Direct Revenues* NA 57 54 49 63
Net Profitability* NA 62 60 54 61
Source: Direct Marketing Association's Quarterly Business Review. *Direct marketing revenue and net profitability indices are benchmarked to the third quarter of 2002. An index of 50 = no change. Anything above 50 represents growth.
The report also indicates strong momentum among individual marketers. The average DMA member reported an impressive average sales increase of 11.6% for the third quarter, with more than half the respondents indicating sales increases.
But while sales results are improving, overall response rates continue to fall. "Our updated economic data show slower sales growth because of lead generation and traffic generation," acknowledged Robert Wientzen, president-CEO of the DMA, who nonetheless noted that "direct order sales" are showing healthy increases over last year.
The DMA projected that Web-driven sales are expected to have the strongest growth of all direct marketing channels in 2003, with U.S. marketers expected to reap $41 billion in Web-driven sales, an increase of 22 percent over 2002. Over the next give years, the DMA projects Web-driven sales will grown at a compounded annual rate of 21 percent.
Results of the DMA's 2003 Response Rate Survey explain why. Email ranked as the top direct response medium in terms of overall return on investment (see table below). While email generated only average rates of revenue per consumer contact, it was by far the most efficient in terms of its cost per consumer contact.
Direct response TV continued to be the second best performing medium, followed by inserts and direct mail.
Revenue, Cost & Response Rates By Direct Medium
Medium Revenue Promo Cost Response ROI
Per Contact Per Contact Rates Index
Email $1.28 $0.09 0.99% 14.2
DRTV $1.35 $0.16 0.27% 8.4
Inserts $1.31 $0.18 1.46% 7.3
Direct Mail $3.95 $0.55 1.61% 7.2
Dimensional Mail $8.99 $1.61 3.46% 5.6
Radio $3.77 $0.74 0.38% 5.1
Catalog $2.88 $0.63 2.32% 4.6
Telephone $6.17 $1.45 5.73% 4.2
Coupons $1.32 $0.43 2.78% 3.1
Newspapers $0.75 $0.35 0.14% 2.1
FSIs $0.03 $0.06 0.09% 0.6
Magazines $0.10 $0.22 0.13% 0.5
Source: DMA Response Rate Survey's Return On Investment Analysis.