Marketing Outpaces Ad Spending, Money Follows Shift To ROI, Pursuit Of 18-34 Demo

Non-advertising-based forms of marketing - especially newer sectors such as branded entertainment, event marketing and experiential marketing - have emerged as the fastest growing segment of the media economy, outpacing advertising, as well as consumer and industrial spending on media. The finding, which comes from the 2006 edition of the Communications Industry Forecast being released this week by Veronis Suhler Stevenson, comes as strong evidence that U.S. marketers and their agencies are shifting spending into forms of marketing that have tangible measures of ROI associated with them. It also suggests that Madison Avenue's shift from conventional ad-based media planning toward marketing-based communications planning is also having an effect, and that the definition of media is expanding well beyond traditional formats like TV, radio, newspapers and magazines.

Perhaps most significantly, much of the shift toward new forms of marketing spending, especially the kind of experiential marketing aimed at active young adults, is a sign that marketers need to find new ways of reaching some important consumer segments.



"A lot of the marketing services sectors in the new marketing area are really targeted toward the 18- to 34-year-old. That's where we see the growth in dollars really going forward," says Leo Kivijarv, vice president-research at PQ Media, which helped VSS compile the report. Kivijarv says the new "vehicles" include things like "guerilla marketing, word-of-mouth, experiential media, branded entertainment, product placemen and some of the smaller things like mobile marketing and webisodes."

While the fastest growing portion of the fastest rising sector of the media industry is coming from new and emerging platforms, Hal Greenberg, a managing director at VSS, it is the overall growth of marketing services, including traditional methods such as direct marketing, consumer and trade promotion, and public relations that represent the bulk of the growth.

Direct mail, for example, is still growing rapidly despite the shift toward newer forms of digital direct response marketing on the Web, but is still a huge contributor to the growth of marketing services, and is projected to rise at a compound average annual growth rate of 8.5 percent through 2010. "For something that is as large an industry as the $55 billion direct mail industry to have an 8.5 percent growth is phenomenal," notes Greenberg.

That's actually slightly better than the 8.0 percent overall rate of growth projected for the total marketing services sector and is an indication that direct mail is still vital and is actually growing in demand as marketers seek methods that deliver a demonstrable return on investment.

At $309.9 billion, total marketing services spending is already the biggest part of the industry and is projected to growth at an average rate of 8.0 percent, outpacing the $197.6 billion U.S. advertising industry's 5.5 percent rate of growth. It's also rising faster than the $185.9 billion consumer end-user market's 4.5 percent growth of the $203.5 billion institutional end-user market's 7.4 percent growth.

PQ's Kivijarv says much of marketing services growth, in fact are forms of media that are not classified under traditional advertising spending, such as custom publications created by consumer or B-to-B marketers that are beginning to supplant conventional ad spending in magazines - a big factor holding down growth in the magazine marketplace.

But as much as these new and traditional forms of marketing are beginning to cannibalize on traditional ad-supported media, VSS' Greenberg notes that many traditional media companies are beginning to become significant players in marketing. "Take event marketing aimed at 18- to 34-year-olds," he says. "Companies like MTV are helping to drive that."

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