Despite Slowing Economy, Direct Marketing Revenue Growth Outpaces Overall U.S. Advertising Sales Growth By 54 Percent, According to the Direct Marketing Association

Business Wire, May 1, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--May 1, 2001

Every Dollar Spent on Direct Marketing

Will Result in $9.03 in Sales

The growth in direct marketing sales continues to outpace overall sales growth in the U.S. by 54 percent. According to the Direct Marketing Association's (The DMA) report 2000 Economic Impact: U.S. Direct & Interactive Marketing Today, U.S. sales revenue attributed to direct marketing reached $1.73 trillion in 2000.

"The results of this study show that even in the face of an economic downturn, businesses still depend on direct and interactive marketing techniques to improve their sales operations," said H. Robert Wientzen, president & CEO, The DMA.

According to the report, direct and interactive marketing can expect to see continued relatively strong economic growth, with business plant and equipment spending, the housing sector, and employment all growing. However, the torrid pace of 2000 will not be repeated, and economic growth will occur at healthy, but diminishing rates for the next few years. Overall direct marketing sales growth is forecast at 9.6 percent annually through 2005, while total U.S. sales growth is estimated at a significantly lower growth rate of 5.4 percent per year.

From 2000 to 2005, direct marketing is forecast to become an increasingly efficient advertising tool with sales projected to grow steadily, compared with continued slower growth in both ad spending and employment. While direct marketing sales growth between 2000 and 2005 are expected to grow by 9.6 percent, ad spending is projected to grow at a slower annual rate of 7.1 percent per year.

"Every dollar spent for direct response advertising generates $9.03 in sales," Wientzen noted. "This is up from $7.67 in 1990 and $8.05 in 1995, which indicates direct marketing ad dollars are working harder and will lead to higher gross profit margins."

Annual direct marketing employment growth rates, another important cost factor, are also slowing. From 1995 to 2000, direct marketing employment grew at a rate of 5.6 percent per year. For the next five years, employment growth is forecast at 4.7 percent annually. This compares to an overall U.S. estimated employment growth rate of 1.3 percent annually through 2005.

"Shortages of qualified labor amid the dot-com boom was a key driver in the trend of direct marketers moving to substitute capital/technology -- such as databases, automation and interactive methods -- for labor," Wientzen added.

Additional findings and analysis from The DMA 2000 Economic Impact Report include:

-- Overall ad spending for direct marketing reached $191.6 billion in 2000 --
up 8.5 percent over 1999's expenditures. Direct marketing advertising
expenditures now represent more than half -- 56.5 percent -- of total U.S. ad
expenditures, which were projected to be $339.3 billion in 2000.

-- Consumer direct marketing sales hit $937.7 billion in 2000 -- an increase of
9.2 percent over 1999 sales. Consumer direct marketing sales increased by 9.1
percent annually from 1995 to 2000, compared to total U.S. consumer sales
growth of 6.5 percent from 1995 to 2000.

-- Business-to-business (b-to-b) direct marketing continues to grow at almost
double the growth rate of total U.S. b-to-b sales. B-to-b direct marketing
sales were $792.8 billion in 2000 -- an increase of 12.1 percent over 1999
b-to-b sales.

-- In terms of direct response sales revenue by state, California led the
nation with $194.2 billion in 2000. New York, at $121.4 billion, overtook Texas
($119.7 billion) for second place, followed by Florida ($96.8 billion), and
Illinois ($83.2 billion).

In 1992, The DMA commissioned the Wharton Economic Forecasting Associates (WEFA) to begin analyzing the scope of direct marketing in the United States and develop an economic model for historical analysis and forecasting purposes. The recently updated 2000 model provides an accurate view of the impact economic conditions due to government policies (including postal rates), industry structure (including the impact of the Internet), and key pricing strategies will have on the direct marketing industry.

The report is the only comprehensive quantitative measure of the size and scope of direct marketing in the U.S. The DMA's sixth edition of Economic Impact: U.S. Direct & Interactive Marketing Today breaks out data on direct marketing advertising expenditures, revenue, and employment for seven major media categories and in 52 major industries. A copy of the 185-page report is priced at $595 for DMA members ($795 for non-members) and can be obtained by calling The DMA Book Distribution Center at 301.604.0187 or online at www.the-dma.org/bookstore/cgi/bookstore.> The DMA is the leading and largest trade association for businesses interested in interactive and database marketing, with nearly 5,000 member companies from the United States and 53 other nations. Founded in 1917, its members include direct marketers from every business segment as well as the nonprofit and electronic marketing sectors, including catalogers, Internet Service Providers, dot-coms, financial services providers, book and magazine publishers, book and music clubs, retail stores, industrial manufacturers and a host of other vertical segments, including the service industries that support them. According to a DMA-commissioned study, direct and interactive marketing sales in the United States exceeded $1.7 trillion in 2000, including $110 billion in catalog sales and $24 billion in sales generated by the Internet. The DMA's Web Site is www.the-dma.org and its consumer Web site is www.shopthenet.org.