2003 saw continuing caution in the marketplace, delaying the much
hoped-for economic recovery. While companies were struggling with cutting costs and consolidating their businesses, their marketing budgets - and above-the-line budgets in particular - were kept at 2002 levels or reduced. However, no company can afford to ignore its customers or prospective customers, even in recession, and the best way of reaching them is by marketing to them directly. The direct marketing industry as a whole grew by 7% in 2003, to reach £12.15bn.
However, the internal dynamics of the market were not uniform. This is a diverse industry and some sectors fared better than others. For example, direct-response advertising, in which some form of call to action is asked for within the advertisement, declined, reflecting the continuing downward trend in media expenditure. Magazine and press advertising showed the sharpest decrease in 2002, faring not much better in 2003, but inserts, rather than display advertisements, are showing growth.
Direct-response television (DRTV) is engaging the industry as the number of households with access to digital television rises, as this affords true interaction on the part of the viewer. It was an interactive television advertisement that picked up the Direct Marketing Association's (DMA) Grand Prix at the 2003 awards. Higher budgets are also being allocated to other new media, most notably the Internet, as advertisers recognise the growing importance of this medium as an efficient way of not just reaching customers but of tailoring communications to meet their personal preferences. E-commerce companies themselves are beginning to use direct marketing as a cost-efficient way of communicating, although they have yet to reach the same kind of sophisticated customer database analysis practised by advertisers that have been in this market for some time.
The Government has issued guidelines to clarify the EU Communications Directive, which came into force in the UK in December 2003 and which clearly states the new rules for e-mail marketing, such as prior consent and the need for the sender to make it clear who the message is from - the
e-mail equivalent to the DMA's code requiring caller-line identification in telemarketing. The US will also adopt these measures during 2004 but, unfortunately, this will not stop the kind of junk spam that Internet users have become accustomed to, as so much originates from outside of these territories and from senders who do not abide by any code of conduct. The very low cost of sending spam means that even a 0.00001% response will make it worthwhile.
The long-awaited return to growth is forecast to begin in 2004 and advertisers have already indicated that they are increasing their budgets for this year. The past few years have focused on consolidation and cost cutting. 2004 should see the beginning of a return to profitability for many client companies, but for some of the major marketing groups 2004 could expose their weaknesses and greater acquisition activity than has been evident in the past few years could be expected.
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