Direct marketing in the US is on track this year to account for 54.3% of all nationwide ad expenditures, up from 52.7% last year, according to a recently released report and forecast from the Direct Marketing Association (DMA).

The report predicts that 2009 will mark the fifth year that direct will comprise more than half of all ad spend, and it is forecasted to remain above 53% for the next five years.

DM Ad Spend Increases Share of Pie

“The Power of Direct Marketing” annual forecast, which examines the economic impact of direct marketing - including ad expenditures and sales - on the US economy, also revealed that though there will be declines this year, total direct marketing ad spending in 2010 is expected to increase 2.7%, yielding $153.3 billion overall.

Recession Takes 11.2% Bite

Despite the fact that DM is now a larger slice of the overall advertising pie than it was last year, the medium is feeling the same recessionary effects plaguing the ad market in general. As a result of ad-budget declines, lower corporate profits, economizing consumers, belt tightening by businesses, and limited credit options, DM ad expenditures are predicted to fall to $149.3 billion in 2009, a decline of 11.2% compared with 2008. Still, the report noted that direct marketing is still performing better than general advertising , which fell to $125.7 billion, down 14.2% from 2008.

Economy Begins Slow and Uneven Recovery

According to the report, future economic growth in the US will be slow, but is expected to be positive in the Q3 and Q4 of 2009. As a result, direct marketers should expect DM-driven sales revenue to decrease, nearly proportionate to ad spending, by 10.9% in 2009. It is predicted to reach $1,738 billion from an actual $1,951.7 billion in 2008.

For 2010, sales generated from direct marketing are forecasted to grow by 3.5% to $1,798 billion. Several broad sectors are expected to realize above-average direct marketing sales growth in 2010, including financial services, retail trade, and manufacturing- resources.

Direct Marketing Adds 8.3% to US Economy in 2009

As in 2008, the overall US Gross Domestic Product (GDP) this in 2009 will benefit from direct marketing, according to the DMA. This year, direct marketing advertising across all economic sectors is expected to add more than $1.2 trillion of incremental final demand nationwide, accounting for almost 8.3% of total US GDP.

Additional report findings related to the economic impact of direct marketing:

• Employment Transfers: Although the overall picture for direct marketing employment is expected to drop in 2009 and into 2010, direct marketing employment, in general, is shifting from traditional, offline media to online, new media. Mobile,internet, and social networking will lead this trend.
• Higher Return on Investment: For 2009, an investment of $1 in direct marketing ad expenditures is predicted to return, on average, $11.65 in incremental revenue across all industries. This exceeds the $11.61 achieved in 2008 and is expected to improve further to $11.73 in 2010.
• Shift in the Media Mix: While offline channels will continue to account for the bulk of advertising dollars in 2009, the most significant developments for the 2009-2010 period are the continued shift of dollars towards online media. Non-email internet advertising will claim more than 15% of all direct marketing advertising dollars in 2009, and nearly 17% in 2010.

 “As digital media continue to take up a bigger role the direct marketing world, we are seeing a permanent shift in spending from offline to online, with a significant increase in email and mobile,” said Yoram Wurmser, PhD, the DMA’s research manager. “These tough times have acted as a catalyst for the marketing community, as businesses have shifted marketing spending to mobile, internet, and email for their greater efficiencies and ROI.”

Wurmser also noted that now that the economy appears to be picking up, these digital channels will likely benefit most.

About the report: First published in 1995, this year’s report was prepared in August 2009 using the economic model of US direct marketing activity updated every year for DMA by Global Insight. It incorportes the most recent data available on developments in all sectors of the US economy and aims to help marketers plan expenditures, sales, ROI, and employment for the 16-month period through the end of 2009. For the first time - and in response to major marketplace shifts to digital, the report includes ad spending and DM-driven sales data for five new categories: Mobile, Internet Display, Search, Social Networking, and Internet-Other. The report is available for purchase and download on DMA’s online bookstore.