*DM Will Total $2 Trillion by 2004, Study Says

Direct marketing sales in the United States will exceed $2 trillion in five years, propelled by the cost efficiencies it generates and the expanding use of the Internet as a business-to-business marketing vehicle, according to a study released last week.

The study, commissioned by the Direct Marketing Association and conducted by The WEFA Group, Eddystone, PA, also revealed that BTB direct marketing sales will make up almost half of all direct marketing sales by 2004.

Total sales derived from direct marketing in the United States will reach about $2.34 trillion in 2004, including $1.21 trillion in consumer sales and $1.13 trillion in BTB sales.

Direct marketing sales grew at a compound annual growth rate of 9.6 percent from 1994 to 1999, including 8.5 percent for consumer sales and 11 percent for BTB sales. During the next five years, the study projects, the compound annual growth rate will slow to 8.8 percent, including a rate of 7.5 percent for consumer sales and 10.3 percent for business sales.

DMA president/CEO H. Robert Wientzen said the growth in direct marketing sales is being driven by three things: normal business growth among the traditional direct marketers at the expense of retail; growth among the number of companies that are using direct marketing, both through e-commerce and traditional forms; and a growth in the number of product categories that are being sold directly, including pharmaceuticals, travel and automobile products.

“The big piece of this is the business-to-business segment,” he said. “It’s growing faster than the consumer segment and it’s accounting for very high dollar amounts because a lot of what’s being sold is of very high value.”

He pointed out that companies like Dell Computer Corp., Round Rock, TX, and Cisco Systems, San Jose, CA, for example, sell millions of dollars worth of computer equipment each day via the Internet.

“People are finding that salespeople are expensive and it costs less to market this way,” Wientzen said.

Among the study’s other findings, direct response advertising during the next five years will become more efficient because spending on direct response ads will increase at a slower rate than sales. It will grow at a compound annual growth rate of 6.4 percent during the next five years, reaching $240.7 billion in 2004, compared with a growth rate of 7.8 percent in the preceding five years.

The study, “1999 Economic Impact: U.S. Direct and Interactive Marketing Today,” also compares the efficiency of each of the media used in direct response advertising by comparing the amount spent on advertising to the amount generated in sales. In 1999, newspaper space advertising will be the most efficient, the study found, producing $1 dollar of sales for each 8.1 cents spent on advertising. Direct mail follows, with 8.8 cents spent to produce each dollar in sales; then magazine space advertising, 11.1 cents; telephone marketing, 12.4 cents; direct response radio, 15.8 cents; television, 19.2 cents; and other media, which include Internet advertising, 19.3 cents.

By 2004, however, the other media category will move up in the rankings ahead of radio and television, with a ratio of 13.3 cents spent to generate $1 in sales.

Job growth in the industry will continue to grow at a faster pace than U.S. employment overall, the study found, although the rate of growth will slow during the next five years, compared with what it was during the preceding five years.

The industry will employ about 17.27 million people in 2004, for a compound annual growth rate of 4.3 percent, compared to a 5.6 percent rate of growth during the past five years. Overall U.S. employment growth will be about 1 percent during the next five years, after growing at a rate of 2.2 percent during the preceding five years.

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