Outlook 2005: Welcome to Outlook 2005

This is the year of the Internet. Any U.S. or international marketer without an Internet strategy, be it for advertising, communications or e-commerce, is planting the seeds for a grand disconnect with the consumer of tomorrow.

Trends indicate that search engine marketing will continue to get a major share of online budgets. Google’s ability to commoditize and effortlessly yield information has made it the Wal-Mart of the Web. Marketers clearly have found an ideal customer acquisition medium in search.

E-mail, though upstaged by search, will continue to play a pivotal role in customer retention. Spam laws may have deterred legitimate companies from abusing marketing etiquette, but shadowy entities have stepped up phishing and identity theft. Security is back on the online consumer agenda as a top concern.

That said, 10 years on, e-commerce continues its rampageous ascent. Online sales have crossed $100 billion. But despite the annual double-digit growth, e-commerce still accounts for just 3 percent to 4 percent of all multichannel retail sales. Better integration – and interdependence – with the store and catalog channels, deeper broadband penetration and greater mainstream consumer ease with online shopping are helping. Shipping costs, however, remain a deterrent.

Offline, the economy is growing, but not all sectors are growing equally. Take magazine publishing. The business-to-business side is still recovering from the advertising recession following the end of the high-tech boom. But consumer publishers are optimistic. Last year saw a flurry of launches and relaunches in the shelter, women’s lifestyle, shopping, luxury and other niche categories. An old dog, Life, made its fourth round. Expect more prospectors in search of the rich vein.

The debut of new magazines is extra revenue for the list business. List companies, however, are worried. Online files are shrinking. Sources of new names are drying up because of increased regulation and scrutiny over industry practices. Not surprisingly, list marketers are expanding into insert media.

Perhaps list companies should take a cue from call center owners. The federal no-call list has crippled outbound telemarketing. But enterprising call centers now handle inbound calls with added services like Web chat, e-mail responses and voice recognition technology services.

Toss in the ranks of the worried legions of nonprofits. It takes a tsunami to generate a remarkable response of generosity. But most charities are finding their initial contribution rates dropping. And bigger disasters divert donations from other, less headline-grabbing causes like saving dolphins or fixing a child’s smile.

The U.S. Postal Service is also fretting. Issues over its pension burden remain unresolved. Reform will be brought up again this year, but will it get through Congress? Higher postal rates are expected next year, but how big will the increase be? Whatever the amount, mailing plans stand to be affected.

Change is the undercurrent for all of direct and interactive marketing. That comes across loud and clear in the commentary from DM News contributors on the following pages. As media and communication channels splinter – Web blogs, videos on news sites (including DMNews.com) and mobile marketing – more data are being generated. This calls for more mining and modeling. The prospects for database marketers and suppliers never looked better.

Another industry segment poised for change is printing. Variable print on demand, digital printing and new presses are changing the landscape. As a result, printers find it harder to differentiate themselves. Technology is leveling the playing field. Mail is looking even prettier and more personalized. So are catalogs.

The consequence of superior technology and marketing is the proliferation of choice: any color, any type, any size, any time, name your price. The flip side is a consumer coddled, picky, stressed and displaying snacking behavior. Ad agencies – branding, sales promotions, direct and interactive – and their clients now have to sleep in the bed they made.

“I think people behave differently now than they did in the past 10 years,” said John Osborn, president/CEO of ad agency BBDO New York. “I think they multitask. In the old days, people watched TV or talked on the phone or sent e-mail. Now they do everything at the same time, all while reading a magazine on a stationary bike in the gym.”

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