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Advertising budgets improve, create more money for market research

August 24, 2011

NEW YORK – Advertising agencies may have more money to devote to conducting market research in the coming months, according to the Direct Marketing Association’s Quarterly Business Review of direct and interactive marketing trends.

The report, released in conjunction with Winterberry Group, found that even in an uncertain economic environment, direct and digital marketing made gains in the second quarter, albeit at a slower pace than earlier periods. Marketers who responded to the DMA’s research surveys said they felt cautiously optimistic about building on marketing efforts, but are also “hedging their bets” by focusing on keeping current customers rather than acquiring new ones.

Indeed, researchers determined customer acquisition budgets are at their lowest point in more than six quarters. More than half of responding marketers said they would be keeping their same direct/digital budgets in quarter three, and 42.3 percent of respondents said they planned to boost advertising spend in the next quarter.

Much of the new investments will be devoted to digital channels such as search, mobile, online display and email, the study indicated. While respondents say they will focus more heavily on digital, they also said they saw improved return on investment in offline channels, insert media and teleservices in Q2 compared to the previous quarter.

Jonathan Margulies, a vice president at Winterberry Group, said U.S. marketers’ reported optimism for future growth has been a consistent feature in every quarter since the economy began its slow recovery.

“It’s now clear that growth simply hasn’t materialized to the extent that was initially anticipated, leading many to stick with the conservative business approaches that served them well during stormy times,” he said. “The good news: That’s more likely a symbol of rationality with respect to the present rather than a lack of confidence in what the future may hold.”

However, it’s also important to be prepared for the possibility of an economic downturn. As Bill Wise notes on Media Post, advertising will need to be more accountable in the event that budgets take a hit. As a result, organizations will likely be looking to “push their analytics practices forward” with smarter marketing. Conducting community panels and online surveys may help agencies gain the insight needed to design these intelligent campaigns.

Wise also warns the engagement aspect of marketing could suffer, since many C-level executives fail to see the “complexity of the media mix” or understand that establishing connections to consumers requires a vast array of touchpoints and metrics – “from the direct point of sale, to the brand impact of an outdoor ad.”

As a result, marketers will need to show the effect that advertising has on sales with more obvious correlations than those offered by view-throughs and other “subtle metrics,” Wise says. However, not everyone is convinced that engagement necessarily has to take a backseat during a downturn. Andrew Razeghi, a Kellogg School of Management professor, echoed the DMA study findings when he told Wise that further developing existing customer-brand relationships is key to surviving a rocky economy.

The smartest way to maintain and improve engagement is to use measurable tactics while increasing efforts to connect with consumers. This will help keep the reliable sources of revenue – existing customers – strong and build a firmer foundation for increased sales when the economy and spending rebound.

Social media is another feature that offers an inexpensive way to hold on to “digital eyeballs,” even when funding is in short supply. “Social media channels are built for viral marketing,” Wise says, so delivering metrics on how these sites and online forums deliver results will help advertising agencies and departments hold on to their budgets when the C-level axe comes swinging down.