Direct Marketers are feeling optimistic for 2006 with segmentation and analysis still providing value, but there are operational challenges such as technology and legislative issues that still need to be solved, according to Alterian's annual direct marketing survey and forecast for the year.
The survey found that optimism within the industry remains high for a second year running but there are still major operational challenges to be tackled. Almost 700 marketers and marketing service providers across the North American and UK direct marketing industries took part in the study, which was conducted at the end of 2005.
Budget forecast
Nearly two-thirds (63%) of respondents believed their, or a client's, direct marketing expenditure would increase during 2006, while only 5% thought it would decrease. This mirrors 2005's survey forecast of 60% and 5% respectively. Confidence in the USA was higher than in the UK, with 70% expecting an increase in the USA, compared with 53% in the UK.
Budget allocation for direct marketing was also examined, with almost half (47%) of participants spending 500,000 (UK) or US$1 million (USA) or more. More than one-quarter (27%) said that their expenditure fell into the highest budget category of 2.5 million (UK) or US$5 million (USA) or more, while opinions of the important mid-market sector were well represented with 35% of respondents spending between 60,000 and 500,000 (UK) or between US$100,000 and US$1 million (USA).
Frustrations for 2006
While the forecast predicts growth for direct marketing, several significant challenges were found to lie ahead for direct marketers. Issues and frustrations were researched and, when asked which areas presented a 'direct marketing related headache', the most common answer across all geographic regions was "customer insight and analysis" (52%), followed by "data hygiene" (46%). One notable difference was that respondents in the UK cited data hygiene as their top problem (55%).
Ownership of marketing technology is also a major issue with 47% saying that other internal departments were responsible for using technology on their behalf, while only 13% outsourced any process that may be assisted by technology to a service provider. But marketers realise technology's value, with 55% saying that "providing the opportunity to analyse, visualise and segment customer data" was the area where it lends most value to the direct marketing process. Interestingly, only 21% chose "campaign management and response analysis".
Improving effectiveness
According to David Eldridge, CEO for Alterian, "Marketing departments are looking to technology to improve effectiveness of campaigns - to help drive the right strategy built on analysis and customer intelligence - ahead of trying to enhance campaign process and workflow. Many marketers are also struggling with data quality issues and extracting value from their data they can actually use to drive a strategy - due to the simple reason that they don't have the in-house expertise or aren't empowered to interact with the data themselves."
Respondents were also asked about legislative issues, with only a third (34%) saying they had a full understanding of current and anticipated data legislation and best practices, coupled with only 6% outsourcing this area to a marketing service provider.
Technological awareness
Technical awareness and maximising return on IT investment were also high on the agenda. Almost half (47%) said that even though there is access to a variety of technologies within the marketing department they are not being used to best advantage. The worst offenders were the UK (57% versus 39% in the US). According to Alterian, this could be due to a lack of appropriate tools for marketers or a shortage of skills in the marketing department - an indication that many organisations aren't calling on experts to assist them with technology related processes.
However, more than one-third (37%) believed their marketing department was extremely technically aware, suggesting that many marketers are becoming proficient in how technology can support their need to operate in a more scientific way.
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