Direct Response-Oriented Marketing Spending Forecasted at 7.8 Percent Annual Growth Through 2007; Brand Marketing Growing Just 5.5 Percent

Oct. 07, 2005

- Faced with media fragmentation and escalating demand for measurable results, U.S. marketers are significantly shifting their spending from brand building to direct response-oriented promotional channels, according to a new report released today by Winterberry Group, a leading strategic consulting firm serving the direct marketing, marketing services and marketing technology industries.

The report was commissioned by V12 Group, the complete provider of below-the-line marketing services, which uses its proprietary databases and multichannel delivery model to provide measurable customer acquisition results for more than 400 clients. Findings were based on Winterberry Group data and exhaustive secondary research from sources including the Direct Marketing Association, JupiterResearch, Universal McCann, Forrester Research, eMarketer and executive leadership in the marketing community.

The report defines and quantifies, for the first time, the shift in spending from above-the-line (ATL) to below-the-line (BTL) marketing channels. Winterberry Group defines ATL marketing channels as those that strive to reach mass audiences with messages that reinforce brands, communicate general product information or inspire emotional response. This includes television, radio and print advertising, as well as outdoor advertising and yellow pages. BTL marketing, on the other hand, includes targeted, direct marketing efforts that offer convenient response mechanisms and comparable ease in measurability. Examples of BTL marketing are database marketing, direct mail, interactive marketing, insert media and promotional marketing.

Winterberry Group used historical data and a variety of forecasts to identify marketing spending trends. Among the findings:

• From 2003 through 2007, ATL advertising is expected to grow by an average of 5.5 percent per year, with BTL spending growing at 7.8 percent annually.
  
• ATL spending was expected to grow 5.6 percent in 2005, a full 1.7 percent behind overall marketing spending. The difference will be more pronounced in 2007, as ATL spending will grow just 4.6 percent for the year, compared with 7.3 percent overall industry growth.
  
• Led by interactive marketing - including search, e-mail and online advertising - nearly all BTL channels are projected to grow in excess of the 6.9 percent annual growth forecast for the whole industry between 2003 and 2007.
  

The growing prevalence of measurable BTL campaigns has had a profound effect on the duties of marketing executives and advertising agencies, forcing them to look beyond brand development and the overall reach of their message. To explain the BTL phenomenon, Winterberry Group identified seven key trends directly affecting the shift in marketing budgets:

• Changing consumer demographics decrease the influence of traditional mass-media (i.e. "one-size-fits-all") marketing messages.
  
• Growing consumer sophistication heightens the demand for channel-agnostic communications.
  
• Widespread marketing "clutter" diminishes the impact of commercial messages that don't address specific and individually relevant consumer needs.
  
• Enhanced information availability empowers both marketers and consumers with insight that allows for precise customer targeting and intelligent purchase decisions.
  
• Heightened client pressure to deliver quantifiable value forces marketing service providers - especially agencies - to re-evaluate services platforms.
  
• Growing effectiveness of "multichannel" campaigns (those that cross multiple media) reinforce demand for tactics that establish one-to-one relationships between marketers and consumers. The Internet Advertising Bureau found that well-executed multichannel campaigns generate a 7 to 34 percent sales lift.
  
• Rapid technological advances allow for consumer/marketer interactions that are frequent, easier and more relevant than previously possible.
  

"Simply stated, above-the-line marketing that utilizes generic messages to build awareness is no longer the best way to influence customer behavior," said Bruce Biegel, managing director of Winterberry Group. "Below-the-line initiatives are more successful because they stress targeted and customer-centric communications. Below-the-line also creates measurable results and ROI metrics, which are important to marketers under growing pressure to prove the value of their campaigns. We expect that this demand for quantitative results will continue to intensify for at least the next five years."

"This report shows the extent of the budget shift we identified in the market, leading to the formation of V12 Group to deliver below-the-line services across a number of channels," said Paul Chachko, founder and CEO of V12 Group. "It is valuable to see the shift quantified for the first time by a firm as respected as Winterberry Group, and we look forward to capitalizing on the increasing demand for measurable marketing campaigns."

To download a free copy of the report with additional findings and analysis, please visit http://www.v12group.com/about_us/press_releases/research.asp.

About Winterberry Group

Winterberry Group is a unique global strategic consulting firm that helps direct marketing, marketing services and marketing technology firms build profits and propel shareholder value. Services include comprehensive business planning and assessment - through its flagship Opportunity Mapping and Value Driver Assessment processes - plus market intelligence, sector research and tactical execution support. Over the last three years, the firm has successfully provided advanced strategic counsel to over 30 leading global marketers, service providers and financial investors, including Alterian, Anderson Direct, arvato AG, Citigroup Venture Capital Partners, Cox Target Media, Datagence, Hewlett-Packard Company, ICOM Information & Communications, Inc., Jetson Direct Mail Services, KRG Capital, MetroGroup Corp., NewPig, Transcontinental Direct, World Marketing and Yahoo!.

Winterberry Group's impact is further enhanced through its affiliation with Petsky Prunier LLC, a leading investment bank providing merger and acquisition advisory services to companies in the direct marketing, marketing services & technology, advertising & promotion and information industries. Working in close collaboration, the two firms offer a unique dual perspective on corporate growth grounded in market knowledge, value assessment and strategic insight. For more information on Winterberry Group, please visit www.winterberrygroup.com.

About V12 Group

The V12 Group is the complete provider of below-the-line marketing initiatives, using our proprietary databases and multi-channel delivery model to provide measurable results for customer acquisition campaigns. V12 was formed in October, 2005 through the merger of three marketing services firms - Datagence, Media Solution Services and Spectra Products. As the world's largest provider of instatement media with seventy percent market share, V12 delivers over three billion inserts annually. McDonalds, Unilever, Universal Music, Ford, AT&T and 47 of the top 50 credit card issuers in the US are among V12's more than 400 clients in industries ranging from oil and gas to travel, financial services and retail. V12 is privately held and headquartered in New York. For more information, please visit: http://www.V12Group.com.