Direct Mail Advertising Looks to Rebound

LOS ANGELES—The recession caused demand for the direct mail advertising industry to fall as businesses cut costs to maintain profit, according to a report released by industry and market research firm IBISWorld. Clients reduced marketing budgets, causing revenue to decline at an average annual rate of 1.6 percent during the five years to 2012, when it totaled $12.9 billion, noted IBISWorld Industry Analyst Kevin Culbert.

Increased competition from other below-the-line promotional tools, including the Internet and text messaging, has also hurt the industry. Revenue declines have caused profit margins to fall.

Industry players attempted to control their costs, causing them to enter a period of consolidation. In the five years to 2012, the number of direct mail enterprises is expected to fall at an average annual rate of 1.3 percent to 3,035, Culbert said. Despite these negative factors, the decline in revenue was relatively mild in the context of the broader advertising services sector, and the industry is poised for further growth in 2012.

During this year, operators will benefit from programs implemented by the U.S. Postal Service to encourage commercial mailers. This factor is expected to contribute to revenue growth of 1.2 percent during 2012.

According to Culbert, for marketers that want to target a specific group or niche market, direct forms of advertising are often more cost effective than traditional advertising. Direct mail advertising displays relatively low volatility, suffering less in a downturn because many businesses substitute their traditional advertising methods with cheaper, broader-reaching advertising methods.

When the economy slows and businesses trim marketing budgets, marketers turn to more cost-effective and targeted forms of promotion, Culbert noted. While fewer funds are allocated to marketing across the board, the proportion devoted to direct mail grows; in essence, the industry takes a larger slice of a smaller pie. This factor helped distance the industry from the declines experienced by the wider advertising sector during the recession.