Putting a price on direct marketing 2012 PUTTING A PRICE ON DIRECT MARKETING 2012 Contents Contents ................................................................................................................................................1 Foreword ................................................................................................................................................2 Introduction ............................................................................................................................................3 Executive summary .................................................................................................................................4 2011 expenditure on direct marketing totalled £14.2 billion; 7% growth expected in 2012.............................4 23% of UK sales are generated by direct marketing ...................................................................................4 The direct marketing industry employs 530,000 people ..............................................................................4 The proposed EU Data Protection Regulation could lose the UK £47 billion in lost sales ................................4 1. £14.2bn spent in 2011, rising by 7% in 2012 .......................................................................................5 1.1 Distribution of direct marketing expenditure by channel ........................................................................5 1.2 Strongest growth expected in digital channels .....................................................................................6 1.3 A quarter of direct marketing expenditure is outsourced .......................................................................6 2. Direct marketing generated 23% of sales in 2011 ...................................................................................7 2.1 Sector variations in sales attributed to direct marketing ........................................................................7 Case study: Work It Baby campaign by Indicia for client Very.co.uk ..............................................................8 3. Direct marketing supports 530,000 jobs ...............................................................................................9 3.1 Direct employment stands at 375,000 ...............................................................................................9 3.2 155,000 full time equivalent (FTE) jobs provided indirectly by direct marketing .......................................9 3.3 Strong growth forecast for employment in direct marketing ...................................................................10 Case study: Work It Baby campaign by Indicia for client Very.co.uk ..............................................................11 4. EU data legislation could cost UK businesses £47 billion .........................................................................12 4.1 Calculating the estimated loss to the UK economy ...............................................................................12 4.2 The retail sector is likely to be hardest hit ...........................................................................................12 4.3 Low awareness of the proposed legislation is widespread ......................................................................13 5. B2B companies are the most reliant on direct marketing.........................................................................14 5.1 Four in five companies engage in direct marketing to business ..............................................................14 5.2 One in two companies engage in B2C direct marketing ........................................................................15 6. Conclusion ........................................................................................................................................16 Methodology ..........................................................................................................................................17 Appendix A - The results in conventional economic terms .............................................................................18 The direct marketing industry contributed £9.1 billion to the UK economy in 2011 .......................................18 Indirect economic contribution was £1.1 billion in 2011 .............................................................................18 Induced economic contribution was £3.7 billion in 2011 ............................................................................18 Appendix B - Comparison to previous DMA economic impact studies .............................................................20 1 COPYRIGHT: THE DIRECT MARKETING ASSOCIATION (UK) LTD 2012 PUTTING A PRICE ON DIRECT MARKETING 2012 Foreword Putting a price on direct marketing is the most comprehensive research to date into direct marketing industry’s financial contribution to the UK’s economy. The report puts a figure on the volume of sales direct marketing generates, assesses how much companies are spending on direct marketing, details the spread of expenditure across all direct media channels and counts the number of people that find their employment directly and indirectly through direct marketing. While the UK remains mired in a protracted recession with the economy shrinking by 0.7% in Q2 of 2012, the creative industries are among the few that are performing strongly. As Putting a price on direct marketing demonstrates, direct marketing in particular is making an outstanding contribution to the UK economy. The industry is bucking the prevailing trend with increases in overall expenditure and employment figures forecast for 2012. Creativity and innovation are the driving forces behind the success of direct marketing. Ingenious new ideas for capturing consumers’ attention with engaging communications that make use of the latest digital channels or find new ways of updating traditional media are what characterise direct marketing. But it’s data that delivers the audience for brands to engage with through tailored one-to-one communications. Yet, direct marketing’s access to consumer data and ability to meet consumer needs is under threat by proposed new legislation. The draft EU Data Protection Regulation has been designed to update legislation conceived in a pre- internet era to protect the data privacy rights of the web-connected consumer. While it’s necessary to bring data legislation in line with the demands of the 21st Century, it must not come at a cost to business. In its current form, the draft EU Data Protection Regulation singularly fails to do this. The findings of Putting a price on direct marketing clearly highlight what the UK stands to lose through the burden of unnecessarily onerous data legislation that does not protect the free exchange of information between consumers and businesses. Chris Combemale Executive Director, DMA 2 COPYRIGHT: THE DIRECT MARKETING ASSOCIATION (UK) LTD 2012 PUTTING A PRICE ON DIRECT MARKETING 2012 Introduction The UK faces a sombre economic outlook over the coming decade. Forecasts predict total UK growth will stand at just 0.3% this year, rising to an unspectacular 1.8% in 20131. Similarly, the future of the Eurozone is uncertain with no apparent good news on the horizon. Yet, in spite of the bleak picture overall there are causes for optimism. For example, the UK’s creative and communications industries are defying the current economic downturn and together rank among the fastest growing sectors in the UK. Today they account for more than 5% of total employment2. Direct marketing in particular has become a vital mainstay of the expanding marketing communications industry. In the past two decades this has been driven by technological advances that have delivered high-speed broadband into the majority of UK homes and web-connected smartphones into the palms of more than 50% of the population. Additionally, 86% of UK citizens now have at least one store loyalty card in their wallets whether from Tesco, Sainsbury’s or another top retailer3. As a result, the majority of marketing communications are now data driven and provide a means of directly targeting individuals with tailored information and offers. While direct marketing is one of the few industries to buck the trend and excel in a flagging economy, the contribution it makes by stimulating economic activity through generating sales and supporting jobs is not widely acknowledged or understood. This perhaps explains why the threat that proposed new EU Data Protection Regulation poses to one of UK’s few economic success stories in these recessionary times has, to date, not attracted greater attention. The situation should be met with serious concern. To redress this, the Direct Marketing Association (DMA) commissioned the international futures consultancy, Future Foundation, to provide a robust evaluation of the economic scale, impact and value of the direct marketing industry in the UK, as well as to estimate the potential negative financial impact of the proposed EU legislation. Putting a price on direct marketing is the result of the most extensive original research into the economic impact and the value of direct marketing in the UK undertaken to date. Six-hundred companies were polled for the study, and were selected to be representative of UK businesses as a whole. Of these, 453 marketing decision makers in companies who undertake direct marketing were interviewed by telephone and their responses have been analysed