Delivering results: Direct Mail posts solid first half adspend growth
Warc's James McDonald examines how direct mail is performing during a tumultuous time for the industry.
UK advertising expenditure for direct mail rose 4.5% to £965m over the first six months of 2015, and is forecast to reach £1.9bn by year-end, according to the latest results from the AA/Warc UK Expenditure Report, released this week.
When measured by expenditure, direct mail is the third-largest medium for advertising in the UK, behind TV and pure play internet. Its share of all UK adspend over the first half of the year stood at 10.4% - rising to 15.1% when measuring only display - and spend of £965m was the highest recorded in the years following the financial crash.
The direct mail adspend data in the AA/Warc UK Expenditure Report are provided by the Royal Mail, and include items such as unrequested catalogues and vouchers/money-off coupons but exclude requested catalogues. The data are supplied as a total of postage and non-postage costs.
The postage element is based on direct mail sales data and, to a decreasing extent, on survey data. The non-postage costs have been calculated by Royal Mail using a methodology developed by PwC and include production costs such as design, printing and packaging.
The new methodology was introduced in July last year, with data being revised back to 2010 to accommodate. Consequently, long-term trend analysis is not truly like for like, however, much can be drawn from the last five years.
Direct mail recovered well from a blow to advertising revenue in the wake of the financial crisis, which in 2009 alone removed 17.4% from the market's value. By the end of 2011 however, adspend had reached £1.9bn, up from £1.4bn at the height of the recession and marginally higher than the forecast total for this year.
Advertising expenditure then declined gradually, dipping at an average annual rate of 1.2% between 2012 and 2014. During this time approximately 1.6pp was lost from direct mail's share of all display adspend, however this was largely due to the rapid rise of internet and mobile display, as opposed to direct mail's declining spend.
Mail's share of display ad expenditure is expected to fall further this year and next as a result of digital's rise, yet advertising spend on direct mail is still expected to increase over this period in what has been somewhat of a resurgence for the medium.
Jonathan Harman, managing director at MarketReach, explains further: "We've now seen three consecutive quarters of growth in mail and Royal Mail maintain its position as the third largest media owner in the UK behind Google and ITV. Marketers know that campaigns with mail in the mix get better results than ones without - a point that was proved by Peter Field's analysis of the IPA Effectiveness Awards database.
"Mail is particularly strong when campaign performance is judged over the longer term, so we see marketers employing more sophisticated attribution techniques as tending to use more mail.
"The continued rise in digital investment is good news for mail; both channels work so well together to drive consumer action and deliver better communications targeting and customisation for individuals. Mail can be considered the first addressable media."
James McDonald is a research analyst at Warc.
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