The Direct Marketing Association has made another attempt to quantify how much direct marketing contributes to the UK economy. The lobby group got more than what it bargained for.
Research into unsolicited marketing is rarely newsworthy. The marketing industry seems to commission 'research' into its business almost on a daily basis, and the findings are always predictable; marketing is invariably portrait as very effective and welcomed by consumers.
The latest research, Putting a price on direct marketing, is no different. What makes the 'study' interesting is that the Direct Marketing Association paid for the research to strengthen its lobbying efforts in both Westminster and Brussels. Even more interesting is that the company that did the research, the Future Foundation, came up with findings beyond marketeers' wildest dreams…
EU Data Privacy Directive will cost £46 billion (roughly)
A particular worry for the marketing industry is the Data Protection Directive that is slowly making its way through the European Parliament. It is not surprising, therefore, that the Direct Marketing Association wanted to quantify how much the Directive is likely to cost the UK economy. The answer, according to Future Foundation, is £46 billion per annum.
The way the researchers estimated the potential cost of the Data Protection Directive is revealing. The report mentions in passing that less than half of the companies that were interviewed were aware of the existence of the proposed legislation. However, that didn't stop the researchers asking the companies how much they would loose in sales if they would no longer be allowed to use 'web analytics' for marketing purposes. How individual companies arrived at an average loss of £76,000 per year - or 11% of the average turnover - is not explained in the report.
Sales through direct marketing: £700 billion (roughly)
The report features more clownish findings. Particularly hilarious is the attempt to quantify how much direct marketing contributes to the UK economy. The companies that were polled told the Future Foundation that they estimate that 23% of their overall turnover is the result of direct marketing. The report doesn't reveal what questions respondents were asked, nor does it explain how individual companies calculated the value of their marketing efforts. Yet, the executive summary of the report drily notes that direct marketing accounts for nearly a quarter of all sales in the UK. The Direct Marketing Association now believes that direct marketing therefore boosts the UK economy with £700 billion worth of sales per annum.
Surprisingly, the report doesn't provide a breakdown of how different types of marketing compare. Last year, the Direct Marketing Association claimed that direct mail contributes £16 billion to the UK economy every year. It appears that advertising mail contributes very little to the economy compared with other direct marketing 'channels'.
Companies spend £14.2 billion on direct marketing (roughly)
Direct marketing appears to be unbelievably profitable. To generate £700 billion for the UK economy marketeers had to spend a meagre £14.2 billion. In other words, the report suggests that every pound spent on direct marketing will generate nearly £50 worth of sales. Interestingly, an earlier 'study' by Royal Mail estimated that the 'return of investment' of direct mail was just over £3 in 2009.
The figure of £14.2 billion becomes even more intriguing when you look at how it has been calculated. The report's appendix explains that the figure includes the 'induced economic contribution' of direct mail - to boost findings the researchers assumed that because people who work in the industry are also consumers who spend money an extra £3.7 billion could be added to direct marketing's contribution. If you would discard this accounting trick the profitability of direct mail would be even greater.
Direct marketing supports 530,000 jobs (roughly)
The way the study estimates the number of people working in the direct marketing industry is equally questionable. The 600 companies that were polled employed 290 people on average, of which five were marketeers. Provided the companies constituted a representative sample and didn't give biased answers - and of course there is no reason to suspect they did - this would equate to 150,000 jobs in the whole of the UK.
To increase this number to 530,000 people - nearly 2% of the total UK workforce - the researchers included all those employed in the 'supply side' of direct marketing as well as a people who don't work in the industry. Amongst others a quarter of Royal Mail's employees is included in the number. After all, a quarter of all mail in the UK is advertising mail…
Whether or not the
most comprehensive research to date into direct marketing's financial contribution to the UK economy will help the Direct Marketing Association's lobbying efforts remains to be seen. Its attempts at quantifying the value of direct marketing has influenced policy makers in the past, if only because Government has never questioned or verified any of the lobby group's data. However, the report raises more questions than answers. It may have taken pseudo-science a step too far.
What does not help the Direct Marketing Association's case is that it has just been revealed that its relationship with Defra is rather tense at the moment. Defra told BBC News last week that it is
disappointed that the Direct Marketing Association has failed to launch an improved opt-out scheme for unaddressed junk mail. It was the first time Defra was publicly critical of the lobby group.