Companies need more research to hit target audiences

The growth of direct marketing to sell products and services threatens one of the key income sources for market research firms - monitoring media advertising. But firms are confident that their income will not diminish as corporate clients look for cost-effective media campaigns. As consumers spend less, companies want reassurance that their advertising messages are reaching potential consumers. Direct marketing or below-the-line (BTL) advertising avoids delivering a company's messages outside a target group by using databases of customers who are contacted directly by mail or telephone. And since BTL costs less than mass media or above-the-line (ATL) advertising, it is growing in popularity.

"Last year around 14% of marketing budgets was spent on direct marketing while in some European countries this expenditure oscillates around 50%," said Mateusz Galica, marketing manager of market research firm OBOP, part of the Taylor Nelson Sofres international network. "The European norm and our research show that this percentage will grow in the future." Since last year OBOP has carried out surveys of attitudes to direct marketing among marketing managers and consumers throughout Poland. "The report shows that there is growing interest in investment in direct marketing but that there are many BTL tools about which companies know very little … but they are clearly growing as a share of marketing expenditure," Galica said. Direct marketing is a growing component of marketing expenditure for Polish white goods manufacturer Amica Wronki, according to the company's spokeswoman Lidia Holewa. "Our expenditure on ATL is currently 20% of our marketing budget and this will increase this year," Holewa said.

Winners and losers But if direct marketing begins to replace mass media campaigns, market research firms stand to lose revenue, Galica said. Television advertising is typically supported by a survey to determine the impact a campaign has on target consumers, their desire for the advertised product and their perception of the brand. A client conducting a telemarketing or mailing campaign buys a database with a fixed number of records, allowing them to easily monitor the sales generated by the campaign themselves. "BTL marketing is characterized by the fact that it contains a measure of the effectiveness of the campaign within itself," Galica said. "These are not just research agency estimates but the actual result - the client knows the exact sales generated by the campaign. This would suggest that BTL campaigns need less research." To exacerbate the problem, research firms have no standards for assessing the sales impact of different BTL campaigns, since these are highly localized, selective and distinct by nature. "BTL has to be combined with research," said Zbigniew Tyszkiewicz, managing director of Polish market research firm Kinoulty. "But it's not done by research firms but good BTL companies or the clients themselves."

Following the money Reduced demand for research is bad news for the Polish research market, which was worth zł. 321 million ($78 million) in 2001. The annual growth of market research revenue slowed significantly in recent years, from 20% in 2000 to more than 5% in 2001, according to an audit by the Organization of Market and Opinion Research Firms (OFBOR). Although advertisers such as the fast-moving consumer goods sector are spending less on mass media, the current lull in consumer spending has led to increased vigilance about the effect advertising has on sales and brand perception. "When you use fewer advertisements there is a greater risk connected with bad advertising," Tyszkiewicz said. "Right now mistakes are more costly, it is harder to get on the shelf and we are slowly heading toward closed markets. This means that the effectiveness of advertising must be more carefully assessed. Clients have learned that research is important because it reduces risk, which is currently high and it pays to eliminate it …"

Compared to ATL, direct marketing is limited in one key aspect: it only provides a company with information about the sales impact of its own promotional activities but will have no information about its competitors. "(ATL) research may suffer from statistical error but it covers the entire market," Galica said. Fortunately, even companies that put emphasis on BTL communications can observe their competitors' activities with ATL research standards and industry-tracking studies." As a result, the shift to direct marketing has not reduced demand for ATL research. "We haven't observed any dip in demand for advertising tracking - quite the opposite, tracking is growing in importance as a marketing research phenomenon in Poland," said Krzysztof Kruszewski, general director of Warsaw research firm SMG KRC Poland Media. "The growth in tracking budgets over the past two years has fully compensated for the decline in advertising expenditure."