Surviving the Great Recession


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By: Ronald C. Pruett, Jr., Chief Executive Officer, Mercury Media

The U.S. — and much of the world’s — economy spent 2009 in one of the most dire economic situations since the 1930s. Beginning with the banking crisis in late 2008 and continuing through today’s troubled unemployment numbers, the Great Recession has also affected the entire advertising business, including providing the direct response industry with the greatest test of its “recession-proof” image ever.

As a member of Response Magazine’s Editorial Advisory Board, I had an opportunity to weigh in on some of the DR industry’s most pressing questions.  Visit Responsemagazine.com to read the full article by Response Editor-in-Chief Thomas Haire.

Q: With leading indicators showing the Great Recession receding in many areas, do you believe that the same is true for the direct response space?

A: I do, although in specific areas. The current recession has demonstrated to me that long-form DR often acts in a counter-cyclical manner, while short-form DR has followed the prevailing economic situation downward. Consumers are staying home, watching television and ordering on the phone or online simply because it’s more convenient and cheaper than going out. Much of the short-form spend is driven by the fact that DR is increasingly led by corporate advertisers who have been tightening the belt in 2009. The outlook for 2010 is improving.

Q: Where was the biggest negative effect felt by the direct response market during the economic downturn? Why do you think this was the case?

A: The entire value chain of our industry has been exposed during the down turn — from script writing to media buying — as many advertisers see our industry as fragmented and undifferentiated. It’s hard for advertisers to discern between commoditized offerings. As an industry, we’ll need to continue to differentiate in the marketplace, improve our respective margins, and increasingly leverage the one driver that will take this “negative effect” and turn it positive — technology.

Q: Many experts have told us that the traditional $19.99 TV product has suffered much less during the economic meltdown than higher-priced products. If so, why? If not, why were certain high-tag products still able to succeed?

A: It’s been easier and cheaper to stay at home and purchase TV products, both on the phone and online. Mobile telephony will continue to increase too, and the mass-marketed products will always have their place in the shopping cart. I believe these products are counter-cyclical. In my mind, the resurgence of higher-priced products being purchased is a societal backlash against the poor economy and sense that consumers have a lack of control over their lives today. They want to feel good, improve their lives in measurable ways that they can control, and move toward environmentally friendly purchases. This movement will continue for a while.

Q: How did the recession help direct response marketing? Did the medium gain an even stronger foothold among traditional branders now looking for even greater measurability in tough times? Or were there other ways DR gained strength during this period?

A: It absolutely helped the industry, and this is largely driven by corporate advertisers now looking for measurable media. This is a trend and will continue to accelerate as the economy continues in the doldrums and an “Internet mindset” permeates the advertising crowd. From Twitter to iTunes, consumers and therefore marketers want it now — and often in real time. This holds true for both the product purchased and the data and analytics around the purchase. For the industry, this will require the expansion of technology and data retrieval and analysis. It’s not by chance that Google is now appearing at industry events.

Q: What verticals in the DR space survived and thrived during the recession?

A: Specific products focused on personal finance — debt settlement and gold purchases — performed, but so did health-and-beauty and basic consumer products. Still, underlying these vertical improvements were bigger trends as the healthcare numbers were helped by the entire senior set — Medicare recipients for instance — who are looking for home delivery of medical supplies and home products. This isn’t just economy driven. It’s a lifestyle trend that is growing as our population ages. There is more to come in this sector for DRTV.

Q: Which verticals, among those that struggled, will be the leaders when it comes to recovery, and why?

A: Like the stock market, timing is challenging in DR, but it appears specific sectors will rebound in the medium term as the economy improves and sector restructuring takes hold. Examples of these areas are automotive (which is shifting more money to DR), travel and tourism, and restaurants.

Ronald C. Pruett, Jr. is Chief Executive Officer of Mercury Media.  Prior to joining Mercury Media, Pruett was the Executive Vice President and Chief Marketing Officer of Polymedica/Liberty Medical, the largest publicly traded diabetic supply company and one of the largest multichannel direct response marketers in the country. The company was sold to Medco Health Solutions.  Pruett has extensive experience in the creation, acquisition, and management of direct to consumer marketing companies in the US and abroad.

Contact him at rpruett@mercurymedia.com

This article appeared in the January 2010 edition of Response Magazine

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