The Gulf's nascent direct marketing industry has the potential to "leapfrog" other regions thanks to new technology such as radio frequency identification tags on post boxes in Saudi Arabia, says the region's newest international investor in the sector. John Meyer, the chief executive and president of Acxiom, the US company that Forbes magazine has called "the world's largest processor of consumer data", said his company made its first investment in the Middle East in September because it expected rapid growth from the sector.
Acxiom bought a majority share of Direct Marketing Services (DMS), based in Jeddah and Dubai. "Potentially we see this as a very fast-growing market," Mr Meyer said. "DMS is small right now, but if you look at the total amount of marketing that is being done here - US$3 billion (Dh11.01bn) annually - only 1 per cent of that is direct marketing. If you see the trends that we see happening in the US, that could be translating into other parts of the world.
"You see that there is a fundamental shift away from brand marketing in itself, to brand marketing combined with targeting." In the US, this year marked the fifth one in a row in which direct marketing has captured more than half of all advertising spending, up to 54.3 per cent from last year's 52.7 per cent, the Direct Marketing Association's annual forecast said last month. The share of ad spending on direct marketing is forecast to remain above 53 per cent of the total for the next five years, rising 2.7 per cent to yield $153.3bn next year.
That does not mean direct marketing has been immune to the global reductions in marketing budgets this year. Direct marketing advertising expenditures in the US are predicted to fall to $149.3bn this year, a decline of 11.2 per cent from last year, the report said. But this fall was less than general advertising's drop of 14.2 per cent, and began to bounce back in the third quarter of this year.
"The industry declined 10 to 16 per cent over the past seven months, but this most recent quarter was a 6 per cent increase sequentially," Mr Meyer said. "So, for the first time in seven quarters, it's ramping up in the other direction. We are seeing some of those green shoots in revenue." But while marketers in the US sit waiting for those early signs of recovery, those in emerging markets are more concerned with planting seeds. And recent technological investments in Saudi Arabia convinced Acxiom's executives that there were few places more fertile.
"Because there is a very nascent direct marketing marketplace in the Middle East, the investments that are made in technology leapfrog the traditional markets," Mr Meyer said. For example, Saudi Post's plan to install radio frequency identification (RFID) tags on post boxes as part of a $270 million project to support its home delivery service will make the delivery of targeted marketing materials to specific consumers even easier than it would be in more mature markets.
The tags allow postmen to identify the recipient of a package through an electronic signal, making names and addresses less important. "What the second-generation RFID tags will allow is a more continuous feedback loop for information, so that the traditional mail stream can be timed and tagged with a marketing effort so that the marketer gets very accurate information about when the materials arrive," said Jerry Jones, the senior vice president of Acxiom.
The UAE is also in the middle of rolling out a home delivery system in several emirates, and the new Acxiom MENA organisation is based both in Jeddah and in Dubai. Mr Meyer said direct marketing went far beyond the stack of junk mail many North Americans found in their post boxes each day. "In a mature market, direct mail would be less than a quarter of our revenue stream," he said. And in a fledgling market like the Middle East, where addressing systems are often nonexistent and home delivery not yet on offer, other media are simply more efficient.
"If the mail system is not an effective way to reach a consumer, we probably don't do as much of it," he said. "The work that we do in China is 100 per cent text and e-mail based. It's about knowledge of the consumer." @Email:firstname.lastname@example.org