The survey of 10,000 consumers, who forward their direct mail to NMR each month, shows total spend fell to £1.68m from £1.87m, with the top-spending sectors, finance and mail-order, cutting back by 6.5% and 12% respectively. Transport and travel firms reduced their activity by 42% and pharmaceutical companies by 36%.
Many organisations have been switching part of their marketing budgets to cheaper digital channels, but the trend is not all one-way. Charities have increased their mailing activity by 7%, and utilities and supermarkets are also spending significantly more.
Financial services mailings are still affected by the slowdown that started in 2004, as lenders respond to concern about consumer debt. 'They represent a high percentage of all direct mail, so this has a significant effect on overall figures,' says Paul Dunn, head of media insight at NMR. The decline in the sector is smaller than last year, suggesting that the decline will level out, though the recent turmoil in financial markets may hit prospect mailings, especially in the subprime market, in the months ahead.
The growth of charities' spend has surprised some, but Dunn views it as a natural reaction: direct mail has long been charities' main prospecting medium, and many will respond to the challenge by mailing more.
Unexpected, too, were the big cutbacks by mail-order and travel and transport businesses. Dunn speculates that this may be an effect of the implementation of Royal Mail's size-based pricing structure. 'These firms' brochures and catalogues can be bulky. They may have decided to pull back until they get to grips with the new rules,' he says.
Postal changes may be creating distortions in other ways, too. Some specialists believe that size-based pricing has caused many marketers to use smaller mailings at a lower unit cost, skewing total spend figures.
It is notable that even brands in the same sector respond differently to market conditions. Capital One and Lloyds TSB are two of the top three spenders, each devoting just over half of their budget to mail. Yet Capital One has increased its spend by 21%, marketing mostly to new prospects, while Lloyds TSB has cut back by the same amount, preferring to focus on existing contacts. 'Lloyds TSB understands the importance of talking to customers through mail, which is not always the case with volume mailers,' says Richard Marshall, business development director of Tullo Marshall Warren.
BSkyB's 28% hike reflects its push into the broadband market and head-to-head battle with Virgin Media. BT is striving to beat off growing competition and has been spending significantly more (45%) as it woos customers with a barrage of offers and messages. Meanwhile, mail-order firm Littlewoods has bucked the trend in its sector by mailing 10% more, focusing mainly on prospects.
A decline of 10% could be seen as a worrying sign for any industry, but it is notable that more than half of the top 500 mailers have increased mailing spend, while only four of the top 20 spend less than 50% of their total marketing budget on direct work. Several have more than doubled their spend, and a few, such as shirt retailer TM Lewin, have multiplied it many times over. More than a quarter of the top 500 have earmarked at least half their budget for communicating with existing customers, suggesting that marketers recognise the power of personalised mail to drive relationships.
Nevertheless, overall mailing spend continues to drop, and agencies are keen to identify the causes. One possible culprit is the squeeze in the data market, according to Joy Whitehead, communications director at Zed Media - fewer people are completing lifestyle surveys and more are opting out of the public electoral roll or registering for the Mailing Preference Service.
Agencies report that a growing number of clients are taking advantage of sophisticated data modelling, analysis and planning techniques to improve or maintain performance. This increases ROI, but hits activity levels. This is not necessarily a threat, however. 'Volumes dropping need not ring alarm bells if we are improving targeting,' argues Ian Stockley, managing director of Entire.
The biggest factor affecting the discipline is the shift online. Asda Financial Services, for one, has cut its mailing by 38%, switching to email to lower costs. 'More customers are willing to transact online, and it's imperative we adapt,' says David Martin, head of marketing and multichannel trading.
Similarly, First Direct has cut its mailing spend by a third, using email to reduce the amount of paper it sends to customers. 'It's been very successful, but without reducing marketing effectiveness,' claims Colette Nugent, the bank's head of direct marketing.
Many agencies are happy to encourage the shift as a way for clients to save money. For one recent campaign, Ashley Bolser Agency scrapped mailings that cost more than 50p each in favour of text messages costing only 7p. It is now increasing its use of email across the board. As well as generating savings, this has improved efficiency and response, hugely increasing ROI. If this is a common experience, direct mail might seem doomed to decline further.
Some experts also see the web changing the very nature of direct mail. 'The notion of telling a brand story on a one-to-one level is not as relevant as it used to be,' says Clark McKay & Walpole planning director Ben Rachel. 'There is less of a need to develop brand story initiatives via mailings.'
But it is too soon to write off a medium whose characteristics cannot easily be duplicated. Even converts to digital recognise that mailing still has an important part to play. 'Consumers still like to open and read mail at their leisure. It also creates impact and can deliver detail,' says Martin.
Indeed, some exclusively online brands, including eBay, are using mail to reach less web-savvy audiences. 'People who search for offers and buy online aren't necessarily happy with a purely virtual relationship. The power of direct mail to convey a more personal approach and build a relationship should not be overlooked,' says Heather Westgate, managing director of TDA.
Amanda Phillips, chief executive of Proximity London, believes the increase in spend in some cases might be explained by brands that had gone overboard in their enthusiasm for digital now switching back. 'New media may be effective, but brands are starting to realise they are best used as part of a broader, integrated strategy,' she says.
Phillips sees brands under constant pressure to innovate to keep up with consumers' changing tastes and habits. However, she believes that direct spend will stabilise across channels once organisations understand new media's role in the mix.
The story behind the headline statistic is clearly more complex than a cursory glance would suggest. This is an industry undergoing gradual change, not facing imminent eclipse. Some ongoing contraction may occur, driven by better targeting and the use of alternative channels, but few doubt the continuing importance of mail.