11 Startling Forecasts for 2006

Forecast #1: The Cost of Talking to Prospects and Customers Will Continue to Rise – BOTH in Direct Mail and on the Internet.

Direct-mail costs will jump by double digits.

In direct mail, new postage rate increases effective January 9th will drive postage rates more than 5% higher in 2006. Paper costs – driven by a global surge in natural resource prices as well as energy surcharges – are rising as well. And if history is any indication, soaring federal deficits, combined with downward pressure on the U.S. dollar around the world and accelerating inflation here at home, guarantee that this trend will continue throughout 2006 and beyond.

Internet marketing costs will soar even higher.

While the cost of contacting prospects and customers via snail mail is moving incrementally higher, the cost of making sales on the World Wide Web is also soaring at an alarming rate.

Search engine costs will continue to surge.

The explosion in the number of websites vying for top ranking with commonly searched keywords is causing massive inflation in search engine costs. In its most recent quarterly report on search engine marketing, DoubleClick reports that search engine cost-per-keyword was up about 15%. And cost-per-click was 30% higher in the third quarter of 2005 than in July of 2004. This trend can only accelerate as the proliferation of new websites causes competition for surfers’ attention to heat up.

Banner ad costs will soar.

The rapid adoption of the new larger IAB-recommended standard ad units at the expense of smaller buttons and banners has resulted in an overall reduction in the amount of ad space available to advertisers – at a time when spending on iNet ads is jumping at the rate of 31.5% per year. As this limited supply of advertising space collides with soaring demand in 2006, look for Internet ad costs to jump substantially.

E-mail marketing to rocket higher.

While there has been no dramatic recent surge in the cost of sending e-mail blasts to prospects and customers, delivery rates are being reduced in many cases by over-enthusiastic spam filters and other things. This is driving the cost per delivered e-mail substantially higher.

Forecast #2: Most – but Not All – Response Rates Will Continue to Decline.

Direct-mail response rates will continue to be a challenge.

To anyone who sells books, print newsletters, or nutritional supplements through direct mail, it’s no secret that response rates have fallen precipitously since 2001. As a result, mailings are shrinking in size and frequency and the universe of current, active buyer names and addresses is declining. Increased competition … the propagation of wild and unbelievable product claims … increased pressure from litigators and regulators … and rising consumer skepticism in these maturing markets will keep this trend intact.

Many Internet response rates will continue falling throughout 2006.

Search engine conversions will continue to decline.

In 2005 alone, the number of people who click through and complete a transaction on the average search engine keyword (including free ones, such as registering or opting-in to an e-zine) has fallen 22% – from around 4.5% to around 3.5%. Look for this trend to continue as consumers become increasingly bombarded with a dizzying array of choices.

E-mail open rates and click-throughs will continue their downward track.

In the latest quarter for which data is available, DoubleClick reports that e-mail open rates declined a staggering 23.6% – to 27.5%. Furthermore, of those who opened their e-mails, 6.5% fewer clicked the links in those e-mails than in the preceding quarter – about 7.2%. Hardly surprising – especially when you consider the sheer volume of e-mails sent to the average Web user each day. As the quantity of e-mails sent by marketers continues to skyrocket in 2006, expect the decline in open rates and click-throughs to fall even further.

Astonishingly, bottom-line Internet response rates will remain relatively unchanged.

While fewer prospects are opening e-mail advertisements and clicking the links, higher percentages of those clicking through are ordering. In the most recent quarter, click-to-purchase rates jumped 27.8% and actual orders per e-mail delivered rose 18.2%. As a result, revenue per e-mail sent is holding steady – at an average of 20 cents. For this reason, the Internet will continue to be a goldmine for entrepreneurs and business owners who adapt quickly in this rapidly changing environment.

Forecast #3: Internet Marketers Will Be Forced to Focus on Accountability, Tracking, Forecasting, and Testing.

While response rates are dropping and costs are rising in direct mail and the Internet, the World Wide Web still presents the greatest opportunities for attracting new customers and for selling more products to existing customers. However, the reality of today’s rising-costs/falling-response virtual world will require increasing vigilance in order to maximize profits while minimizing capital risks.

Once upon a time, marketing on the Web was cheap or even free. Ill-conceived and poorly executed promotions that would have bankrupt any company paying $500/M for a direct-mail campaign were making Internet marketers fat and happy. With little if anything to lose, few iMarketers paid much attention to tracking which promotions produced a bottom-line profit – let alone which techniques produced the highest response rates.

Today, with iNet marketing costs rising and many response rates dropping, savvy iMarketers are beginning to demand that each dollar spent to generate an e-zine subscriber or website visitor produce a positive return on investment in a reasonable amount of time. At the same time, the twin demons of declining response rates and rising costs will demand that Internet marketers produce stronger headlines, subject lines, and sales copy – and that these lynchpins (see Word to the Wise, below) of direct response be constantly tested for relative effectiveness.

Forecast #4: Cheaper Media and Multi-Step Promotions Will Gain in Prominence.

As e-mail open and click-through rates continue to decline, increasing numbers of Internet marketers will turn to other media – television, radio, print, etc. – to drive prospects to landing pages and websites. Internet giants eBay, DiTech, Geico, and Progressive Insurance are already leading the way – and the savviest entrepreneurs and business owners will follow.

Forecast #5: Cooperative Marketing Arrangements Will Gain in Importance and Frequency.

In a rising-cost, falling-response environment – both on the Web and in direct mail – cooperative campaigns will bring breakthroughs in 2006. Affiliate promotions … ride-along promotions … joint ventures and product combinations … and subsidized promotions will take center stage, producing massive breakthroughs for cutting-edge marketers.

Forecast #6: Innovative Consumer-Friendly Marketing Strategies Will Take Center Stage.

To overcome rising consumer skepticism and falling response rates, increasing numbers of Internet marketers will abandon “blunt instrument” marketing strategies and messages in favor of …

“Permission” Marketing or “Invertizing” – in which consumers invite marketers into their lives. Companies that innovate ways for consumers to request advertising materials will prosper.

Advertorials that bring value to consumers’ lives while making a sale will double and triple revenues and profits for many companies.

Involvement Devices that intrigue and entertain – games, contests, self-tests, and other devices that makes sites “sticky” – will produce greater increases in traffic and sales.

Viral Devices – content deemed by recipients to be valuable enough to be passed on to others – will turn each e-mail address that you pay for into two, three, or even four that you don’t have to pay for.

Blogs will become an even more powerful marketing tool. These websites (where visitors are invited to share their opinions on a variety of topics) are still skyrocketing in popularity. In 2005, 33% more people visited Blogspot.Com than read The New York Times! Creating a blog and requiring visitors to register in order to share their opinions – PLUS adding links and ads to the blog site – will become a huge source of new e-mail addresses and revenues for anyone creatively exploiting them.

Rich Media will rule! With about 35% of U.S. households boasting broadband connections to the Internet, the delivery of high-impact rich media (streaming animations, video, audio, interactive games, etc.) will be a major force in boosting response to iNet promotions in 2006. In a recent study, DoubleClick found that banner ads featuring animation, rollovers, or other rich media produced FIVE TIMES the response of non-rich media ads!

Forecast #7: Innovative Delivery Formats Will Make Millions for Information Publishers and “Infopreneurs.”

The format in which information products are presented will become increasingly important. Simple “special reports” delivered as PDFs will continue losing their appeal, while higher-impact formats will attract hordes of new customers. Information products sold and delivered as streaming audio and video reports … PowerPoint presentations with audio … webcasts and webinars … podcasts … live teleseminars … group and one-on-one coaching products … will attract ever-larger audiences and earn fortunes for cutting-edge marketers.

Forecast #8: For Consumers, the “Free Internet” Will Become Harder and Harder to Find.

Like the Internet, TV and radio once provided the majority of their content free to consumers. Today, these industries derive the majority of their revenues and profits directly from consumers – via cable providers, premium channel providers (such as HBO and CineMax), XM Radio, Netflix, DirecTV, and others.

This trend has already begun: U.S. consumers are now paying nearly $2 billion per year to subscribe to websites and e-zines and to access other content online. That’s nearly THREE TIMES MORE than in 2001! Expect many publishers of free e-zines and websites to begin qualifying prospects and bringing revenue forward by providing brief trial periods followed by promotions aimed at converting leads to customers who pay monthly, annual, or per-access fees.

Forecast #9: International Prospects Will Gain in Importance.

While U.S. consumers have been bombarded with a mind-boggling volume of Web-based promotions and are increasingly resistant to their allure, Internet users in many other countries have escaped much of the onslaught. As a result, many Internet marketers will discover rich veins of gold overseas in the year ahead.

According to the CIA World Factbook, 186 million Americans – roughly 63% of the U.S. population – now have Web access. That’s only about 19% of the global Web community. A whopping 81% of all Internet users do NOT live in the U.S. – and to a huge percentage of them, e-mails and Internet sites delivered in English are meaningless.

If you translate your e-mail blasts and websites into Spanish, you’ll pick up about 76 million more prospects in the U.S., Mexico, Central America, South America, and, of course, Spain. Add French, German, Russian, and Portuguese sales messages, and you can talk to 116 million more future customers. And if you can figure out a way to make your sales messages readable to Web nerds in China and India, you’ll pick up another 136 million.

Look for an increasing number of entrepreneurs and businesses to tap this largely virgin audience of consumers.

Forecast #10: The Customer Takes His Rightful Place.

Many marketers who use cheaper media – TV, radio, and the Internet, for example – build their entire businesses on making a single sale to each customer. Now, with rising costs and falling response rates, look for more Internet marketers (as well as more TV and radio infomercial producers) to adopt the venerable “Lifetime Customer Value” model that has turned so many direct-mail marketers into millionaires.

In the year ahead, increasing numbers of Internet marketers will build vast companies and fortunes by (1) generating maximum numbers of new customers at break-even, and (2) systematically increasing the lifetime value of each customer through regular monthly, weekly, even daily promotions.

In short, the most successful Internet marketers in 2006 will be those who view the marketing holistically – as an unbroken chain – and design campaigns to take prospects from first contact to first purchase in a single step, and then continuously upgrade the value of each customer over time. This will force vast improvements in the quality of products offered. It will also cause savvy marketers to think of each product sold as a promotion for the next product to be offered.

Forecast #11: Marketers Who Are the First to Capitalize on These Locked-In Trends for 2006 Will Grow Richer Than Midas in the Year Ahead!

Each one of the above trends presents a truly spectacular opportunity for entrepreneurs, business owners, and marketing pros.

[Ed. Note: Clayton Makepeace offers help in reaping maximum profits through the Internet, direct mail, and print advertising every week in his e-zine, THE TOTAL PACKAGE.

Learn 177 of his surprising secrets that have doubled his clients’ profits in a year and quadrupled them in 36 months in his newly published e-book “Double Your Profits in 12 Months or Less!“]