DMA Quarterly Business Review Reflects 10th Consecutive Quarter of Positive Results

February 17, 2006 — The Direct Marketing Association's (DMA) Quarterly Business Review (QBR) has reported the tenth consecutive quarter of positive economic growth, according to three online surveys of DMA direct marketer, supplier and agency companies. The Q4 2005's revenue vs. same quarter last year (SQLY) index of 68 is nearly at its three year high of 69, reached in Q4 2004.

In the QBR index, a score of 50 represents no change in the direct marketing business' performance this quarter versus the same quarter last year. Scores above 50 represent growth, and those below 50 represent a decline.

"The index numbers attest to the robustness of these three segments of the direct marketing community," said Peter Johnson, PhD, vice president, research and market intelligence, DMA. "Q4 finally broke the three-quarter trend of declining growth for the marketer segment. Revenue was on track with marketer's expectations, which remain positive for Q1 2006."

Industrywide Overview

Q4 findings indicate strength in revenue, profitability, and actual vs. projected revenues for each of the three DMA member marketer, supplier, and agency segments, and point to a satisfying holiday season for direct marketers.

Industry-wide profitability numbers were very strong, with marketers, agencies, and suppliers each showing indices in the 70s. Projected revenues for Q1 2006 look strong, with an overall index of 64.

Revenue vs. original projection is now positive, with an Industry-wide index of 54, vs. Q3's 47. Year-over-year quarterly revenue for agencies rebounded 16 points to 70, having fallen to 54 in Q3 from 71 in Q2.

Projected revenues for Q1 2006 look strong, with an overall index of 64. This measure has tended to remain steady in the mid-60s for the past year. Suppliers are the most optimistic, with an index of 68.

DM Marketers:

· Rising growth indices top those of Q3 2005.

· Marketers experienced strong revenue vs. SQLY and profitability in Q4.

· The weighted average sales change - the measure that is more reflective of the DM community in aggregate - was a robust 12.4 percent.

DM Agencies:

· The revenue vs. SQLY (70) and profitability (72) indices for Q4 2005 returned to the stronger levels seen in Q2 2005, having dipped in the third quarter.

· Revenues came in better than forecasted, with a revenue vs. original projection index of 57. This contrasts with the previous quarter, which had this index at 44.

· 61 percent of agencies entered a new client segment or product line in Q4, up considerably from 47percent in the previous quarter.

DM Suppliers:

· Q4 2005 performance indices reflected strong results for the supplier segment.

· Revenue vs. SQLY and profitability rose to 74 and 76, respectively, from 71 and 70 in Q3.

· Revenue vs. original projection Q1 2006 also rose, climbing 7 points to 56, its first move into positive territory in 2005.

Direct Marketing Breakouts

B-to-B Segment

The revenue and profitability indices of the B-to-B segment improved from already-strong numbers in Q3 2005. The B-to-B weighted average sales change of 16.9 percent was a noteworthy change over the previous quarter's 2.4 percent. The very healthy positive sales change can largely be attributed to the substantial increases reported by the companies in the top sales tiers. The B-to-B segment anticipates growth in revenues for the upcoming quarter, with a 3-point gain over the projection for Q4.

Catalog Segment

Revenue vs. SQLY and Profitability index scores were positive for catalog companies. The revenue vs. SQLY number declined from 59 to 55, but the profitability index rose slightly to 62 from 60. While Revenue vs. Q4 2004 and profitability do indicate growth for this segment, they apparently fell short of projected performance levels.

The catalog segment predicts revenue growth in Q1 2006 (57), but this figure is down 5 points from the previous quarter, making the figure lower than any of the previous 3 quarters.

Consumer Products or Services

All three major performance measures for consumer products or services are higher than they were last quarter. Revenue vs. SQLY was solid, with an index score of 65, up markedly from 51. Profitability rose to 76 (6 points higher than in Q3). This breakout segment has a history of strong profitability results; four out of five quarters since Q4 2004 have this index in the 70s. Revenue vs. original projection has been volatile in 2005 but has rebounded to 65 for Q4, from 43 in Q3, 55 in Q2, and 40 in Q1.

The Q4 2005 Edition of DMA's Quarterly Business Review provides for the first time in-depth analyses of the financial services and nonprofit segments:

Financial Services

This sector shows good profitability for Q4 2005, with an impressive index of 81. Although revenues were apparently lower than originally projected, they indicate growth over SQLY.

Nonprofit

Revenue was strong relative to SQLY for the nonprofit segment, as indicated by an index score of 68. Profitability was reported as very strong, at 76, and revenue exceeded original projections.

About DMA's Quarterly Business Review

DMA's Quarterly Business Review (QBR)s based on three online surveys of DMA marketer, agency, and supplier member companies, conducted by DMA's Research and Market Intelligence Department from January 9, 2005, through January 24, 2005.

Altogether, DMA received 304 survey responses.

DMA members can download the Quarterly Business Review free of charge at:

http://www.the-dma.org/cgi/wpviews?storyid=224

Non-Members can purchase a copy of the report at DMA's online bookstore at:

http://www.the-dma.org/bookstore/cgi/displaybook?product_id=009388

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