DMA Quarterly Business Review (QBR) for Q2 Reflects 12th Consecutive Quarter of Positive Results

August 24, 2006 — The Direct Marketing Association (DMA) yesterday released the second-quarter findings of its Quarterly Business Review (QBR) and the news was, overall, very good. According to the QBR report, the Q2 of 2006 was the twelfth consecutive quarter of positive economic growth for the greater direct marketing business. In fact, in terms of Revenue vs. Same Quarter Last Year (SQLY), the report showed a direct marketing business-wide index of 66.

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.

Moreover, according to the report – which is based on three surveys sent to DMA direct marketer, supplier, and agency members – the direct marketing community’s Revenue vs. Original Projection for the second quarter, while somewhat disappointing at 47, posted a slight improvement over Q1.

“With increases over the previous quarter, second-quarter 2006 findings show growth in both Revenue vs. Same Quarter Last Year and Profitability, pointing to a strong second quarter for marketers,” said Peter Johnson, PhD, DMA’s vice president of research and market intelligence. “Marketers across all sales tiers reported increased sales.”

QBR Charts Optimism

The QBR also reported that Projected Revenue for the current quarter remains strong with an overall index of 67.

All three segments – marketers, suppliers, and agencies – expressed optimism for Q3, continuing a year-long trend of anticipated growth in the coming quarter. Agencies are somewhat more likely than marketers and suppliers to forecast greater growth in Q3.

Business-wide Overview

· With increases over Q1 2006, Q2 represents the twelfth straight quarter of positive results. Q2 findings show strength in both Revenue vs. SQLY and Profitability.

· Revenue vs. SQLY increased by 7 points over Q1, and Profitability increased by 4 points over the previous quarter. Revenue vs. Original Projection indicated a nominal business-wide increase from Q1’s 46, but is still down from Q4 2005’s 54.

· Overall, Revenue vs. SQLY for Q2 marked a turnaround from the previous quarter. Business-wide Profitability index numbers were healthy for all segments, with marketers, agencies, and suppliers each at or surpassing indices of 70.

· Revenue vs. Original Projections indices were consistent with those of Q1, although the marketer and supplier segments showed small upticks from the previous quarter (posting increases of 1 and 2 points, respectively).

DM Marketers:

· Q2 was a robust quarter for marketers, with both Revenue and Profitability reflecting resurgence with a marked improvement over Q1 results. Revenue vs. SQLY rose to 66 from 57, while Profitability increased to 72 from 66.

· Marketers’ revenue compared with Original Projection remained flat with Q1.

· The weighted average sales change – the measure that is more reflective of the DM community in aggregate – was 8.2 percent.

· Marketers’ revenue projections for Q3 2006 remained strong at 65.

DM Agencies:

· Agencies posted the best Revenue and Profitability numbers of the three measured segments.

· Revenue vs. SQLY showed growth with an index of 69, up from Q1 2006.

· Agencies’ profitability (70) was strongest of the three metrics and showed a small gain of 2 points from Q1.

· Revenue came in slightly better than expected, with a Revenue vs. Original Projection index of 52.

· Agencies’ revenue projections for Q3 indicate growth with an index of 70, up 4 points from Q1.

· The Agency Client Volume showed the same level of growth in Q2 as in Q1, with an index of 64. This continues the growth trend exhibited through most of 2005, with this index remaining in the 60s.

DM Suppliers:

· Suppliers’ growth rebounded in Q2 and Revenue vs. SQLY grew to 64, up from 58 in Q1.

· Profitability rose 1 index point to 71.

· Revenue vs. Original Projection, although still disappointing, rose 2 points to 44.

· Suppliers’ optimism for growth for Q3 continues to be positive, with a projected revenue index of 67.

Breakout: Business-to-Business Segment:

· Business-to-business (B-to-B) marketers’ Revenue vs. SQLY and Profitability indices gained strength in the second quarter of 2006. Revenue vs. SQLY rose to a very positive 70, up 9 points over Q1 2006.

· The B-to-B unweighted average sales increase of 11.7 percent was a noteworthy change from the 4.7 percent reported for Q1 2006 and is more in line with all of the 2005 quarters (which ranged from 9.3 percent to 14.2 percent).

· The B-to-B weighted sales change – the best measure of sales growth for this segment – was much higher in Q2 (10.7 percent) than in Q1 (3.7 percent), and was more comparable with the weighted change for SQLY (9.5 percent).

Breakout: Catalog Segment:

· Catalog companies’ Revenue vs. SQLY and Profitability indices for the second quarter were extremely positive. Revenue vs. SQLY rose to 65 from 59 in Q1 2006. The Profitability index also showed impressive growth, with an increase of 9 points to 74, surpassing the previous four quarters (65, 62, 72, and 69).

· Catalogers’ Revenue vs. Original Projection indicated disappointment on this metric with an index of 48, compared with 52 for Q1.

· Catalogers forecasted a healthy revenue growth for the next quarter. The 69 index, while one point lower than the Q1 2006 prediction, still points to a very positive outlook.

Breakout: Consumer Products or Services:

· All three major performance indicators for the consumer products or services sector were higher than they were in Q1. Revenue vs. SQLY was very solid, with an index of 71, up significantly from last quarter’s 54.

· Profitability was robust with an index of 73 (6 points higher than in Q1). Consumer marketers have a history of solid Profitability results; this index has been in the 70s in five of the six quarters since Q1 2005.

· This segment’s expectations for Q3 2006 revenue are healthy, with an index of 69. This is the most optimistic projection of its kind made in the past four quarters, exceeding the projections for Q2 and Q1 (indices of 64 and 68, respectively).

Breakout: Financial Marketers:

· This issue of DMA’s Quarterly Business Review once again provides an in-depth analysis of financial organizations.

· Financial marketers’ Profitability was extremely strong, with an index of 79 for Q2 2006.

· Revenue vs. SQLY showed strength with an index of 60, but Revenue vs. Original Projection was apparently lower than originally expected.

About DMA’s Quarterly Business Review (QBR)

DMA’s Quarterly Business Review (QBR) is based on three online surveys of DMA marketer, agency, and supplier member companies. The second-quarter survey was fielded by DMA’s Research and Market Intelligence Department between July 10 and July 25, 2006. DMA received 250 survey responses.

DMA members can download the Quarterly Business Review free of charge at www.the-dma.org/cgiu/member/whitepapers/Q22006Final.pdf

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=009395

# # #