DMA Quarterly Business Review (QBR) Reflects 15th Consecutive Quarter of Positive Results

June 5, 2007 — The greater direct marketing community — including direct marketers, suppliers, and agencies — collectively experienced a 15th consecutive quarter of positive economic growth. That is a key finding of the Direct Marketing Association’s (DMA) Quarterly Business Review (QBR) for the first quarter of 2007.

“In general, we saw a healthy bottom line for the direct marketing community during the first quarter of the year,” said Anne B. Frankel, DMA’s senior research manager in research and market intelligence. “Revenue compared to the same quarter last year showed growth for Q1. Equally heartening, profitability was also strong in Q1.”

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

“Although growth is softening a little, marketers, agencies, and suppliers are achieving robust profit margins,” said Frankel. “Moreover, for the current quarter [Q2], the overall direct marketing community projected revenue to grow — with the marketer and agency segments being the most optimistic.”

QBR Highlights for Q1 2007

Direct Marketing Community Overview

According to DMA’s latest QBR report, which was published today, Q1 findings for the greater direct marketing community — which, for purposes of this study includes direct marketers, suppliers, and agencies — indicate strength in revenue vs. SQLY, at 61, and profitability at 69.

Moreover, all three of the QBR’s surveyed direct marketing community segments are upbeat about the current quarter (Q2), with an index reading of 66. Individually, agencies project the greatest Q2 revenue growth at 68, followed closely by marketers (67) and suppliers (62).

In Q1, agencies posted the best revenue vs. SQLY results at 63, while marketers reported the highest profitability figures, at 71.

Revenue vs. SQLY for marketers was a close second at 62, and suppliers came in at 59.

Direct marketing community-wide profitability indices were stronger, however, with an overall figure of 69. Numbers for each segment showed marketers had an index of 71, agencies reached 69, and suppliers had 67.

The report showed that actual vs. projected revenue in Q1 fell short of expectations at 48 in the greater direct marketing community, down two points from Q4 2006’s number (50). Segment-by-segment, the numbers were: Marketers 49, agencies 51, and suppliers at 45.

Issues of Concern to Marketers

According to DMA’s latest QBR, the direct marketing community is concerned about the postal rate increases, which marketers and suppliers both cite as a factor likely to affect their Q2 performance. The new postal rates took effect on May 14, 2007.

Marketers are also focusing on issues regarding the economy; consumer confidence; marketing issues, including response rates; technology and capital investment; the Internet, e-commerce, and email; and list, data, and segmentation issues.

Meanwhile, QBR reports that agencies and suppliers are most worried about their client budgets and advertising expenditures.

QBR Highlights Relating to Direct Marketers

Key findings affecting direct marketers include:

· Q1 revenue vs. SQLY (62) dipped slightly from Q4’s 64. Profitability (71) climbed a point, and revenue vs. original projection reached 49, up a point.

· The weighted average sales change — the measure that is more reflective of the direct marketing community in aggregate — was 2.6 percent.

· Future growth is predicted, with projected revenue in Q2 forecast at a healthy 67.

· In terms of spending, marketers say they expect in the Q2 to budget for new customer acquisition and the Internet. They also expect to spend more on postage.

QBR Highlights Regarding Direct Marketing Agencies

· While the revenue vs. SQLY (63) softened in Q1 from Q4 2006, it was comparable with Q1 in 2006 (64). Agency professionals reported profitability at 69 compared to 72 in Q4.

· Agencies’ revenues came in slightly better than forecasted, with a revenue vs. original projection index of 51. This reflects a small decline from Q4 2006 (52).

· Overall, agencies expect a bright future, with Q2’s projected revenue indexed at a healthy 68.

QBR Highlights Regarding Direct Marketing Suppliers

· Revenue and profitability showed growth in the supplier segment in Q1. Revenue vs. SQLY reached 59 and profitability came in at 67.

· Revenue vs. original projection in Q4 fell back into negative territory at 45, which was consistent with most of the past two years.

· Q1 results indicate that suppliers believe the horizon holds promise for them, providing a projected revenue of 62 for Q2.

· While suppliers are optimistic about revenue, they are concerned about the postal rate increases’ impact on their business in Q2 — 18 percent vs. 9 percent in Q1.

Direct Marketing Breakout: B-to-B Segment

· For B-to-B direct marketers, business is good. Both the revenue vs. SQLY (65) and profitability (73) indices were positive, improving on numbers from the last half of 2006. This quarter’s growth beat out 2006 Q4’s revenue vs. SQLY by two points, and improved upon Q3’s by an impressive nine points.

· Profitability was excellent this quarter, bettering Q4 2006 by five points and Q3 by seven.

· Revenue vs. original projection remained in negative territory at 49, but rose from Q4 and Q3’s numbers of 44 and 43.

· Looking ahead, B-to-B marketers paint a positive picture for Q2: Projected revenue is 67.

Direct Marketing Breakout: Consumer Products or Services

· Revenue vs. SQLY (55) reflects growth, but at a more modest level than in Q4, when it was 68. This measure was closer to the Q1 2006 figure of 54.

· Profitability, while still a healthy 67 for this breakout segment with historically strong results, was down five points from Q4.

· This quarter, revenues did not meet expectations, as shown by the index of 43.

· The segment remains optimistic about Q2, with a revenue projection of 63.

About DMA’s Quarterly Business Review

DMA’s Quarterly Business Review (QBR) for the first quarter of 2007 is based on three online surveys of DMA marketer, agency, and supplier member companies. The surveys were conducted by DMA’s Research and Market Intelligence Department from April 11 through April 26, 2007. Altogether, DMA received 305 survey responses.

DMA members can download the QBR free of charge at http://www.the-dma.org/cgi/member/whitepapers/Q12007FINAL.pdf.

Non-Members can purchase a $19.95 copy of the report at DMA’s online bookstore at http://www.the-dma.org/bookstore/cgi/displaybook?product_id=009424.

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