DIRECT & INTERACTIVE MARKETERS REPORT SOFT FIRST QUARTER - DMA Members Continue to Anticipate Strong Rebounds

FOR IMMEADIATE RELEASE

NEW YORK, June 11, 2003 – For the first time since the launch of the Direct Marketing Association’s (The DMA) Quarterly Business Review (QBR) in October 2002, the world climate displaced lingering concerns about the domestic economy as the major issue affecting member company performance. These two issues were followed by concerns surrounding consumer confidence and agency clients and budgets.

"Although the Iraq war did not officially begin until the last two weeks of the quarter, its effects were clearly felt throughout the direct and interactive marketing industry," said H. Robert Wientzen, president & CEO, The DMA. "Now that the war has been concluded in a timely and successful fashion, many members feel there is reason to hope that direct and interactive marketing will pick-up."

The DMA index numbers for the first quarter of 2003, in which 50 equals no change, indicated a soft quarter compared to last. Net profitability remained moderately positive, at 60, although it declined 2 percent from the previous quarter.

Likewise, direct and interactive marketing revenue performance -- perhaps the best single measure -- was down slightly to 54 from the previous quarter’s 57. This quarter’s revenue performance, like the previous quarter’s, was somewhat disappointing relative to beginning-of-year-projections.

Direct and interactive marketers reported entering the second quarter of 2003 with cautious optimism -- if the war’s aftermath is as successful as the war itself was swift, members are looking for an upturn in the all-important consumer confidence indicators. In the meantime, direct and interactive marketers continue to tighten their belts on capital investments in hopes that new clients, new products, and new channels will reap rewards when the economic climate finally improves.

QBR highlights include:

Sales Growth/Decline: For the first time, The DMA asked about the specific direction and magnitude of sales changes for the reporting quarter relative to the same quarter last year. Overall, more member companies reported sales losses than gains. With smaller members reporting on average higher gains more frequently than others, there was an average sales increase for all respondents of 6.1 percent.

However, when these changes were weighted by the size of the member company as revealed by annual dollar sales, sales were revealed to be down on the quarter for the entire industry. Thus, the weighted change for the first quarter was a decline of almost 2 percent (-1.98 percent) as sales declines of the largest member companies (those over $500 million in annual sales) outweighed sales gains among some of the smaller members (e.g., in the $5 million to $20 million annual sales range).

Ad Expenditure Activity: As in recent QBR's, Internet, e-mail, and new customer acquisition continue to be the prime growth areas, both in absolute and relative terms. Conversely, capital budgets and operations budgets continue to be squeezed.

Users of Direct and Interactive Marketing: Users of direct and interactive marketing -- direct mailers, catalogers, consumer products and services, financial products, B-to-B marketers -- performed essentially the same as the agency and supplier segments in terms of profits and revenue. However, users were considerably less optimistic about the prospects for the remainder of 2003 than members in either the agency or supplier segments. Many companies reported introducing major new product lines, and employing new marketing channels -- the expenditure index for e-mail expenditure, at 67, is quite strong.

Direct Response Agencies: Agencies show some optimism about the future, with expectations at 62, indicating moderate improvement. Perhaps this is because many indicated they are gaining more clients than losing them, even if client ad budgets as a whole are -- at 40 -- quite disappointing.

Direct and Interactive Marketing Suppliers (Service Providers): Direct and interactive marketing service providers were the most optimistic about the future, with an expectations index of 65. This segment reported investing strongly in new customer acquisition and customer service.

Issues on the Horizon: Across all segments, DMA members expressed concern about the war, particularly its impact on consumer confidence, the economic climate generally, and for agencies, their clients’ direct marketing budgets.

The DMA’s Quarterly Business Review provides current direct and interactive marketing industry statistics such as changes in sales revenue, customer response rates, marketing expenditures, and staffing levels, among other performance benchmarks. Results in the report come from online surveys conducted by The DMA’s Strategic Information Unit from April 1, 2003, through April 14, 2003. The report generated 220 responses, with the majority received from members in the direct marketing user category at the vice president level or above.

The DMA is the leading trade association for businesses interested in interactive and database marketing, with nearly 4,700 member companies from the United States and 53 other nations. Founded in 1917, its members include direct marketers from every business segment as well as the nonprofit and electronic marketing sectors. Included are catalogers, Internet retailers and service providers, financial services providers, book and magazine publishers, book and music clubs, retail stores, industrial manufacturers and a host of other vertical segments, including the service industries that support them. According to a DMA-commissioned study, direct and interactive marketing sales in the United States is projected to surpass $2 trillion in 2002, including $125 billion in catalog sales and $33 billion in sales generated by the Internet. The DMA's Web site is www.the-dma.org, and its consumer Web site is www.shopthenet.org.

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[Editor’s Note: An executive summary of The DMA’s First Quarter of 2003 Quarterly Business Review -- including breakout data for direct marketing agencies, users, and suppliers -- can be obtained by contacting Christina Duffney at cduffeny@the-dma.org]

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