DIRECT & INTERACTIVE MARKETERS REPORT MIXED RESULTS FOR SECOND QUARTER

FOR IMMEDIATE RELEASE

NEW YORK, August 27, 2003 -- Responses to the Direct Marketing Association's (The DMA) Quarterly Business Review (QBR) for the second quarter of 2003 suggest two very different experiences for direct and interactive marketers: those whose businesses continued to be impacted by a lack of recovery and the war in Iraq, and those who, despite everything, managed to post significant gains over last year.

"The past couple years have been a turbulent time for not just for direct marketers, but the world, our economy, and businesses in general," said H. Robert Wientzen, president & CEO, The DMA. "The predicted economy-wide recovery has, to date, generally failed to materialize, leaving direct marketers now more focused than ever on customer retention and acquisition strategies."

Owning in large part to the war in Iraq, the second quarter was a difficult period for many direct and interactive marketers. The DMA's benchmark Revenue Index slipped five points to 49 from quarter one's 54 index. Consistent with the downturn in the revenue index, response rates continued to decline to 45 from last quarter's 47. Yet, profits and revenue, the two main measures of sales among users of direct and interactive marketing, both registered increases. The unweighted average increase for sales in the second quarter was 1.21 percent, while the weighted average sales increase was a full 6.26 percent.

Legitimate marketers continued their strong movement into e-mail and Web-based marketing strategies last quarter. Quarter two registered a significant drop in the overall employment index for direct and interactive marketers, suggesting that the industry may have experienced its first wave of downsizing since the recession of 2001.

Unlike the first quarter of 2003, when the looming war in Iraq was predicted to be of paramount concern, the general economic climate has resumed its position as the most troubling issue overall for direct and interactive marketers, followed by consumer confidence and recent government initiatives, such as government regulation, do-not-call lists, and privacy concerns.

Users of Direct Response Marketing: Many direct and interactive marketing users indicated that over the past quarter they employed a new marketing channel (15.6 percent) or introduced a new product line (12.3 percent). In contrast to previous quarters, the employment level among direct and interactive marketers has experienced a dip to 45 -- not severe, but a potential sign of softening in the employment market for direct and interactive marketers.

Direct Response Agencies: The data reported by direct response agencies suggests continued consolidation due in part to downsizing of employees, with increased focus on new customer acquisition (60) drawing the lion's share of agency budget growth. Indicators of agency consolidation were confirmed in the employment index for agencies, which dropped to 39, pointing toward a noticeable decline in the employment level within direct response agencies. While the number of clients held relatively steady (54), agencies reported that strong sales goals among these clients (60) were not matched by expenditures (44), budgets (38), or testing (49). Unlike direct marketing users, agency respondents appear a little more upbeat. Yet, their revenue index (50) and the high standard deviation (1.26) suggest that there is much room for improvement and greater consistency before agencies can say recovery is underway.

Direct Response Suppliers: Many suppliers (22.1 percent) indicated that they introduced a major new product line and employed a new marketing channel (15.1 percent) in quarter two. Suppliers also experienced downturns in the level of employment with an index number of 45. Capital budgets (44) and operations budgets (48) also continued to feel the pinch, while most of the expenditure increases were experienced in new customer acquisition (60) and customer service (56).

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 industry performance benchmarks. Results came from online surveys conducted by The DMA’s Strategic Information Unit between July 1, 2003, and July 16, 2003. The report generated 220 responses.

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 surpassed $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 Second Quarter of 2003 Quarterly Business Review -- including breakout data for direct marketing agencies, users, and suppliers -- can be obtained by contacting Christina Duffney at cduffney@the-dma.org]

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