DMA S QUARTERLY BUSINESS REVIEW FOR Q2 2005 CONFIRMS STRENGTH OF DIRECT MARKETING AS SECTOR CONTINUES TO GROW

New York, August 15, 2005-The Direct Marketing Association’s (The DMA) Quarterly Business Review (QBR) reports a Revenue Index of 65, marking the eighth consecutive quarter of very positive results. Direct Marketing continues its pattern of growth with index numbers remaining favorable for Marketers, Agencies, and Suppliers alike. In addition, revenue projections for Quarter 3, 2005 continue to be optimistic.

In the QBR index, a score of 50 represents no change in the industry’s performance this quarter versus the same quarter last year. Scores above 50 represent growth and those below 50 show a decline.

“The index numbers confirm the overall strength and vitality of the practice of direct marketing by all segments of the economy,” said Dr. Peter A. Johnson, director, Strategic Information Unit, The DMA. “Further, we’re extremely encouraged by optimistic expectations for continued growth into Q3.”

All three DMA segments foresee a healthy growth in revenue with an overall Index of 67, up from Q1’s 64. Agencies are particularly optimistic for the next Quarter with an Index of 72. “After a much lower projection for Q2, expectations seem to be back on track for Quarter 3,” added Johnson.

One in five direct marketers cite economic conditions as the issue most likely to affect Q3 performance. While overall postal rates and reform is tied with clients and budgets as the second and third most important issues likely to impact Q3 performance (13% each), postal rates and reform is of greater importance to Marketers, while Agencies are naturally more concerned about clients and budgets.

Actionable Intelligence for Direct Marketers

This quarter, The DMA’s Strategic Information Unit (SIU) analyzed data from previous QBRs in order to assist marketers to better predict revenue performance. Several guidelines exist that may help marketers fine-tune revenue projections in the future:

· Marketers should rely more on their original beginning of year revenue forecasts, which SIU found to be more accurate on average than Marketers’ quarter-by-quarter projections.

· Marketers need to be especially careful in predicting revenue for Q2, which fluctuated more than projections for other quarters. By contrast, Q4 estimates tended to be most accurate.

· Firms with annual revenue below $5 million should consider moderating their revenue forecasts, as actual revenue for these small Marketers has fallen below forecast on average.

· Firms with sales volume between $5 million and $999 million are generally doing well with their forecasts, and should continue with existing approaches. Indeed, other marketers may wish to calibrate their own revenue predictions against those of firms in this sale range.

· Firms with sales over $1 billion may be interested to know that they are conservative in their estimates, with actual performance more likely to exceed projections on average. Firms wishing to expand more aggressively may find the revenue estimates of medium-sized Marketers a better benchmark.

DMA members in the Marketer area anticipate healthy growth in Q3, although at a somewhat lower rate than they expected to experience in Q2. Marketers look forward to a growth in their Total Advertising and Total Direct Marketing budgets over the next 3 months, although their expectations are somewhat lower than they were for Q2.

New customer acquisition and Internet integration/E-commerce solution are at the head of the list of projected expenditure areas, with e-mail and database segmentation/

modeling close behind.

Given that the U.S. Postal Service has applied for a rate increase, it is not surprising that postal rates and reforms has replaced economic conditions as the factor marketers view as most likely to impact growth in the next quarter.

Economic conditions and consumer confidence are now tied for second place in the ranking of important metrics. As the war in Iraq continues and the threat of terrorism continues to be a reality, it is not surprising that international crises were viewed as playing a key role in affecting growth.

Direct Marketing Breakouts

B-to-B Segment

The B-to-B segment posted a slightly higher Revenue vs. Same Quarter Last Year score for Q2 than for Q1 (62 vs. 61). Profitability was a robust 65, although not as high as Q1’s 73. Revenue vs. Original Projection was down from Q1 (46 vs. 53 for Q1); this flatter number may be a result of an overly optimistic original expectation. The B-to-B segment anticipates growing revenues in Q3 2005.

Catalog Segment

All three indices for the Catalog segment have increased compared with Q1. The average unweighted sales changes for this segment is down from Q1. This drop was caused in part by a more pronounced decrease in sales among those who experienced declining sales.

Consumer Products or Services

In contrast with Q1 when this segment underperformed the Marketer category in general, in Q2 the Consumer Products or Services segment reported index numbers that were either comparable to or exceeded those for marketers. The Consumer segment’s Profitability Index far outpaced that for marketers (79 vs. 69).

Q3 2005 Agency and Supplier Projections

Agency Projections For Quarter 3, 2005: Agencies continue to be optimistic for the next quarter of 2005 with a very robust projected revenue of index of 72, up noticeably from Q1’s 63. New customer acquisition heads the list of projected expenditure areas for Q3, followed by wages and salaries.

Supplier Projections for Quarter 3, 2005: Expressing optimism for a strong Q3, the Supplier segment posted a Projected Revenue index of 64, which nearly matches the index for Q2 (65).

The DMA’s Quarterly Business Review is based on three online surveys of DMA member companies conducted by The DMA’s Strategic Information Unit from July 8, 2005 through July 22, 2005. Altogether The DMA received 293 survey responses. For a complete copy of The DMA Quarterly Business Review please visit The DMA’s Web site at http://www.the-dma.org/cgi/wpviews?storyid=203

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About The DMA

The Direct Marketing Association (www.the-dma.org) is the leading trade association for businesses and organizations interested in direct, interactive, and database marketing, which in 2004 generated more than $2.3 trillion in US sales, including $143.3 billion in catalog sales and $52.5 billion in Web-driven sales. In addition to catalogs and the Web, DMA members employ a wide variety of marketing media, including mail, e-mail, telephone, newspapers and magazines, interactive television, and radio, among others. Founded in 1917, The DMA today has more than 5,200 corporate, affiliate, and chapter members from the US and 46 other nations, including 55 companies listed on the Fortune 100. Reflecting the significant and growing role that direct marketing plays in today’s advertising mix, The DMA’s membership represents marketers from every business segment, including catalogers, Internet retailers, retail stores, nonprofit organizations, advertising agencies, financial services providers, book and magazine publishers, book and music clubs, industrial manufacturers, and a host of other vertical segments, as well as the service industries that support marketers.

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