Marketers End 2006 with Solid Performance

NEW YORK, NY, February 22, 2007 – The Direct Marketing Association’s (DMA) Quarterly Business Review (QBR) for the fourth quarter (Q4) of 2006 reported the 14th consecutive quarter of positive economic growth, with findings that indicate strength and growth in Revenue vs. Same Quarter Last Year (SQLY) with a direct marketing business-wide index of 67.

"Marketers ended 2006 with a solid performance, with both Revenue vs. SQLY and Profitability showing improvement over Q3," said Anne B. Frankel, senior research manager, research and market intelligence, DMA. "Revenue projections remain strong for Q1 2007, pointing to continued optimism."

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.

Projected Revenue remains strong with an overall index of 67, which is on par with the Q4 projection. All three segments – Marketers, Agencies, and Suppliers – are optimistic for Q1, signaling anticipated growth in the coming year. In a reversal of the previous quarter, Agencies are somewhat more optimistic than both Marketers and Suppliers, and forecast greater growth in Q1 of 2007.

Business-wide Overview

Direct marketers have reported their strongest Revenue vs. SQLY figures in Q4 in each of the four years measured by the Quarterly Business Review. Industry-wide Profitability index numbers were healthy for all segments, with Marketers, Agencies, and Suppliers each posting an index in the high 60s or better. Agencies posted the best Revenue and Profitability figures of the three measured segments.

Revenue vs. Original Projections for Agencies and Suppliers reflected improvement over the previous quarter. Marketers remained unchanged from Q3 at 48, while Agencies increased by 2 points, to 52. The Supplier segment had a noticeable gain of 7 points, to 51, bringing them into positive territory.

DM Marketers:

·Marketers ended 2006 with a strong performance, with both Revenue vs. SQLY and Profitability showing gains over Q3.

·The weighted average sales change – the measure that is more reflective of the DM community as a whole – was 10.9 percent, marking an improvement over Q1, Q2, and Q3.

·Marketers revenue projections for Q1 2007 was 66, making this the eighth consecutive quarter that this measure has been in the 60s, signaling continued optimism.

DM Agencies:

·Revenue vs. SQLY was extremely positive at 72, surpassing all three earlier quarters in 2006.

·Profitability, with an index of 72, marked the third straight quarter of results of 70 or better.

·Revenue vs. Original Projection increased by 2 points to 52, showing some growth vis-à-vis expectations.

·Agencies are very optimistic for Q1 2007, with a forecast of 70 that points to continued growth.

DM Suppliers:

·The Revenue vs. SQLY and Profitability metrics reflected growth in Q4.

·Revenue vs. SQLY increased 3 points to 67.

·Profitability remained robust at 67, although there was a 2-point drop from Q3.

·Revenue vs. Original Projection climbed into positive territory to 51 after spending most of 2006 and 2005 in the negative range.

·Revenue is expected to grow in the first quarter of 2007, although the Projected Revenue index for Suppliers dipped to 66 from Q4s 71.

Breakout: Business-to-Business Segment:

·Both the Revenue vs. SQLY and Profitability indices for B-to-B Marketers were positive for Q4 2006. Although below Q2 levels, when the Revenue vs. SQLY index was 70 and Profitability was 69, they improved on Q3s Revenue vs. SQLY index of 56 and the Profitability index of 66.

·The B-to-B unweighted average sales increase of 16.1 percent was a considerable increase from the 2.8 percent reported in the previous quarter.

·The B-to-B weighted sales change (14.3 percent) – the best measure of sales growth for this segment – was an improvement over previous quarters in 2006.

·B-to-B Marketers look to growth in Q1 2007. Although the Projected Revenue index of 66 was a 3-point decrease from Q4s 69, the index still remains in the positive range and denotes the eighth consecutive quarter of projected revenue indices in the 60s.

Breakout: Catalog Segment:

·Revenue vs. SQLY and Profitability indices remained extremely positive for Catalog companies in Q4. Revenue vs. SQLY was 69, its highest value in 2006 and a 5-point increase from Q3s 64. Profitability also registered an impressive increase to 75, up 11 points from Q3s 64 and surpassing Q2s 74.

·Revenue vs. Original Projection index remained in positive territory, yet slipped 7 points from Q3s 61 to 54. In 2006, three quarters had a positive Revenue vs. Original Projection index – Q1 (52), Q3 (61), and Q4 2006 (54).

·The average unweighted sales change for Catalogers was 15.1 percent, a large gain from Q3s 8.6 percent, Q2s 6.7 percent, and Q1s 8.0 percent.

Breakout: Consumer Products or Services:

·All three major performance indicators for the Consumer Products or Services sector were lower than they were in Q3, and closer to Q2 levels. Revenue vs. SQLY fell 11 points from 79 to 68, which was also shy of Q2s 71, but higher than Q1s 54.

·Profitability was still very robust with an index of 72 (4 points lower than Q3, but nearly identical to Q2s 73). Consumer Marketers have a history of very solid Profitability results; this index has been in the 70s in seven of the eight quarters since Q1 2005.

Breakout: Financial Marketers:

·This issue of QBR once again provides an in-depth analysis of Financial organizations. The last breakout for this sector was in Q2 2006.

·Revenue vs. SQLY and Profitability both decreased slightly from Q2. Revenue vs. SQLY remained positive but slipped 2 points from Q2s 60, to 58. Profitability still exhibits strength, but fell 7 points from Q2s 79 to 72. Revenue vs. Original Projection, although negative, improved by 4 points over Q2.

About DMAs Quarterly Business Review (QBR)

DMAs Quarterly Business Review (QBR) is based on three online surveys of DMA marketer, agency, and supplier companies. The fourth-quarter survey was fielded by DMAs Research and Market Intelligence Department between January 8 and January 23, 2007. DMA received 588 survey responses.

·DMA members can download the Quarterly Business Review free of charge at http://www.the-dma.org/cgi/member/whitepapers/Q42006FINAL.pdf

·Non-members can purchase a copy of the report at DMAs online bookstore at http://www.the-dma.org/bookstore/cgi/displaybook?product_id=009415

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