DMA's Quarterly Business Review (QBR) Finds Direct Marketers Looking to Modest Growth Despite Decline in Year-Over-Year Revenue for Quarter III
October 13, 2008 — The Direct Marketing Association (DMA) today released its Quarterly Business Review (QBR) for the third quarter of 2008, complete with 2009 forecasts for marketers and suppliers, in conjunction with the DMA08 Conference & Exhibition, the Global Event for Integrated Marketing.
The QBR Revenue Index vs. Same Quarter Last Year (SQLY) for Q3 2008 was 47, remaining the same from Q2. In the QBR Index, scores below 50 represent a decline in direct marketing business performance during the quarter versus the SQL, while a score of 50 represents no change and scores above 50 represent growth.
Despite the third quarter of soft revenue performance, overall profitability remained robust at 62, with each of the three segments that QBR benchmarks (marketers, agencies, and suppliers) posting a positive index in the high 50s and better.
“Overall, findings reveal that weak economic conditions experienced in the third quarter of 2008 are continuing to cause direct marketers to face softer revenues compared with the same quarter in 2007,” said Anne B. Frankel, senior research manager. “While the Revenue vs. SQLY (same quarter last year) metric was negative for the third consecutive quarter, it is heartening that the Profitability results were positive.”
Published every quarter, DMA’s Quarterly Business Review allows direct marketers, agencies, and suppliers to benchmark their performance on key metrics such as: current and projected revenue; profits; ROI; sales; employment; as well as a wide range of expenditure areas.
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QBR Highlights for 2008 Quarter III
Direct Marketing Community: An Overview
Q3’s Profitability remained solid at 62, just one point behind the Q1 and Q2 index. This quarter’s Revenue vs. SQLY, with an overall index of 47, is on par with that for Q2.
The profitability index was healthy for all three segments, with Marketers and Agencies outperforming the Supplier segment. Agencies again had the strongest index at 66; followed by Marketers with an index of 64; and Suppliers with an index of 58.
Projected revenue for Q4 2008 remains positive, but reflects modest expectations for revenue growth, with an index of 51 — a metric that suggests that Direct Marketers continue to be apprehensive about the economy. All three segments have similar Revenue projection indexes for Q4 2008: a Supplier index of 50, an Agency index of 51, and a Marketer index of 52.
Issues of Concern to Marketers
General Economic Conditions once again took an overall first place in terms of factors most likely to impact revenue for Q4 2008, with 57% citing it as a concern.
“Given the widespread apprehensions revolving around the state of the economy, it comes as no surprise that direct marketers, on the whole, express very conservative expectations in terms of revenue for Q4 2008,” continued Frankel. “On a brighter note, the Q4 2008 Revenue projections for the Marketer segment moved out of negative territory, possibly reflecting hopes for a boost from increased sales tied to the holiday season.”
Due to the current economy, Marketers seem fairly certain of a recession, with over two-thirds (70%) saying that it is very or somewhat likely. Given these expectations, it is not surprising that Marketers express modest expectations in terms of their revenue for Q4 2008.
· In case of a recession, Marketers are most likely to keep their marketing budget the same but reallocate expenses (46%).
· Marketers expect to increase spending in key areas in the event of a recession, notably in the online arena.
QBR Highlights Relating to Direct Marketers
· Q3’s Revenue vs. SQLY index of 47 marks a one-point gain from Q2.
· Profitability increased one point to 64 from Q2’s 63.
· Consistent with this revenue Index below 50, QBR estimates that direct marketers’ aggregate revenues declined approximately 1.7% on a weighted basis (a measure that adjusts for the size of direct marketing firms responding to the survey). The size of the revenue decrease for Q3 was about half that recorded for Q2 and Q1 2008 (-3.6%).
· Pointing to modest expectations for growth, Marketers’ revenue projections for Q4 2008 rose four points to 52.
· Marketers expect to increase spending on direct marketing services in 2009 compared to 2008, with a score of 1.20. This is a smaller increase than in 2008 vs. 2007 (when the score was 1.34) and 2007 vs. 2006 (when the score was 1.54).
· Marketers expect their revenue from direct response channels will be higher in 2009 vs. 2008 with a score of 1.45. This is lower than the 1.59 recorded for 2008 vs. 2007 and the 1.66 score posted for 2007 vs. 2006, and points to more conservative expectations.
QBR Highlights Regarding Direct Marketing Agencies
· Revenue vs. SQLY was 51, remaining constant from Q2.
· Profitability, with an index of 66 reflects a one-point gain from Q2’s 65.
· Agencies forecast conservative growth for Q4, with an index of 51.
QBR Highlights Regarding Direct Marketing Suppliers
· Revenue vs. SQLY registered a decline in Q3, dropping one point to 43 from Q2’s 44.
· Profitability remained positive with an index of 58, but was softer than in recent quarters.
· Suppliers expect their revenue to be flat in Q4 2008, with an index of 50.
Direct Marketing Breakout: B-to-B Segment
· The Revenue vs. SQLY index gained one point from Q2 and two points from Q1 2008, to 47.
· Profitability remained strong, with an index of 64.
· In Q3, the weighted average revenue change for the B-to-B Segment was -6.0%. This segment experienced a larger overall weighted revenue decline partly because companies in the largest revenue tier typically recorded larger decreases.
· B-to-B Marketers anticipate modest improvements in their revenue in Q4 2008, with a projected revenue index of 52.
Direct Marketing Breakout: B-to-C Segment
· Consumer Marketers posted a Revenue vs. SQLY index of 46, on par with the index recorded for Q2.
· Profitability stayed healthy in Q3 with an index of 64.
· The weighted average revenue change for the B-to-C segment was -1.2%.
· B-to-C Marketers also anticipate some improvements in their revenue in Q4 2008, with a projected revenue index of 52.
Direct Marketing Breakout: Catalog Segment
· The Revenue vs. SQLY index for Catalog Marketers was 49.
· Catalog Marketers performed somewhat better than their B-to-B and B-to-C counterparts in terms of profitability, posting an index of 67.
· In Q3, the weighted average revenue change for the Catalog segment was -6.3%. This segment registered a larger overall weighted revenue decline in part because companies in the largest revenue categories generally experienced larger decreases.
· Rounding out all three marketer segments and reversing all negative Q3 forecasts, the Catalog segment also anticipates improvements in their revenue in Q4 2008, with a projected revenue index of 52.
About DMA’s Quarterly Business Review
DMA’s Quarterly Business Review (QBR) for the third quarter of 2008 is based on three online surveys of marketer, agency, and supplier companies. The surveys were conducted by DMA’s Research and Market Intelligence department from September 18, 2008 through September 23, 2008. Altogether DMA received 331 survey responses.
DMA members can download the report, for free, and non-members can purchase a copy for $49.95 from DMA’s Bookstore by clicking here.
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