DMA Quarterly Business Review (QBR) for Q1 Reflects 11th Consecutive Quarter of Positive Results
May 19, 2006 — The Direct Marketing Association’s (DMA) Quarterly Business Review (QBR) for the first quarter (Q1) of 2006 reported the eleventh consecutive quarter of positive economic growth, with an industry wide revenue index of 59, despite a dip from Q4’s near-record high Revenue vs. Same Quarter Last Year (SQLY) index of 68.
According to three online surveys of DMA direct marketer, supplier, and agency companies, Q1 findings show strength in Revenue vs. SQLY and Profitability.
In the QBR index, a score of 50 represents no change in the direct marketing business’ performance the quarter versus the same quarter last year. Scores above 50 represent growth, and those below 50 represent a decline.
“Although not as robust as the last quarter of 2005, the first quarter of this year was generally healthy for marketers, with Revenue vs. SQLY and Profitability indices that indicated growth,” said Peter Johnson, PhD, vice president, research and market intelligence, DMA. “With the exception of decreased sales reported by the smallest companies, marketers across all sales tiers reported increased sales.”
Actual vs. projected revenues for each of the three segments – Marketers, Suppliers, and Agencies – have dropped from Q4’s 54. However, Q1’s Revenue vs. SQLY index reflects growth, but at softer levels than that reported over the last two years.
Industry-wide Profitability numbers were very strong, with Marketers, Agencies, and Suppliers each showing indices in the high 60s or better. Revenue vs. Original Projection – at 46 – returned to a level comparable with those of Q3 and Q2 of 2005, (47 and 49, respectively). Agencies are the only segment to show growth on this metric.
· The weighted average sales change – the measure that is more reflective of the DM community in aggregate – was 5.8%, in line with the more modest increases in earlier quarters (4.8% in Q3, 5.9% in Q2, and 6.5% in Q1 of 2005) than with the 12.4% increase reported in Q4.
· Revenue compared with Original Projection was slightly below expectations, as indicated by an index reading of 47.
· The index for DM budgets shows continuing growth at 56, but fell from Q4’s 64. This Q1 index is on par with Q3’s 56 and Q2’s 55.
· The DM Marketer employment index rose 3 points from Q4, to 55. This index is somewhat higher than in the four quarters comprising 2005 (52 in Q4, 50 in Q3, 51 in Q2, and 52 in Q1).
· Overall, Agencies posted the best Revenue and Profitability numbers of the three segments measured. The Revenue vs. SQLY (64) and Profitability (68) indices, while down from Q4, showed strength for the first quarter of 2006. Revenue came in marginally better than expected, with a Revenue vs. Original Projection index of 51.
· Agencies in Q1 express optimism for the current quarter (Q2). Revenue projections point to growth with an index of 66, up 5 points from Q4.
· The Agency Client Volume index showed growth at 64, up 5 points from Q4’s 59, and on track with indices posted in Q3, Q2, and Q1 2005 (61, 65, and 61, respectively).
· The Revenue vs. SQLY and Profitability indices for Q1 2006 reflected growth for the Supplier segment. Growth softened in Q1, and Revenue vs. SQLY and Profitability dropped to 58 and 70, respectively, from 74 and 76 in the previous quarter. Revenue vs. Original Projection declined, falling to 42 from 56 in Q4. This metric was also in negative territory in the first three quarters of 2005.
· The Projected Revenue index for Suppliers at 63 indicates expectations of growth for Q2. Optimism is somewhat more conservative than in previous quarters (compared with projections of 69 for Q1 2006, 68 for Q4 2005, 64 for Q3 2005, and 65 for Q2).
Direct Marketing Breakouts
· The Revenue vs. SQLY and Profitability indices of the B-to-B segment remained strong for Q1 2006, although both figures are lower than they were in Q4 and Q3 2005.
· The B-to-B unweighted average sales increase – at 4.7% -- was substantially lower than the sales increase for any of the 2005 quarters (which ranged from 9.3% to a high of 14.2%).
· The B-to-B weighted average sales change of 3.7% was a large drop from the previous quarter’s 16.9%, but exceeded the 2.4% reported for Q3 and the 2.5% in Q1 2005.
· The Catalog segment registered all positive metrics. The Revenue and Profitability index scores for Catalog companies rose relative to Q4 2005. Revenue vs. SQLY rose from Q4’s 55 to match the 59 of Q3. The Profitability index rose 3 points from 62 to 65.
· The Revenue vs. Original Projection registered the most dramatic growth, with an index of 52. This is in contrast with the previous four quarters’ results, which all revealed disappointment on this measure. The four previous index numbers for Revenue vs. Original Projection were 31, 44, 49, and 45.
· The Catalog segment predicts very healthy revenue growth in Q2 2006. The 70 Index is up considerably from the 57 projection for Q1 2006 and also improves on Q2 – Q4 2005.
Consumer Products or Services:
Although the Revenue vs. SQLY and Profitability performance measures for Consumer Products or Services indicate growth, they are lower than they were last quarter. Revenue vs. SQLY was still positive, with an index score of 54, down from Q4’s 65 but an improvement over Q3’s 51.
Profitability was a healthy 67, although down from the 76 in Q4 and the 70 in Q3 2005. This breakout segment has a history of favorable Profitability results; most of the indices since Q1 2005 have been in the 70s.
Revenue projections for Q2 2006 are healthy, with an index reading of 64. While not quite as optimistic as the 68 projected for Q1, it is considerably higher than the projection of 51 for Q4, and consistent with the forecast of 64 for Q3.
About DMA’s Quarterly Business Review
DMA’s Quarterly Business Review (QBR) is based on three online surveys of DMA Marketer, Agency, and Supplier member companies, conducted by DMA’s Research and Market Intelligence Department from April 10, 2006, through April 25, 2006. Altogether, DMA received 330 survey responses.
DMA Members can download the Quarterly Business Review free of charge at:
Non-DMA Members can purchase a copy of the report at DMA’s online bookstore at:
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