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DMA’s Direct Marketing Performance Index Hits the Skids

The Direct Marketing Association’s Quarterly Business Review index of direct marketing performance was at 39 for the fourth quarter, representing a 50% drop in direct marketing performance from Q4 2007. That marks the fourth consecutive quarter with an index in negative territory.

Despite the soft revenue performance that mirrored the general economy, overall profitability points to marginal growth, with an index of 59.  Each of the three segments that the Quarterly Business Review benchmarks (Marketers, Agencies, and Suppliers) remain generally healthy, posting indices in the high 50’s to low 60’s, according to the DMA. (In the QBR Index, scores below 50 represent a decline in direct marketing business performance, while a score of 50 represents no change and a score above 50 represents growth.)

Spending on online channels grew faster than offline media. Compared with one year ago, marketers most often increased expenditures on Email (index of 60), Search (index of 59), Other Internet Marketing (index of 56), and New Media (index of 54).

Projected revenue for Q1 2009 points to a decline, with an index of 38, as direct marketers do not expect to see improvements in their revenue performance.  All three segments have similar revenue projection indices for Q1 2009:  Suppliers indexed at 36, Agencies at 39, and Marketers at 40.

Client Budgets moved into overall first place in terms of factors most likely to impact revenue for Q1 2009, with 71% citing it as a concern. 61% of respondents cited General Economic Conditions as impacting their revenue for the next quarter, followed by consumer confidence with 37%.  In the list of factors likely to affect business expenditures in Q1 2009, Corporate Growth/Decline (57%) and Overall Marketing Budget/Plan (54%) took the top two places.

While marketers expect to make reductions in both their total advertising and DM budgets for Q1 2009, the drop planned for DM budgets is not quite as severe as that planned for total budgets, with indices of 43 and 39, respectively.

“Now that the U.S. is finally recognized as being in a recession, it is par for the course that marketers are expressing concern and weak revenue expectations for Q1 2009,” says Ramesh Lakshmi-Ratan, DMA evp and COO.  “Slightly comforting, however, is the fact that decreases on the direct marketing advertising budget are smaller than cuts for the total advertising budget.”