After 18 consecutive quarters of positive results, the direct marketing community — direct marketers, agencies, and suppliers — experienced a revenue dip in the first quarter of 2008, according to the Quarterly Business Review (QBR) by the Direct Marketing Association (DMA), reports MarketingCharts.
"On the whole, the Q1 2008 results reflect the fact that many sectors of the economy are slowing," said Anne B. Frankel, senior research manager. "For the first time since Q2 2003, the overall Revenue vs. same quarter last year (SQLY) metric has fallen into negative territory."
"However, direct marketers expect that some growth will resume for Q2, although at more conservative levels than in recent periods."
Moreover, in the QBR index, profitability (as opposed to revenue), remained in positive territory at 63 (a score of 50 represents no change during the quarter versus the SQLY), while revenue vs. SQLY was 48.
Below, the QBR highlights issued by the DMA.
Direct Marketing Community: An Overview
With an overall index of 48, Revenue vs. SQLY reflects a seven-point drop from the previous quarter. Revenue vs. SQLY was flat at 50 for agencies, with marketers and suppliers registering indices below 50 (46 and 47, respectively) that pointed to lower revenue than in the first quarter in 2007.
Profitability remained solid at 63, although at a somewhat more moderate level than that for Q4, Q3, Q2, and Q1 2007 (65, 67, 68, and 69, respectively).
The agency segment posted higher than marketers or suppliers in both revenue and profitability indices.
Projected revenue for Q2 also remains encouraging, with an overall index of 55. All three segments are expected to grow in Q2, although at more conservative levels than in recent periods. However this metric is down from the 57 for Q1, eight points from the 63 for Q4 2007, and is a further decrease for the 65 projected for Q3 and the 66 forecast for Q2 2007.
That this metric has declined over each of the most recent quarters is a clear reflection of marketers' deepening concerns about the economic situation.
Issues of Concern to Marketers
General Economic Conditions is again in first place overall in terms of factors likely to impact revenue for Q2 of 2008, with 56 percent citing it as a concern (as compared with 51 percent for Q1 2008 and 39 percent for Q4 2007).
"QBR initially asked marketers if they expected a recession in the Q3 survey, and found that just over one-third (36 percent) of marketers thought that a recession was at least somewhat likely in 2008," said Frankel.
"Six months later, marketers seem more certain of a recession, with 41 percent saying it is somewhat likely and 37 percent stating it is very likely. Further, the percentage saying that a recession is very likely doubled from Q4 (37 percent vs. 19 percent in Q4). With these economic concerns, it is not surprising that marketers also voiced more modest revenue expectations going into 2008."
In the event of a recession, marketers are most likely to keep their marketing budget the same, but reapportion expenses.
In more encouraging news, marketers intend to boost their spending in a number of areas in the event of a recession, particularly in the online and analytics arena.
MarketingCharts has more detailed Q1 QBR findings affecting direct marketers, DM agencies and suppliers, and B2B and B2C breakouts.
About the data: DMA's Quarterly Business Review (QBR) for the first 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 April 8, 2008 through April 24, 2008. Altogether there were 372 survey responses.