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2011 ANNUAL MULTICHANNEL TREND REPORT: PART IIExecutive Summary (Direct-To-Consumer, Publishing, Not-For-Profit)

DIRECT TO CONSUMER, PUBLISHING AND NOT-FOR-PROFIT: LARGER MORE FREQUENT ORDERS PREVAILED The heavy recession plaguing consumers and marketers during 2008 and 2009 loosened its grip as consumers increased purchases but with temperance. Consumer interest varied significantly during 2010 as more households tended to participate in non-Publishing offers but in general, households purchased more frequently with larger value orders.

GROWERS BY OFFER TYPE

The Continuity market saw an 8% increase in sales due primarily to a strong 26% lift in transactions per household, despite 17% decrease in average order value. Sales for Sweepstakes offers grew 9%, also aided by a 22% increase in transactions per household although coping with a 11% reduction in average order value compared to 2009. Health/Non Pharmaceutical sales were up 11%, primarily from a 9% increase in average order value and despite a marginal 1% decrease in transactions per household. Not-For-Profit was up for all three offer types – Societal Benefit, Environ-mental, and Medical offers – experiencing growth, primarily driven by more gifts per donor, as donors overall declined. For Publishing, only the studied categories of Books – Health/Diet, Newsletters – Business and Financial, and Magazines – Hobby, were up (43%, 21% and 4%, respectively).

DECLINERS BY OFFER TYPE

The Solo market saw a 6% decrease in sales, primarily due to a 7% reduction in average order value. Most Publication category sales, were down compared to 2009, with Books – Health down 26%, influenced by fewer subscribers (28%), Magazines – Children’s down 36% due heavily to 26% fewer subscribers and fewer subscriptions per subscriber, and Magazines – Women declined 49% due to a 37% reduction in subscribers.

ANNUAL SHARE OF WALLET SPENDING TRENDS

Annual share of wallet of consumers was calculated by looking at the total dollar amount of purchases from 2009 to 2010 captured across all Aba-cus Cooperative member companies and then looking at the percentage breakdown of purchases within various purchasing categories.

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% Change in Sales from 2009 to 2010Solo Offers -6%

Continuity Offers 8%

Sweepstakes Offers 9%

Health/Non Pharmaceutical Offers 11%

Publishing

Books - Health/Diet 43%

Books - Health Offers -26%

Books - Cooking Offers -9%

Books - Hobby -9%

Books - General -16%

Magazines - Hobby 4%

Magazines - Home -23%

Magazines - Men’s Offers -31%

Magazines - Children’s -36%

Magazines - Women’s -41%

Magazines/Newsletters - General 13%

Magazines/Newsletters - Business and Financial Offers

21%

Newsletters - Health -9%

Not-For-Profit

Environmental Offers 13%

Societal Benefit Offers 51%

Medical Offers 2%

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DIRECT-TO-CONSUMER

Visible in the Annual Wallet Share Spending Trends table, Solo buyers spent 13% of their wallet, or $703MM, on Solo offers. Continuity buyers spent 10% of their wallet, or $265MM, on continuity offers and Sweepstakes buyers spent the greatest amount on sweepstakes offers with 16% of their annual wallet share or $701MM. Health/Non-Pharmaceutical Offers captured the highest share of wallet at 18% of their buyers’ annual wallet spend, or $1.1B.

PUBLISHING

For Publishing subscribers, annual wallet spend was generally in the 2%-5% range with a few exceptions: The Newsletters – Business and Financial offers had the highest share at 12%, or $84MM, Books – Health Offers were 7% and $17MM. The Magazine groups of Hobby offers, Women’s offers, and Home offers had the lowest share of wallet, with each claiming a 2% share and $29MM, $26MM and $20MM, respectively.

NOT-FOR-PROFIT

In the Not-For-Profit sector we analyzed three key categories including Environmental Offers, Medical Offers, and Societal Benefits Offers. The trends of donors across these categories were generally strong and include an 11% share of wallet, or $272MM, for Environmental Offers. Medical offers received 9% of their donors’ annual wallet share, or $324MM, and 13%, or $276MM, for Societal Benefit Offers.

KEY CONSIDERATIONS FOR TODAY’S MARKETERS

In addition to the key considerations given in prior Trend Reports,, including the importance of implementing strategic share gain strategies and leveraging the power of a marketing database to gain a 360o view of customers, key considerations in this year’s report focus on strategies that enhance the customer experience and build long-term loyalty, exploit all media options, utilize data to more effectively cultivate the housefile or improve the use of complementary marketing efforts, and leveraging full-service marketing solutions providers.

FOCUS ON THE CUSTOMER EXPERIENCE – More has changed in marketing in the past five years than over the past 50 years. Consumers are more empowered and in control of the marketing experience than ever before. The Internet and social media have resulted in a proliferation of channels, and consumers have less time to shop and buy. Marketers need to develop an approach to deliver relevant interactions that anticipate and respond to the many ways consumers want to engage with, shop, and buy from brands. This requires that marketers have the ability to leverage data and technology to engage with customers in 1:1 conversations across all channels in real-time. Using a data-driven approach, dramatic results occur when marketers create customer experiences, fueled by relevance and drawn from customer intelligence.

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EXPLOIT MEDIA OPTIONS – While seeking to acquire customers, Direct Mail still delivers results. In a pure channel comparison, it produces higher sales per household than Online. Understand which prospects and customers have a preference for engaging with your brand Online and through email to strengthen the marketing mix and append existing housefile records with a complete set of targeting data. With advanced solutions now available, tailoring banner ad placement to deliver your messages to the audience most likely to respond further improves visibility and effectiveness.

CULTIVATE HOUSEFILES – Marketers made strong efforts to build housefiles through effective prospecting but cutbacks over the past few years still demand attention. Appending existing customer data records with new insights will help make the most of customer marketing efforts, especially in the new era of 1:1 marketing.

MAXIMIZE PROFITABILITY – While rising costs are impacting marketers in many direct and indirect ways, from postage to raw materials, and distribution, marketers must continue to focus on reducing costs while still achieving top line revenue targets. Thorough understanding of which targets and segments are reducing their purchases will also help deliver stronger returns on investment. Identifying the near-term value of targets will also enable marketers to bring the most cost-effective customers into the housefile. More marketers are consolidating the bulk of their needs with a single provider enabling processing time to be reduced, faster speed to market, attaining efficiencies of scale and bundled pricing to improve total ROI, and relief for overloaded staff. Best-in-class marketing service providers are able to provide a full toolbox of necessary services and solutions direct marketers need such as large and growing universes of prospect names, housefile modeling, hygiene for both mail and email files, plus insightful and in-depth analytics.

Each year our industry continues to change and evolve to new market forces and emerging trends. The 2011 Abacus Trend Report seeks to quantify the trends that are shaping the marketing environment and provide a tool that enhances the strategic decision-making capabilities of marketers. Through our end-to-end suite of offerings, Epsilon Targeting is committed to helping organizations reach their marketing and business goals by overcoming the challenges of our dynamic business environment, improving top-line performance, and identifying areas to reduce processing and mailing costs.

UTILIZE EPSILON’S ADDITIONAL RESEARCH - In an effort to help marketers leverage the power of customer insight to build relationships, drive results, and boost ROI, Epsilon conducts several thought leadership projects in addition to the Abacus Trend Report. The trend summaries, research, whitepapers, and industry best practices cover the most pressing topics facing marketers today, as well as the emerging challenges in our dynamic industry. For more information please visit www.epsilon.com.

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ABOUT THE TREND REPORT

DATA SOURCESTwo main data sources were used to compile the Abacus Cooperative 2011 Trend Report. These sources leverage the combined technology and data assets of Abacus and comprise a wealth of transactional data unmatched in the direct marketing industry.

ABACUS COOPERATIVEThe data housed in the Abacus Cooperative database does not include all direct transactions conducted in the U.S., but does provide a representative view of multichannel industries. The report analyzes 626 multichannel offers with activity across channels.

For this Trend Report, analysis was also conducted on a subset of the Abacus Cooperative members consisting of multichannel merchants, which we refer to as the “Multichannel Benchmark Group.” Each of the merchants in this group separates its call center and web data. This provides a stable group of merchants for analysis over time which isolates channel shifts and differences in seasonal purchasing patterns by channel.

ABACUS CHANNELVIEW® DATAFor an analysis of in-the-mail circulation trends, we have identified a separate comparative group of 39 Consumer multichannel merchants from Abacus ChannelView with full activity from January 1, 2009, through March 31, 2011.

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