The latest IPA Bellwether survey published today (13th October 2011) reveals that marketing budgets were revised up in Q3 ending a three-quarter period of decline, as companies increased expenditure to promote new products and maintain market share amid strong competitive pressure. Business confidence remains low with business confidence hitting a two-and-a half year low.
13/10/2011
The latest IPA Bellwether survey published today (Thursday 13th October 2011) reveals that marketing budgets were revised up in Q3 ending a three-quarter period of decline, as companies increased expenditure to promote new products and maintain market share amid strong competitive pressure. With 21% of companies reporting an upward revision compared to 17% that reported a reduction, the resultant net balance* rose to a one-and-a-half-year high of 3.4% (up from -2.2% in Q2).
* net balance calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.
For the first time since Q2 2007 budgets for all sectors were revised up. The internet saw the steepest increase by a wide margin and the largest quarter-on-quarter jump in the history of the report, with a net balance of 16.6% (up from 1.9% in Q2). Main media spend, a category which includes the internet, recorded the slowest pace of budget growth and only a marginal rise, suggesting a shift to online. Direct marketing budgets were revised upwards to the greatest degree for a year, while sales promotion and ‘all other’ (below-the-line) recorded growth for the first time in 15 and 16 quarters respectively.
Yet business optimism is falling further, with marketing executives’ confidence for the industries in which they operate hitting a two-and-a half year low: the net balance of -23.3% was down from -10.9% in Q2. Even though marketing executives were slightly more optimistic about their own companies’ prospects the degree of optimism was the second lowest since Q1 2009.
Says Nicola Mendelsohn, IPA President, Executive Chairman and Partner, Karmarama: "That we are seeing a further decline in confidence overall continues to reflect the uncertain financial climate that businesses are operating in. Yet it's important that the advertising industry and UK plc at large should do all it can to be as upbeat as possible to meet the challenge that we face. This rise in spend demonstrates that many companies are trying to buck the downward trend. It is a move in the right direction and shows that businesses understand that those that maintain the strongest marketing spend will come out on top."
Says Chris Williamson, Chief Economist at Markit and author of the Bellwether:
"UK companies are tackling the adverse economic climate with increased marketing activity, in an attempt to boost sales in the face of weak demand. Extra money is being targeted at online advertising, direct marketing and sales promotions, but there remains a worrying reluctance to increase spend on traditional main media activities such as broadcast and print advertising.
"The increase in marketing spend in the face of adversity helps to explain why companies became a little more optimistic about their own financial prospects but at the same time were the most pessimistic about prospects for their industries since the early months of 2009."
The Bellwether Report is researched and published by Markit Economics on behalf of the IPA. First published on the 17th July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy. The 8-page 13th October 2011 edition is available to purchase
here
for £99+VAT (IPA Members) and £140+VAT (non Members) as an immediately downloadable PDF. To sign up for an annual subscription, please contact
dan.evans@markit.com
. Historical data is available on request to
economics@markit.com
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Steve Williams, IPA Media Futures Group Chairman and Chief Executive, OMD Group :
“Given the economic outlook, this quarter’s Bellwether Report declares no surprises. A cautious increase in Main Media spend is encouraging; and this, coupled with the extremely positive increase coming from Internet and Search illustrates that businesses are being ambitious in committing to marketing expenditure at this uncertain time. It will be interesting to see the effect that the Olympics has, as we move closer to the event, in attracting positive marketing spend.”
Pete Robbins, IPA Digital Media Group Chairman and Managing Partner Agenda 21:
“With the need to show investment driven sales, it’s maybe not that surprising that internet related spend has shown an upward jump. It could suggest that given the uncertain times, clients are more comfortable and confident with allocating their budgets to those areas that are more trackable and can be optimised accordingly.”
Chris Whitelaw, IPA Search Group Chairman, President, I Spy:
“The Bellwether Report reveals a strengthening of marketing budgets in Q3, particularly in the internet and search channels, in a cautious economic environment as brands focus on defending market share and in some instances driving sales growth forward. Digital and search investment continues to grow as brands take cautious shelter in channels that provide measurable return on investment.”
Mel Cruickshank, IPA Direct Marketing Group Chairman, CEO, LIDA:
Her quote:”The increase in total marketing spend in Q3 is balanced out by the marketing executives confidence being at a two and a half year low. However, we can take some comfort in direct marketing budgets being revised up to the greatest degree for a year."