Marketing budgets revised modestly higher in Q1 2016 despite growing concern over financial prospects
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +3.0% of companies registering an increase to their budgets during Q1 2016 up from +0.5% in Q4 2015, although down on the levels seen throughout much of the preceding two-and-a-half years. (The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.)
While budgets were revised upwards, confidence regarding financial prospects deteriorated. Sentiment about industry financial prospects dropped to the lowest level since the start of 2013, from +7% in Q4 2015 to -6.5% in Q1 2016. Optimism regarding companies’ own financial prospects also slumped from +20.4% in Q4 2015 to +13.6% this quarter, marking the lowest level since late 2012.
In spite of a less optimistic financial outlook, marketing executives are still upbeat about their own budgets for the coming accounting year, with +23.3% forecasting higher spend in 2016/17.
As a result of these developments, Bellwether predicts adspend growth of 3.3% for 2016, a downward revision to the 3.9% in projected in Q4 2015.
Internet marketing once again saw the strongest upward revision to budgets of all Bellwether categories, recording a five-quarter high of +9.8% (from +6.9% in Q4 2015) and marking 27 quarters of continuous expansion. (Within internet, search/SEO also showed continued growth, at +2.8%, although this was down from +5.8% in Q4 2015). Events also saw a marked increase to budgets of +6.3% and main media recorded modest growth of (+1.7%). Reduced spending was, however, seen in sales promotion (-8.4%), direct marketing (-4.9%), ‘other’ marketing activities (-4%), PR (-4%), and market research (-3.1%).
Paul Bainsfair, IPA Director General:
“It is good to see that marketing budgets have now been revised up continuously for three-and-a-half years, however, with confidence waning the outlook appears mixed.
“Following the referendum in June, the summer Bellwether should hopefully provide better clarity on where we are headed. On balance some growth seems the most likely outcome especially with the European football championships and Olympics set to provide a shot in the arm to budgets in the immediate months ahead.”
Paul Smith, Senior Economist at Markit and author of the Bellwether Report:
“The latest Bellwether survey leaves the impression that marketing executives are currently living in a period of flux.
“On the one hand, economic and financial prospects have taken somewhat of a nosedive – probably not helped by uncertainty around EU membership – and that’s led to those holding company purse strings to adopt ongoing prudence and caution when committing funds to areas such as marketing.
“While this inevitably has led to downward pressure on budgets, steady sales flows are encouraging new product development and enabling marketing executives to eke out some modest growth in funds."
Read further industry comment here.
Notes to editors:
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 14th April 2016 edition is available to purchase from the IPA website for £99+VAT (IPA members) and £140+VAT (non-members) as an immediately downloadable PDF. To sign up for an annual subscription, or to request historical data, contact firstname.lastname@example.org.
Last updated 14/04/2016