The Q1 2003 Bellwether Report, the quarterly survey of marketing budgets, published today (15th April 2003) by NTC Research on behalf of the IPA, shows marketing budgets were revised down on average for the third quarter running, but the rate of decline has slowed for the second successive quarter.
The war in Iraq as well as weak sales, falling profitability and concerns over economic growth were all commonly cited causes of downward revisions to current marketing budgets. But forecasts of stronger sales, driven by the rebuilding of business and consumer confidence following a successful conclusion to the war in Iraq were all key factors behind increases in budgeted spend for 2003. New budget setting was the most buoyant since late 2000.
The quarterly report, which looks at advertisers’ new budget setting, current budget revisions and actual marketing spend, reveals that:
A further shift in spend from above-the-line to below-the-line was indicated.
Total current marketing budgets were revised down on average in Q1 2003 for the third consecutive quarter, however, the revision was only small and less steep than that seen in the previous quarter, suggesting a slowing in the rate of decline of marketing spend for the second quarter running.
Companies setting new budgets for 2003 in Q1 reported that total marketing budgets had been set higher on average than in 2002. Moreover, the rise was the largest signalled by the survey since Q4 2000 with 46% of companies reporting an increase in new budget spend - well over double the number (19%) that reported a decline.
Current media advertising budgets were revised down on average in Q1 2003 with 1 in 5 advertisers revising their budgets down and just 1 in 8 reporting upward revisions. The scale of the downgrade was less steep than that seen in the previous two quarters, suggesting that the rate of decline in media adspend has slowed.
Advertisers adopted a more cautious approach to new budget setting than in previous years with equal numbers of advertisers reporting an increase as reporting cuts. Rising global economic concerns, heightened by the war in Iraq, and weak profits are attributed for this more conservative approach.
The Q1 survey showed that companies operating calendar year accounting budgets reported a drop in media adspend on average in 2002 compared to spend in real terms in 2001.
Current sales promotion budgets were revised down for the third quarter running in Q1, but the fall was only small. Companies setting new budgets in Q1 reported an increase in budgeted 2003 spend with just over 1 in 4 reporting an increase compared to just 15% noting a decline. Sales promotion spend in 2002 was reported to have fallen, dropping at a similar rate to that seen in the previous two years.
For the third quarter running, DM budgets were the only marketing category besides internet-related spend to be revised up on average. DM has been revised up on average for the sixth consecutive quarter. Companies again cited greater efficiency and lower cost as factors favouring DM to above-the-line spend. Looking at 2003 financial year spend, companies increasing their DM marketing budgets outnumbered those reporting a decrease by over two-to-one. 36% of companies reported an increase in budgeted spend whereas just 14% reported a decline. The Q1 survey also showed that, for companies settling budgets on a calendar year basis, direct marketing saw the greatest increase in spend of all main marketing categories in 2002.
‘All other’ marketing activities which includes disciplines such as: conferences, sponsorship, PR, corporate hospitality, entertainment and e-commerce
Current budgets for ‘all other’ marketing activities were revised down for the third quarter running, but the rate of decline was much less than in either of the two previous quarters. New budgets for ‘all other’ categories of marketing in 2003 were set higher than 2002 on average. The rise was of a similar magnitude to those operating calendar year budgets. Just under 1 in 4 firms reported an increase in budgeted spend while just over 1 in 10 reported a decline. The combined Q4 and Q1 date point to the strongest growth of ‘all other’ marketing spend since late 2000. However, spend in 2002 was reported to have fallen slightly below that of 2001.
Q1 showed the steepest upward revision to internet-related spend since Q2 2000. Current budgets for internet marketing were revised up by almost 25% of companies while just 5% reported a downward revision. The scale of the upward revision was greater than for any other type of activity covered by the survey, pointing to an increase in share. Cost efficiency and accountability were the most often cited reasons for using internet marketing which had been established from past campaigns.
Says Stephen Woodford, CEO WCRS and IPA President: “The Q1 2003 Bellwether Report is reflecting the current ‘wait and see’ attitude of advertisers towards spending their marketing budgets. Certainly the war in Iraq as well as a continued tough economic climate at the moment is foremost on advertisers’ minds, but there are definitely some encouraging indicators. The general picture appears to be that the rate of decline in current media spend budgets is slowing significantly. We’re seeing media adspend budgets stabilising and increases in DM, sales promotion and internet marketing activities as well as ‘all other’ activities, including PR.
The Bellwether report contains detailed analysis of the UK’s marketing economy, based on a survey of 250 companies, representing all key business sectors.
To subscribe to the Bellwether report please contact Markit on 01491 418 700, email
Bellwether costs £500 per annum (£375 for IPA members) for the report, £650 per annum for the data (£487 for IPA members) and £1000 per annum for both the report and data (£750 for IPA members).
The Q2 IPA Bellwether Report will be published on 15th July 2003
Note to editors:
The IPA is the industry body and professional institute for UK advertising, media and marketing communications agencies and was established in 1917 as a servicing body and to negotiate on behalf of its members with media bodies, government departments and unions. The IPA’s 230 corporate members represent the major part of the advertising agency business, handling advertising with an estimated value of some £7,000 million per year (over 80 per cent of advertising placed by agencies) on behalf of many tens of thousands of their client companies and organisations nationwide.
For further information:
Stephen Woodford, CEO WCRS and IPA President tel: 020 7806 5000
Chris Williamson, NTC-Research and author of the report tel: 01392 202361
IPA Press Office tel: 020 7201 8240
Last updated 19/09/2008