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Marketing spend maintains upward trend in Q2 2015 as confidence eases

Marketing budget growth increased to a three-quarter high in Q2 2015, marking 11 quarters of successive expansion. Despite this, there was a noticeable drop in marketers’ confidence surrounding financial prospects both at the company and industry level.

16/07/2015

The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +12.2% of companies registering an increase in budgets in Q2 2015, up from +11.8% in Q1 and +6.1% in Q4 2014. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.)

The latest survey also revealed a solid start to the 2015/16 financial year and matches up with the positive projections outlined by marketing executives in Q1. Final data revealed that a net balance of +15.1% of marketers indicated an upward revision to total marketing budgets in 2014/15, which followed on from 2013/14’s nine-year record of +19.9%.

Despite the sustained growth, there was a marked deterioration in optimism regarding companies’ own financial prospects which declined to a nine-quarter low of +25.3%, from +37.8% in the previous survey. A similar trend was seen for wider industry financial prospects with the net balance dropping to a two-year low of +13.1%, down from +26.0% in the previous survey.

In terms of overall UK adspend growth in 2015, Bellwether predictions remain unchanged since Q1 and forecast a real-term increase of +4.2%. This is, however, dependent on an acceleration of economic growth in the second half of 2015.

By sector:

Events was the strongest performing category in Q2 2015, with a net balance of +7.4% of companies recording growth, which was a three-quarter high. Internet budgets were also revised higher, although the net balance of +6.8% was a two-and-a-half year low. Within internet, spend related to search/SEO followed a similar trend, slipping to +6.5% from +8.5%, its lowest level for a year-and-a-half. Sales promotion recorded the best quarterly net balance for this category since Q1 2004 of +6.0%. All other categories with the exception of ‘other’ (-5.1%) recorded marginal growth, including: main media advertising (+1.7%); PR (+1.1%); market research (0.6%) and direct marketing (0.5%).

Quotes:

Paul Bainsfair, IPA Director General: “With eleven quarters of successive growth in marketing budgets and a strong start to the financial year, this latest Bellwether is generally positive. With confidence on the wane, however, it is worth reminding marketers - as our effectiveness databank evidence attests - you won't produce profits over time without maintaining  brand building adspend. So while it is good to see sales promotion activity is on the increase, the industry must guard against short-termism.”

Paul Smith, Senior Economist at Markit and author of the Bellwether Report: “At the headline level, the Bellwether for Q2 2015 provided further positive news on marketing activity in the UK, with growth being extended to just short of three years and at a rate that remained historically strong.

“Below the surface, however, the underlying drivers of growth are a little harder to read.

“On the one hand, companies are showing an increasing willingness to engage in corporate hospitality, conferences and sponsorship.

“But belying this confidence is an increased willingness to engage in discounting and promotional activities designed to support sales at a time when the economic and financial outlook for companies has become just a little more uncertain.

“Whereas we see growth holding up in 2015 overall, the latest survey supports the projection of softer expansion further out.”

Tom Lewis, IPA Finance Director: “Spend remains high but there are questions about longer term confidence. So although we can't ignore the various global threats from Russia, Grexit and China's stock market, the message for our industry remains that the outlook is still good so agencies should continue to look at building longer term value through talent and effectiveness strategies.”

Read further industry comment here.

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 16th July 2015 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, or to request historical data, contact economics@markit.com.

 

Last updated 16/07/2015


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