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Q1 2014 Bellwether Report: largest ever upward revision to marketing budgets

The Q1 2014 IPA Bellwether Report, published today (17th April 2014), reveals the record largest single upwards revision to marketing budgets in 14 years of data collection.

23/04/2014

The Survey comes amid reports that sustained sales growth and rising incomes have continued to support financial prospects, both within companies and across industries. The latest survey also marks the sixth successive quarter that marketing budgets have been revised up and rounds off a positive 2013/14 financial year which saw budgets increased to the greatest degree for seven years.

The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +20.4% of companies registering an increase in budgets during Q1 2014, up sharply from Q4 2013’s +11% and the previous Survey record of +12.3% in Q3 2013. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision).

The sustained period of upward revisions meant that the 2013/14 financial year proved to be positive for marketing executives with a net balance of +17.2% of companies reporting that their budgets had been increased. This proved more positive than companies were forecasting at the start of 2013 when a net balance of +13.5% of companies were anticipating budget growth and marked the first net increase in budgets over the year for the first time since 2006/07.

Companies also remained upbeat regarding their own financial prospects with the net balance of firms that have become more optimistic remaining historically high at +41.7%, although this is slightly down from +47% in Q4 2013. Meanwhile, the net balance for wider industry financial prospects rose to a new Survey high of +39%, up from +35.4% in Q4 2013.

This optimism, which reflects the wider UK economic outlook, looks set to grow further with provisional data for the 2014/15 financial year revealing a net balance of +26% of companies expecting to see growth, the best recorded by the survey for seven years.

Additionally, the Bellwether Report’s predictive model, which is based on the Office for Budget Responsibility’s forecasts for the UK economy indicates a slightly more bullish projection for GDP of 3%, which in turn is set to result in a real-term increase in adspend of 4.7% in 2014 and 3.5% in 2015.

By sector

All categories registered upwards revisions, with main media advertising being the primary beneficiary of the uplift, recording a series record net balance of +11.7%. It also supplanted internet advertising as the best performer of all categories for the first time in just under three years and indicated a growing confidence and willingness amongst marketing executives to commit to high profile campaigns. (Main media advertising: +11.7%; Internet: +8.5% and within Internet, Search: +13.9%; Events: +6.2%; Sales Promotions: +3.4%; Other +2.8%; Direct Marketing +2.6%; PR: +2.1% and Market Research: +1.1%.)

Says Paul Bainsfair, Director General, IPA: “With confidence remaining strong, forecasts revised up higher than ever before, and budgets being increased to the highest degree for seven years, the Q1 2014 Bellwether Report reveals that both the advertising industry and the wider economy are facing a future full of opportunity, innovation and most importantly of growth. This is a very good place to be. All very good news for the Government in the run-up to an election year.”

Says Chris Williamson, Chief Economist at Markit and author of the IPA Bellwether Report: “The spring Bellwether Report reveals the most upbeat assessment of business and marketing spend that we have seen since starting the survey back in 2000. Last year saw the biggest rise in marketing spend since 2006, and 2014 looks set to be even better.

“If the initial increase in budgets for the year being the strongest since 2006 wasn’t already enough, the fact that companies have already revised these budgets higher to an extent not seen in the 14-year history paints a remarkably buoyant picture for the rest of 2014.

“Companies are ramping up their markets and advertising expenditure in the face of growing optimism about the economic outlook. As higher marketing spend is also usually accompanied by rising business investment and job creation, this augurs well for economic growth to top 3.0% this year.”

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 17th April 2014 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.

What do you think of the latest findings? Join the conversation on twitter with #bellwether.

Here's what some experts from across sectors and around the UK think:

Main Media
Tom George, CEO, MEC and Chair of the IPA Media Futures Group:

“The fact that marketing executives sentiments represented a 14-year high, should give growing confidence to marketers, media owners and agencies alike that investing in marketing communications can have a real and positive impact on clients’ businesses. It is particularly pleasing that main media registered a series record upward revision which, as the Bellwether indicates, suggests an increased confidence amongst companies to raise spend on high profile campaigns related to areas such as TV, cinema and press.”

Direct Marketing
Josette James, Client Services Director, Wunderman and chair of the IPA Customer Experience Group:

“Modest it may be, however this increase in spend can only be good news for direct agencies and definitely reflects the mood and confidence of clients. Of the companies reporting an increase in spend in 2014 those putting spend into direct marketing far exceeded other marketing areas, including media advertising. This is a promising scenario. Clients increasingly demand high performing solutions to business problems that are a mixture of creativity, connected data and smart technology. These skills sit at the heart of the direct industry and make us well placed to create moments of connection between brands and consumers. Connections that drive business performance for our clients. As CRM becomes enticingly about exploring customer experience, direct marketing collides and colludes with budgets across advertising, digital, PR and experiential. As inter dependency has increased, I suspect the delineation of budgets becomes less clear than in the past.”

Search
Paul Mead, Founder & Managing Director, VCCP Media and chair of the IPA Search Group:

“Despite Internet only seeing a modest net balance increase in this quarter’s Bellwether Report, search rose at an accelerated pace to +13.9% - the biggest quarterly rise we have seen since 2011 and over a 10 percentage point increase since Q4 2013. This is great news for the search sector.”

PR
James Goddard, Chief Executive, JJ Marketing:

“The latest Bellwether Report reveals that public relations marketing budgets were revised up for the first time in three quarters during Q1 2014. This bodes extremely well for continued growth in public relations spend for the rest of 2014. CEOs are placing increasing importance on corporate reputation where PR is a mandatory rather than a nice thing to have. We have also noticed that our PR teams have been reabsorbing more social briefs recently. These figures should send a very upbeat message to the wider economy.”

Market Research
Denise Turner, Head of Intelligence, Havas Media:

“Market research is a vital tool in the marketing director's armoury, giving them the confidence to make those big decisions about increased marketing investment. As such the investment in market research often comes before the increase in investment. It is pleasing to see that investment in market research is on the rise this quarter, and we are seeing the results played out in the very positive outlook for marketing spend as a whole.”

Events
Paul Simonet, Creative Strategy Director, Imagination:

“The continuing improvement in the prospects of the events and experiences sector is a long term market trend as well as a short term impetus. As confidence returns, marketers know that bringing their brands to life for consumers as experiences will be as important as reaching out to them through main media. Long may it continue!”

Ireland
Stephen Roycroft, IPA Northern Ireland Chairman and Deputy Managing Director, Ardmore Advertising:

“It is particularly encouraging that increased national marketing budgets are reflecting the current optimism for the economy. It is important now here in Northern Ireland to ensure that that trend is reflected here also. Furthermore, it is important that investment (not only in media, but also in accountable results-driven creativity) is entrusted to proven, professional communications companies such as the Institute of Practitioners in Advertising members here in Belfast”.

Manchester
Peter Craven, IPA City Head for Manchester and co-founder, Madhouse Associates:

"The ongoing rise in marketing budgets forecast in the Q1 2014 Bellwether Report presents a positive and optimistic outlook for our industry. The sustained period of upward revisions signifies a great opportunity for Manchester agencies. With the expected recovery of the UK economy and increasing consumer confidence, the future looks very hopeful indeed."

Birmingham
Andrew Wilson, IPA City Head for Birmingham and Chief Executive, WAA:

“This quarter’s Bellwether Report bodes extremely well for the marketing industry. After a successful financial year in 2013, it appears the sector is to continue in its strong emergence from the recession, with optimistic levels of marketing expenditure. Companies last year saw the biggest rise in marketing spend since 2006, and this quarter’s report indicates that such confidence looks set to continue. The report demonstrates the largest single upward revision to marketing budgets by executives since 2000, which will consequently result in increased job creation and investment. In this, the most positive assessment of the industry’s economic health since the inaugural Bellwether Report in 2000, the Midlands looks set to enjoy a boost to its already thriving creative sector.”

England and Wales
Ben Quigley, IPA Chairman England & Wales and Group Chief Executive, Everything Different:

“The latest Bellwether Report reveals the most upbeat assessment of business and marketing spend that we have seen since starting the survey back in 2000. Last year saw the biggest rise in marketing spend since 2006, and 2014 looks set to be even better which is great news for the UK.”

Last updated 23/04/2014


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