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Q2 2014 Bellwether Report: marketing budgets revised up for seventh successive quarter

The Q2 2014 IPA Bellwether Report, published today (17th July 2014), reveals that marketing budgets continued to be revised up for the seventh successive quarter as marketing executives sought to boost brand awareness, maintain market share and capitalise on the favourable economic climate. This is the longest period of continuous growth in the survey’s 14-year history.

17/07/2014

The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +15.2% of companies registering an increase in budgets during Q2 2014, which, although down on the Q1 2014 survey record of +20.4%, is the second highest reading recorded in the survey’s history. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upwards revision).

The ongoing upwards revision to marketing budgets, again in Q2 2014, reflected companies’ continued optimism regarding their own and wider industry financial prospects. The latest data showed that the net balance of companies indicating growing optimism with regards to their company financial prospects was at +37.5%, while that for wider industry prospects was at +33.0%. Although these are the lowest readings for a year, they both remain at historically elevated levels.

In terms of actual spend, the final data for the 2013/14 financial year showed a net balance of +19.9% of companies registered an increase in marketing budgets, which was the best result since 2004/05.

Additionally, the Bellwether expects the economy to expand by at least 3.0% in 2014, in line with recent upbeat survey data. According to the Bellwether’s predictive model, this should translate into a strong real-term increase in adspend of 6.1% for the year as a whole, up from the 4.7% prediction in Q1. This is due, in part, to companies responding positively to the Bank of England’s forward guidance and the prospect of interest rates staying lower for longer. Bellwether further predicts a slower increase in adspend of +3.8% in 2015.

By sector:

Spending on internet marketing was revised higher than any other Bellwether category and to the sharpest degree for a year (a net balance of +14.7%). Within Internet, Search recorded a net balance upward revision of +12.9% which, although marginally lower than Q1 (+13.9%), extends the current run of growth for this sector to five years.

This was followed closely by Main media advertising (recording a net balance upward revision of +11.5%), only fractionally below the Q1 2014 survey record of +11.7%.

Other Bellwether categories recorded modest growth: Events (+7.8%), Direct marketing (+4.0%), PR (+3.9%), and Sales promotion (+3.0%).

The only categories to record no growth, or negative growth were ‘Other’ (0.0%) and Market research (-2.4%).

Says Paul Bainsfair, Director General, IPA: “The latest Q2 Bellwether Report is an upbeat one, both for marketing budgets and companies’ financial prospects. It demonstrates that companies are capitalising on the positive economic climate to drive business growth, sending out a positive message to our industry and to the UK at large.

“It also reinforces the advertising sector’s significant contribution to the £71.4bn value added (GVA) that the creative industries generate which was highlighted in the launch of the recent Government-backed creative industries strategy.”

Says Chris Williamson, Chief Economist at Markit and author of the Bellwether Report: “Marketing spend is surging higher as companies remain upbeat about the future. The extent to which business confidence has shown continual improvements over the past year is remarkable, generating a major inflow of investment in marketing.

“Companies reported that spending on marketing and advertising activities showed the strongest rise for a decade last year. This year’s budgeted spend, which was already set higher than last year, has been revised up again in the second quarter, setting the scene for a bumper year.

“The survey also adds to a growing body of data which points to the UK economy sustaining strong growth as we move into the second half of the 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 July 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:

Direct Marketing:
Josette James, Client Services Director, Wunderman and chair of the IPA Customer Experience Group: “It is surprising to see only a modest growth in Direct budgets this quarter. Brands increasingly have an appetite to invest and explore connected customer journeys with data at the heart of those strategies. A new era of 'direct' which is focused on customer engagement is critical for brands' success but requires many elements to be drawn together seamlessly. The separation of direct and digital/internet is often not cut and dried.”

Events:
Paul Simonet, Creative Strategy Director, Imagination: “The continuing growth of the events and experiences sector is encouraging. Even more encouraging is the degree to which events and experiences are increasingly at the very heart of brands’ social, digital and content strategy.”

Internet:
Pete Robins, Managing Partner, Agenda21 and chair of the IPA Digital Media Group: “The anticipated growth in Internet spend appears to back up the feeling that more clients are willing to invest more into online media that can deliver very targeted audiences at scale. The ongoing advances in technology to do this are continuing to adapt at pace, and more advertisers are developing the confidence to take advantage.”

Main Media:
Jane Ratcliffe, member of the IPA Media Futures Group and Chairman, Mediacom: “With the second sharpest revision to marketing budgets in over a decade, this quarter’s Bellwether Report bodes extremely well for the economic health of the marketing industry. It is clear marketing departments are being given the chance to spread their wings again, making the most of budget increases and new product developments. We must maintain this re-emerging confidence and by doing so, creativity will continue to flourish, ensuring not only our industry’s prosperity but also our place as a world leader in creativity.”

Market Research:
Denise Turner, Managing Partner, Chief Insight Officer, 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. We are seeing a sustained increase in advertising investment, no doubt as a result of previous investment in research. It is pleasing to see that investment in market research is remaining relatively steady over time."

PR:
James Goddard, Chief Executive, JJ Marketing: “In the latest Bellwether Report it’s good to see Public Relations marketing budgets still showing an upward trend - making solid and sensible progress. This bodes extremely well for continued growth in Public Relations spend for the rest of 2014. We are certainly witnessing increased convergence across disciplines and seeing more integration across bought and earned media. These figures should send a very upbeat message to the wider economy.”

Search:
Paul Mead, Founder & Managing Director, VCCP Media and chair of the IPA Search Group: “The recent trends continue in search with another double digital upward revision to budgets adding to a very positive outlook.”

Birmingham:
Andrew Wilson, IPA City Head for Birmingham and Chief Executive, WAA: “It’s fantastic to see that the positive findings from 2014’s first Bellwether report are being reflected in Quarter 2’s figures. The fact we are seeing the second highest revision to marketing budgets in the survey’s history, not to mention that this is the seventh successive quarter of upward revisions, demonstrates the upbeat climate marketing managers are finding themselves in. It is optimistic indeed to see the marketing industry continue in its recovery from the recession, and this bodes very well for the second half of the year. The creative industry is thriving in Birmingham and with the city in a phase of strong investment and development this can only continue.”

England & Wales:
Ben Quigley, IPA Chairman England & Wales and Group Chief Executive, Everything Different: “The latest Bellwether Report is the seventh successive quarter of upward growth, which is the longest period of continuous growth in the survey’s history. Further evidence if you need it, that UK plc is booming once again.”

Manchester:
Peter Craven, IPA City Head for Manchester and Managing Partner, Madhouse: “It is very encouraging to see the continued positive outlook shown by the UK’s marketeers in the latest Bellwether Report. There is definitely a renewed and sustained optimism about the UK economy and hopefully this will translate to more investment into marketing activity and thus higher levels of business for our all the agencies in the North West.”

Northern Ireland:
Stephen Roycroft, IPA Northern Ireland Chairman and Managing Director, RLA Ireland: “With budgets up for the seventh successive quarter and confidence remaining at historically elevated levels, the outlook for the industry and for the wider UK economy is looking particularly positive. I look forward to seeing our agencies, particularly in Northern Ireland, continue to capitalise on this upbeat outlook by producing advertising that transforms their clients’ businesses.”

Scotland:
Claire Wood, IPA Chairman for Scotland, and Planning Director, Leith Agency: “We're delighted by the latest Bellwether Report findings which suggest that marketing budgets are being revised up for the seventh successive quarter. This is the longest period of continuous growth we've seen in the survey's 14 year history.

“These findings are reinforced by statistics shared recently by the Department for Culture Media and Sport, showing that employment in the creative industries is growing at five times the rate of the wider UK economy. 1 in 10 UK graduates are now employed in the creative industries.
“The latest Bank of Scotland survey shows strong growth in employment in Scotland accompanied by rising salaries. All encouraging signs of economic recovery. We look forward to a buoyant second half of 2014.”

Last updated 17/07/2014


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