The Q4 2004 Bellwether Report, the quarterly survey of marketing budgets, published today (18th January 2005) by NTC Research on behalf of the IPA, saw further upward revisions to marketing budgets, reporting continued growth of current budgets for the fifth consecutive quarter – the longest in the survey’s five year history.
The most positive outcomes were recorded for internet-related marketing, direct marketing and sales promotion, which all saw upward revisions to their current budgets. Internet related spend reached a new high in Q4, with the survey recording an estimated allocation of 3.5% of marketing budgets towards the medium. The current situation for media advertising was however more gloomy and, in contrast to the previous three quarters, the medium saw budgets revised down on average in Q4. This decline was attributed to an unexpected slowdown in sales for many companies which encouraged a shift of spend away from media advertising to lower cost activities, particularly direct marketing.
Looking towards 2005, of those companies which have already set their 2005 budgets, over half have reported that budgets have been set higher than actual spend in 2004. The resulting net rise signalled for the coming year is the strongest since the survey began and can be attributed to improved business confidence, new product launches and unexpected upturn in economic growth from the winter lull.
On average media advertising budgets were revised down in Q4 – the first cut recorded by the survey for the medium in a year. The downward revision was attributed to an unexpected slowdown in sales for many companies, which has in turn encouraged a shift in spend towards lower cost marketing activities, in particular direct marketing. However, 2005 looks set to be more positive with over half of the panel reporting an increase in budgeted spend for 2005, resulting in the largest net increase signalled for future spend since Q3 2000. Moreover, the rate of growth indicated for media adpsend exceeds that of all other marketing categories for 2005 surveyed by the Bellwether.
Current budgets for sales promotion were revised up on average in Q4. However, this increase was only slight and was less than the modest increase recorded by Bellwether in Q3. In particular consumer durables, financial services and FMCG sectors reported upgrades and attributed this growth to the need to offer incentives in the face of intense competition and also support new product launches. Budgets for 2005 were set higher than actual spend on average, but the rate of growth indicated was below that of total marketing budgets, which suggests that sales promotion may lose share during 2005.
For the sixth consecutive quarter, current direct marketing budgets were revised up on average. Not only was this revision the largest since Q1 2004, but the rate of growth also exceeded all other mediums apart from Internet-related spend, and suggests a preference for direct marketing over above-the-line marketing activities. Meanwhile, new budgets set for 2005 saw 44% of the panel reporting an increase compared to 10% reporting a decline, signalling the largest rise in the report history (but none the less a rate of growth weaker than that recorded for main media advertising).
Current budgets for all other marketing activites were revised up in Q4, contrasting with the previous two quarters, which saw budget cuts. The upward revision was only marginal, however, with 12% of respondents reporting an increase compared to 11% reporting a decrease. New budgets set for 2005 looked positive for ‘All other marketing’ with 34% reporting an increase to budgets in the coming year, outnumbering those reporting decreases by three-to-one.
Sustaining the trend of previous reports, Internet-related marketing continued to gain share of total marketing budgets in Q4, with current budgets again revised up and showing a stronger rate of increase than all other types of marketing activity. Internet marketing now stands at approximately 3.5% of total marketing expenditure, and the number of companies allocating over 10% of their spend to the Internet has risen to a new survey high of 10.5%.
Bellwether report author Chris Williamson of NTC research
: “The latest Bellwether suggests that the UK economy is set for a rebound following an easing in growth late last year. In the fourth quarter of 2004, sales revenues had come under pressure and forced a cut in current media adspend budgets. However, companies were more optimistic about the year ahead than at any time since 2000, with media advertising set to win an increased share of total spend in 2005.”
Stephen Woodford, IPA President and CEO, WCRS
: “The positive trend in the Bellwether report indicates that 2005 will see consistent growth in total marketing budgets. However there are warning signs that some companies and sectors may be seeing a downturn in demand, with media budgets being revised down on average, on the back of lower than expected sales.”
Sir Martin Sorrell, Chief Executive WPP Group Plc
: “The IPA Bellwether Report confirms our view. The recovery that we have seen in the second half of 2004 in the UK (and Western Europe) continues, driven especially by growth in non-traditional marketing services areas, such as direct, internet and interactive. The one divergence would be that media advertising was not as weak as the IPA Bellwether Report suggests. We too, at WPP, believe that 2005 will see further improvements, although relative growth may not be as strong as the quadrennial 2004 over 2003. All the evidence seems to suggest a shift in client thinking from cost cutting to driving top line growth through increases in advertising and marketing services expenditures.”
Jim Marshall Chairman IPA Media Futures Group and Chairman, Starcom UK Group
said: “Overall this would imply a pretty positive picture, though a note of caution should be added given the rather erratic nature and unpredictability of consumer expenditure. This is borne out by recent events, given December 2004 proved a slightly disappointing month, but the first quarter 2005 looks very strong.”
John Owen, Chairman IPA Digital Marketing Group and Planning Partner, Dare
: “Digital marketing’s effectiveness has created a momentum that continues to gather pace. More clients than ever before are investing upwards of 10% in the medium. Over a fifth are now investing upwards of 5%. The medium now commands a 3.5% share of the total marketing pie market and, in Q4, it grew faster than at any time since Q1.”
Rupert Howell, Chairman UK & Ireland, President EMEA, McCann Erickson
: “I’m optimistic about 2005. I expect the first quarter to show cautious growth, but then the brakes to come off after the election is out of the way. The one area set to explode is internet advertising, with internet shopping being one of the main reasons for most retailers’ poor Christmas showing.”
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).
Last updated 19/09/2008