IPA Bellwether Q4 2014: cautious rise in marketing budgets
Marketing budgets have increased for the ninth successive quarter but at a slower rate, reveals the Q4 2014 IPA Bellwether Report, published today.
Despite the loss of growth momentum, which stems from “heightened caution” regarding the slowdown in the wider economy, the average growth rate for marketing budgets in 2014 was the highest recorded in the survey’s 15-year history.
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +6.1% of companies registering an increase in budgets during Q4 2014, down from +12.6% in Q3 2014 and its lowest since Q1 2013.
Supporting the overall increase in marketing budgets, optimism regarding companies’ future financial prospects has improved. A net balance of +30.7% of companies indicated they had grown more optimistic compared to three months ago, although this is down from +38.6% in Q3 2014.
Confidence regarding wider industry financial industry prospects also remained positive at +16.2%, although down from +30.4% in Q3, marking the lowest level for six quarters.
In terms of actual spend, plans for the 2015/16 budget year have been set to their highest levels in eight years. A net balance of +30.6% of companies are anticipating a rise in their marketing budgets, relative to 2014/15 levels. Events, PR and main media are expected to benefit most from this uplift in total budgets.
Regarding growth in UK adspend, the Bellwether’s forecasting model predicts a rise of 4.1% in 2015, in line with a stronger than previously expected increase in consumer spending.
By sector
All categories recorded upwards revisions to their marketing budgets in Q4 2014, with the exception of ‘other’ (-10.5%).
The highest upward revisions were made to internet with a net balance of +15.1%. This was up from +14.5% in Q3 and marks the highest reading since Q2 2013. Within internet, search also recorded a significant net balance increase of +15.7%, up from+9.4% in Q3 2014, marking 22 consecutive quarters of growth.
Main media advertising also recorded growth, +6.7%, although this was down from +9.2% in Q3, marking a one-year low.
Additional categories to record growth include: PR (+6.6%); direct marketing (+3.9%); events (+2.4%); sales promotion (+2.4%); and market research (+0.6%).
“[The report] gives the industry real cause for celebration,” said Paul Bainsfair, IPA director general. “While it is inevitable that the current wider economic uncertainty and geopolitical unrest is starting to impact decisions regarding marketing budgets, it will be interesting to see which companies will weather this best. In the long run, we know that maintaining share of voice drives brand growth and wins market share.”
Chris Williamson, chief economist at Markit and author of the Bellwether report, added that the further upward revision to budgets at the end of last year rounds off what looks to have been the best year in terms of marketing expenditure growth in the history of the Bellwether report – and 2015 could be even better.
“The planned increase in marketing budgets for the coming year is more aggressive than anything we’ve seen since data were first collected back in 2000,” he said.
“However, it’s clear that business optimism has cooled. Given the upcoming general election, the likelihood of interest rates starting to rise in 2015 and ongoing worries about the Eurozone, it’s not surprising that we are seeing companies report increased uncertainty about the year ahead.
“We’re therefore forecasting a further solid rise in marketing and advertising spend in 2015, but expect that 2014 will prove to have been the high-water mark in terms of growth in the current upturn.”
Matthew Hook, managing director of Carat, added that a ninth quarter of successive growth in media spend is “clearly great news for the creative industry and the economy as a whole”, and relative caution in some categories of the economy where business models are under pressure does not detract from the overall positive picture.
“As an industry it is incumbent on us to use this period of relative prosperity to drive innovation, creativity and accountability, particularly in digital channels, to support long-term sustainable growth,” he said.