Bellwether Reveals Increasing Optimism For Advertisers
The outlook finally appears to be improving for UK advertisers and new research reveals a rising tide of corporate optimism that could see adspend climb to levels not seen since the dotcom boom.
The IPA’s latest quarterly Bellwether report shows that the improving economic conditions have prompted more than half of all companies to increase their overall annual budgets for the coming year, with just one in five reducing spend allocated for the same period.
The survey, which is drawn from a panel of over 250 UK marketing professionals, reveals a level of optimism that could translate to an increase in marketing and advertising expenditure not seen since before the downturn took hold more than three years ago.
Chris Williamson of NTC Research, the company behind the report, said: “Marketing and advertising executives are entering 2004 in the most optimistic mood since the height of the dotcom boom. It is particularly encouraging that budget increases are being driven primarily by the reality of rising profits, growth of which recently hit a four-year high, rather than just by improved business confidence.”
Upward revisions to current budgets were widely reported across all the main sectors, with modest rises in FMCG, media and travel. Current media budgets remained stable in the three months to December representing a stark contrast to the downward revisions recorded over the past three years.
Of those companies setting new media-budgets for 2004, some 40% reported that adspend has been set higher than actual spend in 2003. This increase reflects improved confidence in relation to sales revenues expected over the coming months, as well as activity expected on new product launches and rebranded activities.
Sir Martin Sorrell, chief executive of WPP, said: “Corporate profitability is improving, but up to now mainly as a result of cost reductions. Perhaps now the focus is switching to top line growth and advertising and marketing services spending is rising as a result.”
He added: “Where the UK seems to be different is that most, if not all, of the current growth is coming from non-media areas such as direct, internet and interactive the functions that are more easily measurable and quantifiable.”
Sales promotion spend rose on average during 2003 as companies sought to boost sales volumes though discounting and special offers in the face of ongoing economic uncertainty. However, new budget setting for the coming year is relatively weak indicating that companies are looking more to brand building as a way to increase media spend.
Direct marketing continued to benefit from an increasing trend towards more accountable and cost effective forms of advertising, with firms from a range of sectors reporting strong upward revision in current budgets in the three months to December. The sector is expected to experience further growth over the coming months with around 43% of companies reporting an increase in spend for 2004, compared with actual spend in the previous year.
Internet advertising went from strength to strength in the fourth quarter of 2003 and continued to outperform all other types of marketing in terms of upward revisions to budgets. John Owen, IPA digital marketing group chairman, said: “Clients from all sectors now consider it a staple part of their marketing mix and many continue to revise their online budgets upwards as they see further proof of the medium’s effectiveness.”
Other marketing expenditure, which includes public relations and market research, remained unchanged in 2003 when compared to the previous year. Budgets for 2003 has originally been set higher, but downward revisions led to zero growth.
The UK advertising market looks set to pick up during 2004 and expenditure is expected to rise by 4.4% on average over the coming year, according to a consensus of recent forecasts complied by MediaTelINSIGHT.
IPA: 020 7235 7020 www.ipa.co.uk
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