Q1 2005 Bellwether: Slower Growth Period Ahead
The first quarter of 2005 signals slower growth for marketing, compared to the strong performance it enjoyed in 2004, according to the IPA’s latest quarterly Bellwether report, complied by NTC research.
Figures for budget setting are shown to be less buoyant than recorded in previous surveys, with this quarter being the weakest in three years. The less buoyant outlook is attributed to growth of budgets being scaled back in line with a squeeze on profit margins caused by sluggish sales and high costs.
The slower growth was also due to the persistence of high oil prices putting pressure on industrial and travel sectors in particular.
Like previous quarters, direct marketing and the internet, showed the strongest signs of growth for the coming year. Current budgets for direct marketing and internet were revised up in quarter one, whereas current budgets for main media advertising, sales promotion and ‘all other’ were revised down.
In particular, those companies setting new budgets in quarter one reported that media advertising and sales promotion were set lower than actual spend in 2004.
Commenting on the findings, Chris Williamson, author of the report said: “The Q1 Bellwether suggests a moderation in the rate of growth of marketing spend for the year ahead compared to the particularly buoyant picture seen late last year.”
Sir Martin Sorrell, chief executive of WPP continued: “Again the IPA Bellwether Report shows continued growth in advertising and marketing services spending in the UK, although at a slightly slower rate. In addition the report clearly shows that marketing services, such as direct and internet, are growing faster than traditional media. Clearly, clients are looking for new media and technology alternatives.”
For the second quarter running, budgets for main media advertising were shown to be revised down in quarter one, while sales promotion saw a net downward revision indicated in quarter one as the number of respondents reporting downward revisions exceeded those reporting an increase.
Rupert Howell, chairman of McCann Erickson added: “Consumer confidence is fragile, as is most of the High Street, with the notable exception of Tesco. It is not therefore surprising to see some caution reflected in these findings. Once the election is over, we’ll get a clearer picture of how the year will pan out.”
The continued growth for direct marketing is the 7th quarterly improvement in succession and direct marketing was revealed to now represent 23% of all marketing spend. The Bellwether shows that internet related marketing now accounts for approximately 4% of total marketing spend, with the number of companies allocating 10% or more of their total budget to the internet rising from 11% in Q4 to 13% in Q1 2005 (see Q4 Bellwether: UK Marketing Budgets Continue To Rise).
David Payne, IPA head of direct marketing added: “There seems to be some caution in total budget setting this period and I therefore think that we are seeing the continuing trend towards greater short-term accountability of expenditure. The consistent buoyancy in the direct marketing sector is testament to the importance which clients are now putting on the discipline.”