The IPA’s latest Bellwether survey published today has found that in Q4 2008 annual marketing budgets were revised down to the greatest extent ever recorded in the report’s nine-year history.
The cut was the fifth successive quarterly reduction in spend, and 2009 is set to see further cuts, with a number of companies setting their initial budgets for the year ahead below 2008 levels of spend.
The IPA said 45% of companies reported that they were cutting marketing spend compared with last year, while just 20% said they were planning an increase.
Current and future spend has been reduced due to “lower-than-anticipated” sales revenues and growing concerns about the economy, with around 75% of companies admitting that their financial prospects have deteriorated compared to just three months ago, according to the report.
Hardest hit were budgets for main media advertising and “all other”, which includes PR, events sponsorship and market research, however, even online advertising suffered a record reduction in spend in Q4.
Just 7% of companies reported an increase in budgeted marketing spend in the final quarter of 2008, compared with 49% that said they would be cutting spend.
“This Bellwether Report suggests that adland in 2009 will be no place for the faint hearted. Confidence has plummeted and the data suggests a steep decline in GDP for Q1,” said Moray MacLenan, IPA president.
“Nevertheless, given that marketing and creativity are the solution and not the problem, it will be interesting to see when the investment community starts to look favourably on those who maintain budgets and increase share of voice, as they are more likely to succeed in the future,” MacLenan added.
Chris Williamson, chief economist at financial information service Markit, which compiled the report, said: “The Bellwether reports shows an alarming rate of corporate retrenchment as the recession deepens. Disappointing sales in all sectors have also led companies to cut budgets for the year ahead for the first time since the survey began, suggesting there will be no quick return to growth for marketing spend.”
Last month, ZenithOptimedia forecast no growth in global adspend in 2009 and reduced its overall forecast from 4.0% to -0.2% for this year, due to recent financial crisis (see ZenithOptimedia forecasts no growth in global adspend in 2009).
“The fallout from the financial crisis has spread throughout the real economies of the developed world. Consumer and corporate confidence has been severely shaken, and the economic outlook is uncertain,” the report said.
“The global ad market will be very tough in Q1 2009 and Q2 is unlikely to be much better,” according to Zenith.
However, Zenith’s report also predicts a mild recovery to kick-in by the end of 2009, with a positive 5.5% growth in global ad spend in 2010, followed by 5.8% growth in 2011.
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