Bellwether Reveals Continuing Uncertainty For UK Marketers
The IPA’s quarterly Bellwether report, published today, has quashed hopes of an improvement in fortunes for the advertising industry by revealing that marketing budgets were revised down again during the second quarter of this year.
The report attributes the cut in budgets, which was the worst since Q4 2001, to disappointing sales and revenue growth, as well as weaker than expected business conditions brought on by the war in Iraq.
According to the survey, which is drawn from a panel of over 200 UK marketing professionals, just 18% of companies increased their total marketing budget between April and June this year, compared to 29% that reported a decrease.
There was no respite for media advertising budgets, which were revised down for the tenth consecutive quarter as advertisers shifted spend away from mainstream media towards more accountable channels. The number of companies cutting budgets outnumbered those reporting a rise by two to one, thereby generating the largest downward revision since Q3 2001.
Average sales promotion budgets were cut back for the fourth consecutive quarter and the latest figures represent the biggest decline in the survey’s history. This was largely due to pressure on profits margins caused by cut-backs in the sector.
Current direct marketing budgets were revised down on average for the first time since Q3 2001, while budgets for ‘all other’ marketing activities, including PR, sponsorship and market research, were cut back on average for the fourth quarter running.
The only bright spot in an otherwise gloomy market was internet related activity, which was the only category to see an upward revision and has outperformed all other categories for five consecutive quarters. However, the scale of revision was weaker than in the previous two quarters, reflecting growing concerns over sales levels and the need to cut costs.”
Commenting on the findings, the IPA’s president, Stephen Woodford, said: “While this latest data is disappointing, it is worth highlighting that over half of all clients are expecting to keep adspend the same this quarter, and around 20% are increasing budgets, while a third are looking at cuts. This is against a background of higher budget setting for 2003 over 2002, so budgets are at a higher base level.”
The report’s author, Chris Williamson, added: “Marketing managers are treading cautiously. While previous reports had shown that budgets for 2003 had generally been set higher than 2002, the failure of sales and revenue growth to pick up sharply in the wake of the Iraq war has meant that this budgeted spend has already been adjusted down somewhat. Also evident from the latest survey is a continued shift in the allocation of spend away from media advertising towards activities such as direct marketing, which are cited as offering more flexibility and accountability.”
The signals around a recovery in adspend are uncertain at best. The latest data from the Advertising Association shows that total UK advertising expenditure was relatively flat in 2002 (see Nominal Growth For Advertising Market In 2002), while figures from Nielsen Media Research suggest that the market has shown year on year growth in every single month since May 2002 (see Light At The End Of The Tunnel For UK Advertising?).
Recent forecasts from ZenithOptimedia are slightly more dispiriting and indicate there is little hope of any real growth in the ad market until 2004 (see NewsLine Feature: Global Ad Forecasts From ZenithOptimedia).
IPA: 020 7235 7020 www.ipa.co.uk
Recent Related Stories from NewsLine MediaCom And Carat Identified As Most Admired Agencies IPA Census Brings Good News For Smaller Agencies Agency Reviews On The Rise Despite Uncertain Climate
Subscribers can access ten years of NewsLine articles by clicking the Search button to the left