INSIGHTanalysis: Bellwether Brings Mixed Message For Marketers

The latest IPA Bellwether report showed that of those setting new budgets for 2003 in the fourth quarter, twice as many firms set budgets higher than reported a decrease (see IPA Bellwether Report: Down But Not Out). However, analysis of current budgets shows that lacklustre sales performances and disappointing profits are continuing to act as a drag on actual spending.

Marketing budgets According to the survey, total current marketing budgets were revised down on average for the second quarter running. The percentage of respondents who admitted that budgets had increased was up from less than 15% to 18.3%. However, more than 23% indicated that cuts had been made with difficult market conditions largely held responsible.

The optimism that was apparent in the early months of 2002 appears to have diminished but the silver lining is that the extent of the downward revision in Q4 was less than seen in the previous quarter and not as pronounced as that witnessed a year ago.

Revisions To Current Budgets
		% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q3	17.9	53.8	28.3	-10.4
	Q4	19.0	48.5	32.5	-13.5
2002	Q1	22.5	57.6	19.9	2.6
	Q2	23.6	61.2	15.2	8.5
	Q3	14.9	61.7	23.4	-8.5
	Q4	18.3	58.5	23.2	-4.9
Source: IPA Bellwether Report, January 2003

Over half of those companies setting new budgets for 2003 said that they had been set higher in real terms when compared with the year before. The net improvement in total marketing spend was the strongest reported since Q4 2000. The largest rises in budgets came from business services, FMCG, consumer durables and travel and entertainment companies.

New Budget Setting
		% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q1	41.2	38.2	20.6	20.6
	Q2	question not asked			–
	Q3	42.3	34.6	23.1	19.2
	Q4	40.8	36.9	22.3	18.5
2002	Q1	41.9	32.3	25.8	16.1
	Q2	question not asked			–
	Q3	question not asked			–
	Q4	51.6	23.7	24.7	26.9
Source: IPA Bellwether Report, January 2003

Media budgets Current media adspend budgets were downgraded in Q4 2002 with only about one-in-ten advertisers reporting upward revisions. As before, almost a quarter of respondents said that media advertising budgets were revised down. According to the report, the ongoing decline “reflected both a reduction of total marketing spend to cut costs and a shift in allocation of spend to other marketing categories.”

Revisions To Current Budgets
		% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q3	16.0	53.4	30.7	-14.7
	Q4	18.3	50.3	31.4	-13.1
2002	Q1	17.6	62.0	20.4	-2.8
	Q2	17.0	64.1	19.0	-2.0
	Q3	13.8	62.1	24.1	-10.3
	Q4	11.0	65.2	23.9	-12.9
Source: IPA Bellwether Report, January 2003

Approximately one-in-three companies increased their media adspend budgets for 2003 in the fourth quarter, slightly higher than the number who reported a cut. The net increase of 5.8% was the highest reported since Q3 2001 but it appears that many companies are reluctant to commit large sums of money in this area and have chosen to allocate funds to more targeted forms of marketing.

Media Budget Setting
		% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q1	34.9	38.1	27.0	7.9
	Q2	question not asked			–
	Q3	35.3	35.3	29.4	5.9
	Q4	33.3	38.2	28.5	4.9
2002	Q1	27.6	48.3	24.1	3.4
	Q2	question not asked			–
	Q3	question not asked			–
	Q4	34.9	36.0	29.1	5.8
Source: IPA Bellwether Report, January 2003