INSIGHTanalysis: Bellwether Sees Weakest Advertising Outlook Yet

The survey of UK marketers found that 18.2% planned to increase their budgets, 61.3% expected to leave them the same and 20.4% are revising them downwards. This leaves a net balance of -2.2% and represents the third consecutive quarter of improving figures: Q3 2002 had a net balance of -8.5% and Q4 was -4.9%.

Revisions To Current Marketing Budgets
ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ
ÂÂ	ÂÂ	% Up	% Same	% Down	Net Balance (+/- % points)
2001	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
ÂÂ	Q3	14.9	61.7	23.4	-8.5
ÂÂ	Q4	18.3	58.5	23.2	-4.9
2003	Q1	18.2	61.3	20.4	-2.2
Source: IPA Bellwether Report, January 2003

When asked how they are planning to set new budgets for the financial year, the majority of marketers (45.8%) said that they would be revised upwards in real terms. A balance of +27.1% comes from 35.4% expecting the budgets to be the same as the previous year and 18.8% expecting them to be lower.

New Budget Setting
ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ
Budget for:	Quarter budget was set	% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q1 2001	41.2	38.2	20.6	20.6
2002	Q4 2001	40.8	36.9	22.3	18.5
	Q1 2002	41.9	32.3	25.8	16.1
2003	Q4 2002	51.6	23.7	24.7	26.9
	Q1 2003	45.8	35.4	18.8	27.1
Source: IPA Bellwether Report, April 2003

Media budgets Media advertising budgets show the same trend as the overall marketing budgets; that is, the net balance shows a reduction, but it is the third quarter in a row that this reduction has declined.

The majority (68.5%) expects current media budgets to remain unchanged, whilst 12.3% anticipate an increase and 19.2% a decrease. This leaves a balance of -6.9%, as shown.

Revisions To Media Current Budgets
ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ
ÂÂ	ÂÂ	% Up	% Same	% Down	Net Balance (+/- % points)
2001	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
ÂÂ	Q3	13.8	62.1	24.1	-10.3
ÂÂ	Q4	11.0	65.2	23.9	-12.9
2003	Q1	12.3	68.5	19.2	-6.9
Source: IPA Bellwether Report, April 2003

The IPA says that cuts in current media budgets reflect weak profits and the uncertain economic outlook. Whilst the rate of decline in advertising budgets has continued to ease, the report notes that they have now been revised down continually for three years.

In terms of new budgeting, 2003 expectations as of Q1 were that on average there would be no change in advertising budgets, with 25.5% planning an increase and 25.5% decrease. This is weaker than all previous quarters of the survey so far, when new budgets were on balance always expected to rise.

“The resulting overall indication of ‘no change’ in budgets for the coming year was the weakest forward-looking signal provided by the survey to date. This more conservative approach to adspend budget-setting reflected rising global economic concerns, heightened by the uncertainty caused by the war in Iraq, and weak profits,” says the IPA.

New Media Budget Setting
ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ	ÂÂ
Budget for:	Quarter budget was set	% Up	% Same	% Down	Net Balance (+/- % points)
2001	Q1 2001	34.9	38.1	27.0	7.9
2002	Q4 2001	33.3	38.2	28.5	4.9
	Q1 2002	27.6	48.3	24.1	3.4
2003	Q4 2002	34.9	36.0	29.1	5.8
	Q1 2003	25.5	48.9	25.5	0.0
Source: IPA Bellwether Report, April 2003

Ray of hope? A ray hope for the advertising industry was provided by the fact that the data on revisions to current budgets showed that the rate of decline of current media adspend budgets eased for the second quarter running in Q1.

“However, the lack of growth in adspend indicated for 2003 by the data on new budget setting was the weakest forward-looking signal for advertising seen so far over the surveyÂÂ’s three-year history, reflecting the fact that advertisers are taking a more cautious approach to their budget setting due to the uncertainty caused by the Iraq war,” concludes the report.