NewsLine Column:
The latest Bellwether report from the IPA (www.warc.com/bellwether) shows that improved business confidence in the first quarter of 2004 encouraged companies to raise their marketing spend to a greatest extent since the bursting of the dot-com bubble.
The survey, which is based on a 250-strong panel of the country’s top advertisers, is valued as it provides forward-looking data on marketing spend and is based on actual budget changes rather than being an opinion survey or forecast. Some 26% of companies surveyed reported that their current marketing budgets had been revised up in Q1 while just 16% reported a decline. This was the most positive survey reading since data were first collected at the start of 2000.
Of particular note, media adspend budgets were revised up for the first time since the start of 2000, suggesting that the recovery in expenditure on activities such as TV, print, outdoor and radio will show further signs of recovery as we move into the second half of the year.
However, media spend nevertheless showed the weakest upward revision of all marketing categories covered by the survey, suggesting that activities such as sales promotion, direct marketing and the internet continue to enjoy growing popularity amongst the country’s top marketing executives.
The upward revisions to current budgets were matched by increases in budgeted spend for the 2004-05 financial year. Just under half of all companies setting new budgets in Q1 reported that spend for the next financial year had been set higher than spend in 2003-04. Only 15% reported a decline. As with current budget revisions, this was the most positive survey outcome since 2000.
The findings of the Bellwether survey are therefore very much in line with the latest Advertising Association Forecast, which predicts a recovery of media adspend (after accounting for inflation) in 2004 after three years of decline.
The increased buoyancy of the Bellwether survey in Q1 was driven by higher sales and improved profits at surveyed companies. This in turn reflects stronger economic growth at home and abroad, which has fuelled higher spending by both consumers and businesses. Such a scenario is likely to continue in the short-term as it is becoming increasingly evident that the UK will experience robust growth in the lead up to the next general election, which is widely expected to be in the Spring of 2005.
Two key factors are expected to spur growth over the next year: first, public spending is currently rising sharply, but taxes have not been raised. Second, the Bank of England is unable to raise interest rates too sharply due to inflation being at the low end of its target range and because of fears of pricking the house price bubble.
Both fiscal and monetary policy are therefore like to remain expansionary, at least until after a general election. Which is perhaps when corrective action will need to be taken, and we may therefore see marketing and advertising spend come under pressure again in the second half of next year.
If you would like to respond or make further comment on this or any other NewsLine article, please email [email protected].
Subscribers can access previous articles by NewsLine columnists in the Columnist Archive – click button on left.