NewsLine Column: Bringing Home The Bellwether
Christopher Williamson, Economist at NTC Research, digests the findings of the IPA’s latest Bellwether Report and discusses what lies in-store for the advertising industry over the coming months…
Light at the end of the tunnel, green shoots of recovery? Quite what the future currently holds for the advertising industry has perhaps not been more difficult to gauge for many years.
In the space of just two years, the industry has suffered many setbacks. First came the collapse of the dotcom boom. Then came the terrorist attacks in New York and Washington, which led to a new wave of economic uncertainty. If that wasn’t enough, the Enron and WorldCom accounting scandals left global stock markets shattered and the prolonged uncertainty of a renewed military conflict in Iraq has further dented business confidence.
In spite of all these setbacks, recession has been avoided in the UK and a return to growth is now evident in adspend. The latest available industry data shows that UK adspend rose in the third quarter of last year to a level 3.6% above that of a year earlier. However, the world has clearly moved on since this data was published and we must look to the business surveys to provide a more up-to-date picture of trends in advertising and marketing. One such business survey that has developed a reliable track record of accurately anticipating changes in adspend is the Bellwether Report from the Institute of Practitioners in Advertising.
The Bellwether is based on actual information provided by around 200 of the UK’s top advertisers, telling us what they are doing with their marketing budgets. This makes a refreshing change from surveys of business confidence or opinion, instead focusing on the hard facts of what advertisers are actually doing with their money. We can therefore learn if marketing budgets are being revised up or down, and which marketing activities are seeing spend rise or fall. In the final quarter of last year we learnt that the number of companies increasing their budgeted marketing spend for 2003 compared to 2002 outnumbered those reporting a decline by two-to-one. In the majority of cases, increased spend was related to the expectation of increased revenues and profits, driven in turn by stronger economic growth.
This prima facie case for drinks-all-round must be qualified by the fact that, first, spend in 2002 wasn’t anything to write home about and, second, budgets can always be revised down again. This second point is perhaps particularly important to consider as the Bellwether shows us that spend has been moved away from main media advertising (and particularly TV) towards direct marketing, sales promotion and internet-related activities – all of which may involve only modest commitments of spend which can be easily monitored for effectiveness and shut off quickly.
Furthermore, in the UK, to cap it all we are living in a property market bubble. Whether the UK property market bubble bursts with a bang or slowly deflates is likely to be of great bearing. The latter is of course the more benign outcome as the former raises the possibility of a sharp fall in consumer spending, which seems to be the main prop underpinning the UK economy at present. Certainly, the Bellwether report suggests that it is sectors such as fast moving consumer goods and consumer durables that are currently reporting the strongest growth of advertising budgets.
The Bellwether will no doubt show us the first signs of how marketing spend will be affected by the changing situation in Iraq and the future of the UK property market. However, right now the Bellwether points to widespread, though cautious, increases in marketing spend among the companies that hold the largest advertising and marketing budgets in the country. It is difficult, given the global economies’ resilience to date, to not see some light at the end of the tunnel for the UK advertising industry.
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