The IPA’s latest Bellwether Report, for the first quarter of 2008, reveals that current budgets have been revised down for the second consecutive quarter.
Weaker than expected sales, subdued consumer spending, and ongoing concerns about the health of the UK economy have driven this cost-cutting, said the report.
The ‘All other’ category, which includes ‘below-the-line’ activities like events, PR and market research, has seen the sharpest cut to budgets, the steepest for two years.
? Only 9% of companies reported an increase to budgets for ‘all other’ marketing, while 16% reported a decline, with a net balance of -7.8 %.
Direct marketing has seen the largest fall in eight years, and sales promotion the biggest decline for two years.
Main media budgets were unchanged in Q1, and are set to see the fastest growth in 2008. However, this rise is because of the inclusion of the internet which continues to rise heavily, suggesting that print, TV, outdoor, cinema, radio were revised down.
Although total marketing expenditure is still set to rise in 2008, (almost half of all companies have set their 2008 budgets higher than their 2007 actual spend), the actual growth of spend for the year is currently well below the buoyant growth signalled by initial budget setting at the start of this year, and considerably below that seen at the start of 2007.
Recent research from the IAB and PwC found that online advertising grew almost 40% year on year in 2007 to a new high of over £2.8 billion (see UK Online Adspend Grows Almost 40% Year On Year In 2007)
This means that the medium was the third largest last year, up from being the smallest market sector in 2003, taking its share to 15.3% from 11.4% in 2006.
| Revisions To Current Marketing Budgets, By Sector, Q1 2008 |
| |
Q1 2007 |
Q2 2007 |
Q3 2007 |
Q4 2007 |
Q1 2008 |
| Total marketing |
7.7 |
8.6 |
8.3 |
-4.4 |
-2.1 |
| Media adspend |
2.5 |
6.2 |
9.2 |
-6.5 |
0.0 |
| Sales promotion |
0 |
3.9 |
5.3 |
2.1 |
-6.0 |
| Direct marketing |
0.6 |
5.9 |
-0.5 |
-1.3 |
-6.3 |
| All other marketing |
2.5 |
2.3 |
9.8 |
-4.7 |
-7.8 |
| of which internet |
19.3 |
21.8 |
24.7 |
15.8 |
21.2 |
| Source: IPA Bellwether Report, April 2008 |
Chris Williamson, Bellwether Report author, NTC Economics, said: “The latest Bellwether highlights the dilemma that faces the Bank of England, pointing to a combination of slowing growth but rising inflationary pressures.
“Pressure on profit margins led to a further trimming of marketing budgets in Q1, with planned expenditure for 2008 now set to grow less than had been indicated by the survey at the end of last year. However, sales promotions are set to see the weakest growth for at least eight years, reflecting the need to withdraw discounts and offers as companies battle with rising costs.”
Robert Lerwill, Aegis chief executive, said: “Let’s not lose sight of the fact that, as today’s report points out, marketing spend is still set to increase in 2008, with budgets ahead of 2007 levels.
“The Bellwether also shows that media spend, led by the internet, will likely see the strongest acceleration in the year. Both those facts are fully consistent with what we see in our own business — in the UK and elsewhere. But for all that, we should not be complacent.”
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