Q3 Bellwether Report Suggests Downturn Will Be ‘Brief’

Of those questioned, 42% of companies setting new budgets in Q3 were increasing their spending for 2002 compared with just 23% who were planning on cutting back. The situation mirrors the responses given in the Q1 survey (see Forecasts) when just over 40% of all companies reported an increase in their 2001 budgets and less than half reported a decrease in spending. This is all the more optimistic considering that the responses were collected in the period between 13th September and 2nd October, when a global recession was feared in the wake of the attacks on the US.

Predictably, in light of the current climate, sectors such as travel, financial services and entertainment/media reported the greatest budget cuts. Retail, FMCG and consumer durables were sectors where current budgets were revised up and higher budgets set for next year. Spending on internet marketing, which includes all e-commerce projects for some companies, was revised down from 2.9% to 2.7% between Q2 and Q3.

Breakdown Of Revisions
	Q3 2000	Q4 2000	Q1 2001	Q2 2001	Q3 2001
Total marketing	43.9	48.3	48.1	49.1	44.8
Media adspend	41.6	50	45.7	45.4	42.6
Sales promotions	50.3	50.3	47.7	49.3	45.6
Direct marketing	48.1	50.9	49.1	50.7	49.7
All other marketing	45.1	48.7	47.5	45.5	41.7
(of which Internet)	57.1	55.6	53.1	57.9	50.7
Source: IPA, October 2001

Diffusion index, 50 = no change. An index reading above 50 indicates an increase on the previous year and below 50, a decrease.

IPA president, Bruce Haines, said: “Behind these figures lies a complex picture – a fundamental change in media mix, a certain amount of caution, a reflection of the year’s activities and perhaps also a reaction to the events of 11 September. They show a significant redistribution of marketing spend as well as those tactical decisions taken by cautious companies in the third quarter of the year. We expect to see an adjustment of spend in the third quarter as budgets are recalculated in time for year-end. What we don’t know is whether they’ve revised their budgets down because of savings they’ve already made on lower media rates, or whether they are having to redistribute their marketing budget elsewhere.

“We’re seeing different patterns emerging too. Some sectors are holding up very well – food, retail, household goods and cars – while others like the airlines, whose ad spend was already down 15% by June of this year, are in trouble. Nobody knows the impact of the events of 11 September but those companies in trouble before that date have obviously had their problems exacerbated. But the good news is, the marking up of next year’s marketing budgets in so many cases means that advertisers are optimistic for 2002.’

The Bellwether Report, published quarterly by the IPA, tracks actual client spending intentions within the economy drawn from data generated by a panel of over 200 UK marketing professionals.