Q4 Bellwether: UK Marketing Budgets Continue To Rise
Marketing budgets continued to rise, with further upward revisions reported for the fifth consecutive quarter and internet related marketing, direct marketing and sales promotion are all expected to do well in 2005.
The IPA has attributed this positive trend to improved business confidence, new product launches and an unexpected upturn in economic growth from the winter lull.
Chris Williamson, author of the report said: “The latest Bellwether suggests the UK economy is set for a rebound following an easing in growth late last year. Companies are more optimistic about the year ahead than at any time since 2000, with media advertising set to win an increased share of total adspend in 2005.”
Continuing the upward trend of previous surveys (see Q3 Bellwether: UK Marketing Recovery Still On Track)internet related spend reached a new high in the last quarter of 2004, with the survey recording a current estimated allocation of 3.5% of marketing budgets towards the medium. The number of companies allocating over 10% of their spend to the internet has risen to a new survey high of 10.5%.
Media advertising however, saw its budgets revised down in Q4, resulting in the first cut recorded by the survey for the medium in a year. The downward revision is blamed on the unexpected slowdown in sales for many companies, resulting in a shift of spend towards lower cost marketing, such as direct marketing.
Commenting on the report, Sir Martin Sorrell, chief executive of WPP said: “The IPA Bellwether Report confirms our view that the recovery we have seen in the second half of 2004 in the UK continues. However, the one divergence would be that media advertising was not as weak as the report suggests.”
The report is optimistic, however for media spend in 2005, with over half the panel reporting an increase in budgeted spend for the year, resulting in the largest net increase signalled for future spend since Q3 2000. In addition, the growth of rate indicated for media adspend exceeds that of all other marketing categories for 2005 surveyed by the Bellwether.
Sales promotion saw an upward revision in its current budgets in Q4, with budgets for 2005 being set higher than actual spend on average. However, the rate of growth indicated was below that of total marketing budget, suggesting that sales promotion may lose share during the coming year.
Direct marketing budgets were also revised upwards. This was the largest revision since Q1 2004, and is echoed in growth rate increase, exceeding all other mediums apart from internet-related spend. New budgets set for 2005 saw 44% of the panel reporting an increase compared to 10% reporting a decline.
Present budgets for all other marketing activities were revised up in Q4, contrasting with the budget cuts in the previous two quarters. The upward revision was only marginal with 12% of respondents reporting an increase compared to 11% reporting a decrease. However, new budgets for ‘all other marketing’ look positive for 2005, with 34% of those surveyed announcing an increase to budgets in the coming year, outnumbering those reporting decreases by three-to-one.
Commenting on the report, Stephen Woodford, IPA president and chief executive of WCRS said: “The positive trend in the Bellwether report indicates that 2005 will see consistent growth in total marketing budgets. However there are warning signs that some companies and sectors may be seeing a downturn in demand, with media budgets being revised down on average, on the back of lower than expected sales.”