Bellwether - marketing budgets revised down for 2nd successive quarter

18 Oct 2012  |  Stuart Corke 

The latest IPA Bellwether survey published today (Thursday 18th October) has revealed that marketing budgets were revised down for a second successive quarter in Q3 to the lowest reading since the end of 2009.

The report remarks that the performance was due to a tough trading environment hampering profitability and cash flow, while concerns continued for the economic outlook. As a consequence a tight control on costs led to a downward pressure on marketing budgets.

With 23% of companies reporting a reduction compared to 18% reporting a rise, the resultant net balance was -5.5%, down from -1.1% in Q2 and +1% in Q1.

This second downward revision suggests it is doubtful that total marketing spend for 2012 will increase as anticipated earlier on in the year.

Business confidence amongst marketing executives in relation to their own companies' prospects has weakened compared to three months earlier with a net balance dropping from 2% to -3% revealing the first negative outturn of 2012 so far and the lowest in nearly a year.

Marketing executives' views on the prospects for the industry in which they operate saw the net balance of -16.5% little changed from Q2's -16.8% (compares to +1% seen in Q1). General business optimism has ebbed throughout the year as the global economy has slowed and a resolution to the Eurozone sovereign debt crisis has remained slow to materialise.

By sector, internet advertising budgets were revised higher and at a firmer rate (net balance up from +5.1% to +7.1%). But all the other categories saw declines, the sharpest fall was in 'all other' (below-the-line) advertising which was the greatest in three years, followed by main media, direct marketing and sales promotion.

IPA President and executive chairman and partner at Karmarama, Nicola Mendelsohn said: "The message provided by the Bellwether survey is consistent and indicative of the economic situation as a whole which is one of underlying stagnation."

"We had hoped when the year started that things were picking up but as time has gone on the economy has stuttered and confidence isn't particularly strong. We had hoped for growth but are instead looking at a flat market."

"Although this is disappointing it is by no means terrible. The outlook for UK economic growth in 2013 is looking better than this year so consequently we are expecting a relative improvement in marketing spend. We shall see what Q4 and the year ahead brings but the advertising and marketing industry is certainly not a market in decline."

Chris Williamson, chief economist at Markit and author of the Bellwether report added: "Disappointing sales and revenues prompted companies to cut their marketing budgets again in the third quarter, reflecting the weaker than expected economic environment than many had hoped to be operating in."

Williamson continued: "The modest increase in budgets that had been set at the start of the year looks instead to turn into a reduction in spend compared with 2011, as companies seek to reduce costs. It therefore seems likely that marketing spend will have fallen for a fifth successive year."

The latest Bellwether report is consistent with other surveys which suggest that the official data overstated the weakness of the economy in the first half of the year. Last week ZenithOptimedia revised their advertsing forecasts downwards.

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