19 Oct 2004 | Gareth Jones

UK Marketing Recovery Still On Track

Marketing budgets continued to rise in the third quarter of this year with little evidence that high oil prices, rising interest rates and economic worries are hampering the recovery.

The IPA’s latest quarterly Bellwether report, compiled by NTC research, reveals that the number of UK companies increasing their marketing spend outnumbered those cutting it for the fourth consecutive quarter.

This is the first time in history that there has been a rise in the third quarter of the year, which is typically the time when advertising budgets are trimmed back. However, recent events such as Euro 2004 and the Olympics have given the industry a much needed shot in the arm.

WWP chief executive, Sir Martin Sorrell, said: “The UK is showing a marked recovery, recouping the levels achieved in 2000. Investment in media advertising is expanding, with areas such as direct, interactive and internet expanding even faster as clients seek more effective cpms and more quantifiable communications services.”

The survey of over 250 UK marketing professionals reveals only a modest increase for media adspend in the three months to September. However, this contrasts with downward revisions seen between mid 2000 and late 2003 and points to further growth, as rising profits and robust business sentiment encourages advertisers to further boost their expenditure.

Internet advertising saw the most significant growth in the third quarter with one in four companies reporting an upward revision in online expenditure. The sector is becoming an increasingly important part of the media mix and figures suggest online is on-course to overtake radio’s share of display advertising by 2007 (see Internet Adspend Rockets By 76% In First Half).

John Owen, chairman of the IPA’s digital marketing group, said: “The growth of online marketing shows no signs of abating. If anything the pace of that growth is getting faster as clients see the results for themselves. It’s particularly interesting that a record number of advertisers are now allocating 10% or more of their total budget to the internet.”
Sales promotion budgets also increased in the three months to September following a marked rise in new product launches and intense competition in the market, which prompted companies to offer greater incentives to consumers. The figures represent a reversal of downward trend seen in the previous quarter.

Direct marketing budgets rose for the fifth consecutive quarter as advertisers continued to take advantage of the medium’s cost-effectiveness and accountability. The latest figures from the advertising Association suggest that direct mail will see adspend rise by 3.6% next year (see UK Adspend Expected To Grow By 4.4% Next Year).

All other marketing spend, which includes PR, market research, sponsorship and conferences, was the only category to see budgets revised down during the third quarter of this year. The IPA claims this reflects the need to cut costs in some companies, as well as a diversion of spend to other marketing activities.

IPA President and chief executive of WCRS, Stephen Woodford, said: “This is an extremely encouraging report and the best we’ve ever seen in the third quarter, which is usually the time for end of year budget readjustments. It shows there is underlying good profitability, although we’re beginning to see higher interest rates.”

Earlier this month ZenithOptimedia revised up it global advertising spending forecast for this year from 4.2% to 6.2% as world-wide advertising confidence holds despite oil and consumer uncertainties. The updated report says that by 2005 the global advertising expenditure growth target is now set at 6.2%, up from April’s prediction of 3.4% (see Advertising Market Looks Set To Grow By 6.2%).

IPA: 020 7235 702 www.ipa.co.uk

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