IPA Bellwether Predicts Rising Ad Budgets For 2006

Marketing budgets look set to rise in 2006, compared to the succession of cutbacks endured by the industry in 2005.

The growth, however, appears to be at the weakest rate since 2001, indicating that gross domestic product (GDP) growth is set to be downcast in early 2006.

According to the latest IPA Bellwether Report, marketing budgets for the fourth quarter of 2005 were cut for the third consecutive quarter, and at the sharpest rate for two and a half years, attributed to weaker than expected sales and poor profitability after a optimistic start to the year.

Budgets were most commonly revised downwards in the retail, consumer goods, industrial and media sectors, with only business services and the public sector reporting increases.

Main media, sales promotions and ‘all other marketing’, including PR, sponsorship, market research and corporate communications saw budget cuts, with main media experiencing the steepest fall in the six years of the survey.

Budget increases were seen in direct marketing and internet related activities, with direct marketing enjoying a modest rise, while internet related marketing continued to record strong growth, now accounting for 4% of spend.

According to the IPA, the total breakdown of marketing spend by activity at the end of the year was: media advertising at 34%, direct marketing at 26%, all other at 26% and sales promotion at 14%.

Commenting on the results, Chris Williamson, from NTC Research and author of the report, said: “The Q4 Bellwether report confirms that business conditions remained tough towards the end of last year. Slower than expected sales growth over the course of the year led to a trimming of marketing spend compared to that originally budgeted for the year.”

He continued: “Companies are clearly entering 2006 in a more cautious mood than in recent years. Early signs are that marketing spend will rise during the year, but growth is likely to remain subdued and we are set to see a further shift away from main media advertising towards direct marketing and the internet.”

Sir Martin Sorrell, group chief executive of WPP added: “IPA Bellwether again confirms what we are seeing in the UK – a tough market, even in comparison to western continental Europe. New media activities, however, continue to show stronger growth.”

IPA: 020 7235 7020 www.ipa.co.uk