IPA Bellwether Report: Marketing spend rises slightly, whilst company morale soars

The latest IPA Bellwether survey reveals that there was little change in marketing budgets during Q1 2013, however confidence in company finance was at the highest it has been for a year.

With broadly similar proportions of companies reporting rises and cuts, the reported net balance – which is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision – was down from 1.1% in Q4 2012 to 0.1% in Q1 2013, though still up significantly from the Q3 2012 result of -5.5%.

Despite low marketing spend, positivity about company performance was at a yearly high, up 10% on Q4 to a healthy net balance of 16.8%.

Of those marketing executives asked, 36% said that they are planning to raise 2013 budgets relative to last year. Compared to 23% anticipating a fall, this is at the best level for two years, with a net balance of 13.5%.

The Q1 results rounded off a difficult period with marketing budgets recording an annual decline for the fifth successive year, and provisional data so far revealing a worse performance than 2011 (a net balance of -7.4% versus -1.7% in 2011).

The planned rise in 2013 budgets is modest compared to pre-financial crisis levels and the continued negativity regarding industry prospects reflects wider concerns about the strength of the economy.

With current projections from the Office for Budget Responsibility (OBR) for GDP growth to be just 0.6% for 2013, household spending at 0.5% and business investment to increase by only 1.9%, advertising spend may also find itself under pressure.

Using a predictive model created for the Bellwether survey, these key components of economic growth now point to a fall of -0.3% in adspend this year. However with the economy expected to improve next year the model forecasts that adspend should grow at a rate of 2.3% in 2014 before accelerating to 4.4% in 2017.

By sector

The internet continued to lead the way in Q1 and was at the fastest rate it has been since Q4 2011 – a net balance of 8.9%. Within internet advertising, online search/SEO spend was also up 1.8%, but was the lowest since Q2 2009.

Additionally, growth was seen in PR, up 1.8%, and market research, up 1.3%.

The rest of the categories all saw declines, yet events, main media and sales promotion saw only marginal declines, with the net balance for sales promotion the best in three quarters.
DM saw a sharper decline of -3.6% and ‘other’ at -8.9% recorded the lowest net balance of all categories.

“Marketing spend has been revised up again, albeit marginally, and plans for the 2013 budget period are also more positive as companies expect to raise their budgets relative to last year,” said Paul Bainsfair, director general of IPA.

“Moreover advertisers’ confidence about their own financial prospects has grown markedly and to the highest rate in twelve months. So while there is continued concern about the economic outlook, things do seem to be holding up. We will have to wait and see how the situation pans out as the year progresses.”

Chris Williamson, Chief Economist at Markit and author of the Bellwether survey said that though the business confidence and corresponding increase in marketing spend for 2013 augers well for the wider economy, it still looks to be another challenging year for businesses.

“While the Bellwether is suggesting the economy is recovering, it looks set to be another challenging year for businesses and the pace of economic expansion is likely to be modest.

“The hope among many companies is that increased sales and marketing activity will drive business growth, but firms will need to see convincing signs that demand and profits are improving in the coming months to prevent business confidence falling again and marketing budgets from being revised down as the year proceeds.”