IPA Bellwether: Marketing budgets continue to rise

The Q2 2014 IPA Bellwether Report, published today, reveals that marketing budgets continued to be revised up for the seventh successive quarter as marketing executives sought to boost brand awareness, maintain market share and capitalise on the favourable economic climate. It is the longest period of continuous growth in the survey’s 14-year history.

The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +15.2% of companies registering an increase in budgets during Q2 2014, which, although down on the Q1 2014 survey record of +20.4%, is the second highest reading recorded in the survey’s history.

The ongoing upwards revision to marketing budgets, again in Q2 2014, reflected companies’ continued optimism regarding their own and wider industry financial prospects. The latest data showed that the net balance of companies indicating growing optimism with regards to their company financial prospects was at +37.5%, while that for wider industry prospects was at +33.0%. Although these are the lowest readings for a year, they both remain at historically elevated levels.

In terms of actual spend, the final data for the 2013/14 financial year showed a net balance of +19.9% of companies registered an increase in marketing budgets, which was the best result since 2004/05.

Additionally, the report expects the economy to expand by at least 3% in 2014, in line with recent upbeat survey data. According to the report’s predictive model, this should translate into a strong real-term increase in adspend of 6.1% for the year as a whole, up from the 4.7% prediction in Q1. This is due, in part, to companies responding positively to the Bank of England’s forward guidance and the prospect of interest rates staying lower for longer.

The report further predicts a slower increase in adspend of +3.8% in 2015.

By sector

Spending on internet marketing was revised higher than any other Bellwether category and to the sharpest degree for a year (a net balance of +14.7%). Within Internet, Search recorded a net balance upward revision of +12.9% which, although marginally lower than Q1 (+13.9%), extends the current run of growth for this sector to five years.

This was followed closely by Main media advertising (recording a net balance upward revision of +11.5%), only fractionally below the Q1 2014 survey record of +11.7%.

Other Bellwether categories recorded modest growth: Events (+7.8%), Direct marketing (+4.0%), PR (+3.9%), and Sales promotion (+3.0%).

The only categories to record no growth, or negative growth were ‘Other’ (0.0%) and Market research (-2.4%).

“With the second sharpest revision to marketing budgets in over a decade, this quarter’s Bellwether Report bodes extremely well for the economic health of the marketing industry,” said Jane Ratcliffe, member of the IPA Media Futures Group and chairman, MediaCom.

“It is clear marketing departments are being given the chance to spread their wings again, making the most of budget increases and new product developments. We must maintain this re-emerging confidence and by doing so, creativity will continue to flourish, ensuring not only our industry’s prosperity but also our place as a world leader in creativity.”

Chris Williamson, chief economist at Markit and author of the Bellwether Report, said: “Marketing spend is surging higher as companies remain upbeat about the future. The extent to which business confidence has shown continual improvements over the past year is remarkable, generating a major inflow of investment in marketing.

“Companies reported that spending on marketing and advertising activities showed the strongest rise for a decade last year. This year’s budgeted spend, which was already set higher than last year, has been revised up again in the second quarter, setting the scene for a bumper year.

“The survey also adds to a growing body of data which points to the UK economy sustaining strong growth as we move into the second half of the year.”