Q4 2004 IPA Bellwether Report shows positive outlook for 2005
The Bellwether Report, the quarterly survey of marketing budgets, published today, saw further upward revisions to marketing budgets, reporting continued growth of current budgets for the fifth consecutive quarter – the longest in the survey’s five year history.
The most positive outcomes were recorded for internet-related marketing, direct marketing and sales promotion, which all saw upward revisions to their current budgets. Internet related spend reached a new high in Q4, with the survey recording an estimated allocation of 3.5 per cent of marketing budgets towards the medium. The current situation for media advertising was however more gloomy and, in contrast to the previous three quarters, the medium saw budgets revised down on average in Q4. This decline was attributed to an unexpected slowdown in sales for many companies which encouraged a shift of spend away from media advertising to lower cost activities, particularly direct marketing.
Looking towards 2005, of those companies which have already set their 2005 budgets, over half have reported that budgets have been set higher than actual spend in 2004. The resulting net rise signalled for the coming year is the strongest since the survey began and can be attributed to improved business confidence, new product launches and unexpected upturn in economic growth from the winter lull.
The Breakdown of disciplines
Media advertising
On average media advertising budgets were revised down in Q4 – the first cut recorded by the survey for the medium in a year. The downward revision was attributed to an unexpected slowdown in sales for many companies, which has in turn encouraged a shift in spend towards lower cost marketing activities, in particular direct marketing. However, 2005 looks set to be more positive with over half of the panel reporting an increase in budgeted spend for 2005, resulting in the largest net increase signalled for future spend since Q3 2000. Moreover, the rate of growth indicated for media adpsend exceeds that of all other marketing categories for 2005 surveyed by the Bellwether.
Sales promotion
Current budgets for sales promotion were revised up on average in Q4. However, this increase was only slight and was less than the modest increase recorded by Bellwether in Q3. In particular consumer durables, financial services and FMCG sectors reported upgrades and attributed this growth to the need to offer incentives in the face of intense competition and also support new product launches. Budgets for 2005 were set higher than actual spend on average, but the rate of growth indicated was below that of total marketing budgets, which suggests that sales promotion may lose share during 2005.
Direct marketing
For the sixth consecutive quarter, current direct marketing budgets were revised up on average. Not only was this revision the largest since Q1 2004, but the rate of growth also exceeded all other mediums apart from Internet-related spend, and suggests a preference for direct marketing over above-the-line marketing activities. Meanwhile, new budgets set for 2005 saw 44% of the panel reporting an increase compared to 10% reporting a decline, signalling the largest rise in the report history (but none the less a rate of growth weaker than that recorded for main media advertising).
Other marketing
Current budgets for all other marketing activites were revised up in Q4, contrasting with the previous two quarters, which saw budget cuts. The upward revision was only marginal, however, with 12% of respondents reporting an increase compared to 11% reporting a decrease. New budgets set for 2005 looked positive for ‘All other marketing’ with 34% reporting an increase to budgets in the coming year, outnumbering those reporting decreases by three-to-one.
Internet marketing
Sustaining the trend of previous reports, Internet-related marketing continued to gain share of total marketing budgets in Q4, with current budgets again revised up and showing a stronger rate of increase than all other types of marketing activity. Internet marketing now stands at approximately 3.5% of total marketing expenditure, and the number of companies allocating over 10% of their spend to the Internet has risen to a new survey high of 10.5%.
Said Bellwether report author Chris Williamson of NTC research: “The latest Bellwether suggests that the UK economy is set for a rebound following an easing in growth late last year. In the fourth quarter of 2004, sales revenues had come under pressure and forced a cut in current media adspend budgets. However, companies were more optimistic about the year ahead than at any time since 2000, with media advertising set to win an increased share of total spend in 2005.”
Stephen Woodford, IPA President and CEO, WCRS, added: “The positive trend in the Bellwether report indicates that 2005 will see consistent growth in total marketing budgets. However there are warning signs that some companies and sectors may be seeing a downturn in demand, with media budgets being revised down on average, on the back of lower than expected sales.”