The IPA’s Bellwether Report has found the third upward revision to total marketing budgets in as many quarters, in response to new product launches, expectations of better economic conditions and higher rates of return on investment.
It was found that almost 22% of companies reported an upward revision to budgets compared to 21% that recorded a downward revision.
Nicola Mendelsohn, IPA president and executive chairman and partner at Karmarama, said: “It’s encouraging to see that marketing budgets are up again for the third quarter running, leading to the first rise in annual spend in four years. Business confidence is returning which is also welcome news.
“Companies have also set their budgets higher for 2012, albeit with a much greater degree of caution than in recent years due to the continuing uncertain economic climate. Yet there is no doubt that key events such as the London 2012 Games and the Queen’s Diamond Jubilee will do much to ensure that marketing spend continues to rise.
The report also found that executives’ views for financial prospects in the industry in which they operate, up from -44.9% in Q4 to a six-quarter high of 1% in Q1, the largest quarterly jump in the history of the report.
Says Chris Williamson, chief economist at Markit and author of the Bellwether: "Companies' views on their financial prospects have risen to the highest for two years, but the brighter outlook has yet to be fully reflected in plans for marketing spend.
"Although current marketing budgets were revised higher for the third consecutive quarter, the increase was only marginal. Furthermore, although companies have set their marketing budgets higher for 2012-13 on average, they have started 2012 with the most cautious approach to spending for three years.
"This perhaps reflects a more pragmatic approach to budget setting, given that initial increases in budgets were steadily revised away in the past two years, as weaker than expected sales caused firms to cut marketing costs. However, with the coming year seeing events such as the Olympics, Diamond Jubilee and Euro 2012, it is likely that the year will again see an increase in marketing spend."
It was discovered that internet advertising budgets were revised up to the greatest extent of all categories, up 7.8%, and the main contributor to the overall upgrade. Within internet advertising, online search/SEO spend was also revised up by 4.7%. Sales promotion was unchanged, while main media was revised down 2.7%, and direct marketing was revised down by 3.2%.
Pietro Leone, CEO of G2 EMEA, said: “It is positive to see that internet advertising, online search and SEO are being given increasing budgets to build consumer engagement with brands in the digital space.
“Brand owners need to use data insights to create targeted communications that increase consumer engagement and confidence in the online shopping experience.
“In addition, even though consumer confidence is growing – boosted by events such as the Olympics and the Jubilee in the UK – marketers still need to think long term and create targeted and relevant communications that build relations with consumers along the entire purchase decision journey in an enduring and meaningful way.”