The latest IPA Bellwether survey reveals in Q2 marketing budgets were revised down for the first time in a year reflecting the on-going pressure to cut costs as profit margins continue to be hit by weaker-than-expected sales.
The report - researched and published by Markit Economics on behalf of the IPA (Institute of Practitioners) features data from 300 UK Marketing professionals - found downward revision was marginal with 23 per cent of companies reporting a reduction compared to 22 per cent reporting a rise, the resulting net balance - calculated by subtracting percentage reporting a downward revision from the percentage reporting an upward revision - was just -1.1 per cent, down 1 per cent form Q1.
The downward revision does, however, imply it will remain a close call as to whether total marketing spend will increase this year, as had been initially suggested. Nicola Medelsohn, IPA president, executive chairman and partner, Karmarama, explained that “it’s not surprising the signs are less than encouraging” following renewed concerns surrounding the state of the economy both at home and abroad.
She added: “Given this situation, things do seem to be holding up nevertheless, spend is down but only very marginally at -1.1%.”
Internet advertising budgets saw the greatest revision with a net balance of 5.1 per cent, within internet advertising online search/SEO spend was revised up to a net balance of 7.4 per cent. Sales promotion budgets were revised up with the strongest rate of growth in five years (from 0 per cent to 4.5 per cent). Main media, direct marketing and all other below-the-line marketing and advertising were all revised down.
Business confidence also took a knock in Q2 compared to the surge seen three months earlier when business optimism was at a high amid hopes the global economy had turned a corner. Market executives’ views on the industry they work in saw the net balance drop to -16.8 per cent from 1 per cent in the previous quarter. In relation to their own companies prospects the net balance fell from 19.1 per cent in Q1 to 2.1 per cent in Q2. This slide reflects the re-emergence of uncertainly following the euro debt crisis.
Chief economist at Markit and author of the Bellwether, Chris Williamson, commented: “The second quarter saw some fairly typical risk aversion creeping in to marketing plans as the economic outlook dimmed and sales often disappointed. Business confidence has taken a step back again, having perked up briefly at the start of the year, which has caused companies to review their planned spend on marketing this year.
“The focus has been on cutting back on main media advertising, direct marketing and below-the-line activities and reallocating that money towards sales promotions and the internet, both of which are often cited as a means to quickly grow sales, especially in a downturn when customers are particularly cost conscious.”
He added the downturn in confidence is “not surprising given recent events in the euro area” as it is the UK’s main trading partner, but, “it is reassuring to see that confidence is nothing like as negative as we saw late last year and any upturn in business optimism could soon feed through to higher marketing spend, and the Olympics should of course also provide a boost in the third quarter.”