‘Cost-efficient’ online marketers slow advertising budgets, says Bellwether

The fragile nature of the economy has knocked the confidence of marketers and forced many to adopt “cost-efficient” online strategies to reign in their advertising spend in the latest quarter, according to a study.

The latest Bellwether report, a quarterly survey of 300 senior marketers from the UK’s top companies, found the increase in those planning to upweight their outlay was slashed by more than half in the period. A net balance of 6.1 per cent of companies boosted budgets in the final quarter of 2014, down from the 12.6 per cent in the previous quarter and the lowest since the third quarter in 2013.

Cautious marketers leant increasingly on targeted, cost-efficient online channels such as the Internet toward the end of the year in a bid to offset a slowdown in the wider economy, found the report. It led to the Internet securing a bigger slice of the media mix in the period with a net balance of 15.1 per cent, up from the previous quarter’s 14.5 per cent and the channel with highest upward revision from marketers.

Despite the slowdown in advertising spend in the final months of 2014, marketing budgets continued to rise as companies elevated expenditure in line with better revenue and profits growth. It sparked the ninth successive quarter of growth for the industry, while the average growth rate of marketing budgets was the highest since the IPA began publishing the report in 2000.

Consequently, marketers are optimistic going into 2015 with nearly 48 per cent of companies predicting a rise in their marketing budgets relative to 2014/15 level. The resulting net balance of 30.6 per cent was the best recorded for eight years, with main media advertising, PR and events expected to benefit from the bigger total budgets.

Growth in UK spend for 2015 is tipped to rise 4.1 per cent, according to the report, in line with a higher than previously expected increase in consumer spending.

Paul Bainsfair, IPA director general, highlighted the rewards to reaped for those cautious marketers who opt to boost advertising budgets in times of domestic uncertainty due to the “inconclusive General Election”, rising geopolitical risks and global financial market stress.

“While it is inevitable that the current wider economic uncertainty and geopolitical unrest is starting to impact decisions regarding marketing budgets, it will be interesting to see which companies will weather this best. In the long run, we know that maintaining share of voice drives brand growth and wins market share”, he added.

Chris Williamson, chief economist at Markit and author of the Bellwether report, added that budgets would rise over the next 12 months, although 2014 could have been the peak year for growth.

“The planned increase in marketing budgets for the coming year is more aggressive than anything we’ve seen since data were first collected back in 2000”, he added. “However, it’s clear that business optimism has cooled. Given the upcoming General Election, the likelihood of interest rates starting to rise in 2015 and ongoing worries about the Eurozone, it’s not surprising that we are seeing companies report increased uncertainty about the year ahead. We’re therefore forecasting a further solid rise in marketing and advertising spend in 2015, but expect that 2014 will prove to have been the high-water mark in terms of growth in the current upturn.”

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