Budgets up, but hopes down in ‘mixed’ Bellwether report

The IPA’s latest Bellwether report paints a “mixed” picture of the UK’s advertising industry, with overall budgets enjoying a continued boost, during the second quarter of 2015, but other indicators recorded in the survey point to a downturn in optimism surrounding the financial prospects both at a company and industry-wide level.

The study, which surveys 300 marketers from the UK’s top 1000 companies, revealed that 25 per cent enjoyed a boost to their marketing budgets in Q2 2015, with just 13 per cent registering a fall, resulting in a net balance increase of 12.2 per cent, up from an 11.8 per cent jump during the previous report, and amounting to a three-quarter high.

The IPA further broke down the ad spend categories with ‘events’, and ‘internet’ registering the strongest net growth with an increase of 7.4 per cent and 6.8 per cent respectively, while ‘other’ was the only category to have registered a decrease (see chart).

Participants further forecast a 4.2 per cent increase in ad spend throughout the remainder of 2015 dependent on an acceleration of economic growth in the second half of this year.

However, the survey also noted a marked deterioration among participants when it comes to their company’s financial prospects, as an increased proportion of marketing executives indicated no-change in their outlook compared to three months ago. As a result, the respective net balance subsequently declined to a nine-quarter low of +25.3 per cent (from +37.8 per cent in the previous survey).

Similarly, participants were also downbeat over the financial prospects of their wider industry, with the respective net balance falling to a nine-quarter low of +25.3 per cent, down from +37.8 per cent in the previous survey (see chart).

Commenting on the insights, Paul Bainsfair, director general, IPA, said: “With eleven quarters of successive growth in marketing budgets and a strong start to the financial year, this latest Bellwether is generally positive.

“With confidence on the wane, however, it is worth reminding marketers - as our effectiveness databank evidence attests - you won't produce profits over time without maintaining brand building ad spend. So while it is good to see sales promotion activity is on the increase, the industry must guard against short-termism.”

Paul Smith, author of the Bellwether report, and senior economist at Markit, said the figures were positive overall, but it was harder to detect the underlying drivers of the growth.

Commenting on how advertisers were investing their budgets, he added: “On the one hand, companies are showing an increasing willingness to engage in corporate hospitality, conferences and sponsorship.

“But belying this confidence is an increased willingness to engage in discounting and promotional activities designed to support sales at a time when the economic and financial outlook for companies has become just a little more uncertain.

Smith's observations were backed by Jon Goulding, managing partner at Atomic London, who added: "It's great to see another quarter of growth and especially given continued uncertainty in Europe which is killing confidence and investment in non Euro markets. But the shift in spend from mainstream media to experiential and results driven activity reflects a market shift to smarter, more targeted activity and giving consumers richer and more rewarding experiences. I suspect when confidence picks up, the reported mix of spend will probably not shift back to the way it was. And with very good reason."

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