The Q2 2004 Bellwether Report, the quarterly survey of marketing budgets, published today (20th July 2004) by NTC Research on behalf of the IPA, reports continuing buoyancy in the marketing sector, with final data for 2003 showing the steepest rise in marketing spend since the survey began and improved confidence among top marketing executives.
One of the most significant trends appearing in Q2 Bellwether Report is the shift in marketing spend back towards the main media. Whilst budgets for media were only revised up modestly, this upward trend is the largest seen since the survey began and appears to suggest that media advertising has gained favour as companies perceive a brightened economic outlook.
Other categories showing upward revisions were direct marketing which, whilst still showing growth, saw the smallest upward revision since Q2 2003, and internet related marketing, which continues to show the strongest rate of growth but still only accounts for less than 3% of total spend. Sales promotion and ‘all other’ marketing saw budgets revised down for the first time since Q3 2003 and Q2 2003 respectively.
Looking at the various marketing activities covered by the Bellwether:
Media budgets were revised up for the second quarter in a row in Q2, with 19% of companies reporting an increase compared to 17% reporting a decrease. Although this net increase was only modest, it is the largest since Q1 2000 and can be linked to strong sales, with FMCG, retail, and IT and computing sectors showing the strongest upward revisions.
Sales promotion budgets were revised down on average in Q2 contrasting with upward revisions seen in the previous three quarters. Industrial/utilities, retail and financial services sectors reported the steepest downward revisions with all other sectors reporting no significant change in budgets.
For the fourth quarter in a row, direct marketing budgets were revised up on average with 35% of panel members reporting an increase, although this revision was somewhat smaller than previous quarters. This slight drop can be attributed to a shift in spend by those companies which previously shifted from main media towards direct marketing returning back to main media.
Other marketing expenditure
Current budgets for ‘all other’ marketing were revised down in Q2, contrasting with upward revisions in the previous two quarters. However these cuts were only modest with 20% reporting an increase in spend compared to 22% reporting a decline. These cuts were attributed to the need to reduce costs and boost profitability.
Internet marketing expenditure
For the ninth quarter in a row, the growth rate of internet-related marketing spend in Q2 was well above that of other marketing activities, with one in four companies reporting an upward revision to budgets. However it must be noted that whilst a consistent upward trend is evident, internet marketing spend remains at below 3% of total marketing expenditure.
Sir Martin Sorrell, Chief Executive WPP Group Plc said
: “In a way the Bellwether Report findings are not surprising. Growth in corporate profitability, operating margins and liquidity is strong – perhaps the strongest for 20 years. The really encouraging signal is the switch to brand building through media, direct and internet related marketing. Perhaps brands are becoming more important, thankfully. The report also clearly indicates the growing importance of quantifiable methods of marketing – like direct and internet.
Also encouraging was the recovery in information technology and computing spending. Maybe clients are also developing a little more pricing flexibility and this may explain the fall in promotional spending. I guess where we differ from the Bellwether Report, at WPP, is that the UK remains a relatively difficult market, along with France and Germany and public relations and public affairs have shown some recent resilience.”
Said Carolyn Carter, President & CEO, Grey Global Group Europe, Middle East, Africa
: “On the whole this Bellwether Report confirms our own experience of strengthening client confidence and willingness to invest – and that's encouraging. In fact, our own experience suggests an improved outlook in the PR sector, which is perhaps the most sensitive barometer. The rebound of traditional media powerhouses – television and press – may be benefiting from transient drivers – events like the Euro 2004 football championships – and a surge in previously deferred new product launches. For the longer term, we see these media continue to be challenged by direct marketing and more personal and engaging media like online.”
Said Rupert Howell, President EMEA & Chairman UK & Ireland Group, McCann Erickson:
“Everyone always writes off media/advertising during a recession yet it always bounces back as markets improve, because it is still the most cost effective way to sell mass goods and services to mass audiences.”
Said IPA President and Chief Executive of WCRS Stephen Woodford:
“The patterns which are emerging in the recent Bellwether Report appear to show the start of a steady period of recovery for the industry. The Q2 Bellwether report seems to support the findings of the recent AA survey which suggests that there will be a consistent and sustained recovery period. And so it seems that the real challenge which is facing the advertising business is to increase income and agency fortunes in line with this period of increased confidence.”
Said Bellwether’s author Chris Williamson of NTC Research:
“The Bellwether presents a very positive picture. For the first time since 2000, companies have not only set their initial budgets higher than a year ago, but are revising these budgets up as sales and profits have proved better than expected on average. Particularly encourag-ing is the first real noteworthy upward revision to adspend since the survey began, indicating a further steady improvement in the advertising outlook.”
Jim Marshall, Chairman IPA Medias Futures Group and Chairman, Starcom UK Group said:
“This is a very positive report indeed, in the past we have seen one or two signs of recovery but have been very cautious as markets can be extremely erratic. The latest Bellwether Report shows a consistently positive outlook and is the best report for many years. We still have to be cautious, but there certainly seems to be a renewed confidence in investing in brand advertising.”
Said John Owen, IPA Digital Marketing Group Chairman and Planning Director of Dare Digital:
“It is great to see an upturn in investment in mainstream media and, within this context, it's very significant that internet marketing has continued its impressive growth curve. It is not being ditched in favour of main media. It is being retained and expanded on the basis of strong, accountable performance.
Online may be worth just under 3% of total spend – but that compares with 1% not long ago. It's also important to understand that this is an average. We are seeing increasing evidence of individual companies allocating a double–figure share to the medium.”
The Bellwether report contains detailed analysis of the UK’s marketing economy, based on a survey of 250 companies, representing all key business sectors.
To subscribe to the Bellwether report please contact Markit on 01491 418 700, email
Bellwether costs £500 per annum (£375 for IPA members) for the report, £650 per annum for the data (£487 for IPA members) and £1000 per annum for both the report and data (£750 for IPA members).
The next Bellwether Report is out on October 19th 2004.
Last updated 19/09/2008