The Q3 2003 Bellwether Report, the quarterly survey of marketing budgets, published today (21st October 2003) by NTC Research on behalf of the IPA, shows an improved business sentiment among the UK’s top advertisers compared to the second quarter results, even though marketing budgets were revised down on average for the fifth consecutive quarter.
This feeling of renewed optimism echoes the recent CAF Barometer findings (published September 2003) of an increase in communications budgets and a generally more optimistic mood among agencies about the future.
This is the first time in the surveys’ history that there has not been a marked readjustment of budgets in the third quarter. However this could be due to the severe readjustments seen in the Q2 because of the impact of the war in Iraq on business confidence.
The survey also includes for the first time a chart illustrating how the Bellwether Report has acted as a leading indicator of adspend growth over the past four years. This chart also anticipates a renewed upturn in late 2003, early 2004.
The Q3 report focuses on revisions to current budgets and shows:
Adspend budgets were cut for the eleventh consecutive quarter Q3 but showed the smallest downward revision since Q2 2002.
Total current budgets were revised down on average for the fifth consecutive quarter, however the downgrade was significantly lower than in Q2, reflecting reduced pessimism with regard to economic outlook.
Trends varied by sector, with upward trends recorded for public sector, automobile and industrial sectors. In contrast the steepest downward revisions were recorded for FMCG, IT/computing and consumer durables.
Current media advertising budgets were revised down on average for the eleventh quarter running in Q3. Weak sales continued to prompt either cuts to total budgets or shifts in allocation of spend to other forms of marketing, notably direct marketing. However the downgrade to media budgets was the smallest recorded since Q2 2002.
Retail and FMCG showed the steepest downward revisions while car manufacturers and public sector advertisers reported the strongest upward revisions.
Sales promotion budgets were revised up on average in Q3 for the first time since Q2 2002. Although only modest, the upward revision contrasted with the downward revision to total marketing budgets in Q3, suggesting that sales promotion will receive an increased share of total spend. Companies raising their budgets cited business optimism as well as a preference for more accountable spend. The strongest rises were for autos and consumer durables.
Direct Marketing budgets were revised up on average in Q3 having been cut in Q2. The rise was the largest since Q4 2002 and was exceeded only by internet marketing. Firms in industrial, consumer durable, retail and financial services reported the strongest upward revisions, in many cases citing the greater accountability of direct marketing. However, downward revisions to budgets were again recorded to FMCG and travel/entertainment.
For the sixth consecutive quarter, internet related marketing budgets rose at a faster rate than any other category. Moreover the upward revision in Q3 was significantly greater than seen in Q2.
Although rate of growth of internet spend outstripped that of other activities, it is clear that the share of total marketing budgets accounted for by internet related activities remains only modest. The proportion of all firms allocating no spend to internet activities has fallen from 29% to 26% over the course of the past year, while the proportion allocating in excess of 10% of their total budget has risen from just 4% to 7%.
Budgets for ‘all other’ marketing (which includes activities such as PR, sponsorship, market research and e-commerce) were revised down on average in Q3 for the fifth quarter running. Although the downgrade was slightly less steep than in Q2, it was larger than for any other category monitored by the Bellwether survey. Decline or stagnation were recorded across all main sectors except services, though the steepest downgrades were seen in FMCG, retail, consumer durables and IT/computing.
Commenting on this report, IPA President Stephen Woodford said: “We are very encouraged by this report especially since the previous two year’s 3Q results seemed to suggest that we should probably expect a severe adjustment downwards as companies prepare their figures for year end. It also tied in with the recent CAF Barometer findings which reported an increase in new business activity and an increased commitment in communication budgets.”
Author Chris Williamson added: “This Q3 report is in line with other cautiously optimistic industry forecasts and suggests that we will see firm signs of a recovery in marketing and advertising expenditures as we move into the new year.”
Says Sir Martin Sorrell, Chief Executive WPP, about the reports findings: “WPP's experience reflects the Bellwether Report. The UK remains our toughest market, although the rate of decline is slowing and prospects for next year look better.Stabilisation and muted recovery in the United States should help”.
Says Nigel Gwilliam, IPA e-Commerce consultant: “The ongoing growth rate for internet-related marketing is fantastic. But whilst the proportion of advertisers putting more than 10% of their budget into the sector has risen from 4% to 7%, the internet now accounts for almost 10% of total media consumption in the UK and there is considerable room for further rises.”
Says Ian Finlayson, IPA Finance Director: “At a time when the business world is looking for signs of optimism, it should be noted that Bellwether data has acted as a leading indicator of adspend growth over the past four years, anticipating the downturn in adspend in 2000 and tracking in advance the short-lived upturn of 2002. While the recent easing in growth of adspend was predicted by the Bellwether survey, the latest Bellwether data indicates a renewed upturn in adspend growth in late-2003 or early 2004.”
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 Q4 2003 Bellwether Report will be published on 20th January 2004.
Last updated 19/09/2008