The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +12.6% of companies registering an increase in budgets during Q3 2014. Although this is down for a second quarter running (from previous record survey highs in Q1: +20.4% and Q2: +15.2%), this latest positive outturn extends an already unprecedented period of growth as firms sought to take advantage of a positive trading environment and bolster sales with high-profile and targeted marketing campaigns. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.)
The ongoing upward revision to marketing budgets reflected the continued optimism of companies regarding their own financial prospects. A net balance of +38.6% of companies indicated they had grown more optimistic compared to three months ago, up from +37.5% in Q2. Confidence regarding wider industry financial industry prospects also remained high, despite the net balance slipping to a five-quarter low of +30.4%, from +33.0% in Q2.
In terms of actual spend, the Q3 survey marks the mid-point of the 2014/15 financial year and suggests that full-year marketing budgets are on course to be higher than those initially set earlier in the year, when marketing executives were at their most upbeat for seven years. A net balance of +26.0% of companies recorded an uplift in their marketing budgets, relative to the 2013/14 accounting period.
Additionally, in line with upbeat economic data showing an increasingly positive UK business climate as companies invest more in brand building and expanding their sales, the Bellwether predicts an adspend growth of 7.0% in 2014.However, with this growth, there is an increased chance of higher interest rates which the Bellwether predicts will slow growth. It therefore forecasts lower adspend growth of 3.8% in 2015.
The sharpest upward revisions to marketing budgets were made to internet (+14.5%) and main media advertising (+9.2%). The net balance to internet was fractionally below the Q2 one-year high of 14.7%. Within internet, search recorded a net balance increase of +9.4%, which despite being the weakest since the Q4 2013 Bellwether survey, extended the current run of growth to 21 successive quarters. Main media advertising was at the joint-third highest in the survey history, although down from 11.5% in Q2.
Events also recorded a marked upward revision to budgets, with a net balance of +7.8% and modest upward revisions were seen for direct marketing (+2.1%) and PR (+1.0%).
In contrast, there were reductions in budgets for sales promotions (-1.1%), market research (-1.7%) and other (-4.7%).
Says Paul Bainsfair, IPA Director General: “Two years of continuous investment in marketing budgets, coupled with sustained confidence, has enabled the industry to innovate and diversify, and crucially to drive business growth. It is good to see companies adapting to the complex media landscape and capitalising on the positive economic climate.”
Says Chris Williamson, Chief Economist at Markit and author of the Bellwether report: “Companies remain bullish about the business outlook, ratcheting up their marketing spend once again and adding to prospects of the economy continuing to grow strongly as we head towards the end of the year.
“The third quarter upward revision to marketing budgets was the third largest recorded since the survey began in 2000, exceeded only by the upward revisions already seen in the first two quarters of the year. This represents a remarkably positive picture of companies gaining confidence about the economic outlook as the year has proceeded, ploughing more money into budgets that had already been set higher at the start of the year. At this rate, 2014 is panning out to be the best year for growth of marketing spend in the survey’s 15-year history.”
The Bellwether Report is researched and published by Markit Economics on behalf of the IPA. First published on the 17th July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy. The 8-page 16 October 2014 edition is available to purchase here for £99+VAT (IPA members) and £140+VAT (non-members) as an immediately downloadable PDF. To sign up for an annual subscription, or to request historical data, contact firstname.lastname@example.org.
Here's what some experts from across sectors and around the UK think:
Pete Robins, IPA Digital Media Group Chairman and Managing Partner, Agenda 21, “In line with the overall positive outlook, the internet related forecast is still very upbeat. These figures, alongside the main media forecast, seem to back up the feeling that more advertisers are realising a combination of both broad and targeted media is an advantageous mix as they up their marketing investments.”
Josette James, Client Services Director, Wunderman and chair of the IPA Customer Experience Group, “The quarter on quarter increase in direct marketing budgets is a strong indicator to the confidence we are seeing with brands. With an increasingly clear focus on future growth through product expansion, platforms and new consumers, brands are definitely feeling braver with budgets but looking for high impact spend or re-engineering of old ways of doing things. This is a scenario I suspect to see increase in momentum over the next 6 months.”
Paul Simonet, Creative Strategy Director, Imagination, “As the growth in budgets behind experience keep pace with the other main marketing channels, the challenge will increasingly be to gain the right level of synergy between PR, digital, events and experiences and advertising. Smart brands are getting high impact from successful co-ordination.”
Tom George, Chairman UK and Northern Europe EMEA, MEC and chair of the IPA Media Futures Group, “The continued optimism shown by marketers in the latest Bellwether Report reflects what we are seeing in the media market as a whole, with 2014 expenditure forecast, as seen in the latest AA/WARC Expenditure Report, to grow by a further 6% on what was a buoyant 2013.”
Denise Turner, Head of Intelligence, Havas Media, “Market research is a vital tool in the marketing director's armoury, giving them the confidence to make those big decisions about increased marketing investment. As such the investment in market research often comes before the increase in investment. We are seeing a sustained increase in advertising investment, no doubt as a result of previous investment in research. It is pleasing to see that investment in market research is remaining relatively steady over time with the majority of panellists (79%) leaving their market research budgets unchanged.”
Paul Mead, Founder & Managing Director, VCCP Media and chair of the IPA Search Group: “The latest Bellwether Report shows a remarkable 21 consecutive quarters of growth for search and reflects not only an increasingly buoyant economic view from the industry but also how advertisers often look to expand investment in this area before any other channel.”
James Goddard, Chief Executive, JJ Marketing: “In the latest Bellwether Report it’s good to see Public Relations marketing budgets maintaining the run of growth that has been evident since the start of the calendar year. This bodes extremely well for continued growth in Public Relations spend for the remainder of this year and into 2015. PR is certainly contributing to 2014 potentially being the best year for growth of marketing spend in the history of the survey.”
Around the UK:
Ben Quigley, IPA Chairman England & Wales and Group Chief Executive, Everything Different, “The latest Bellwether Report shows that marketing executives around the whole UK are more optimistic about their financial prospects, increasing marketing spend again. Internet and main media advertising together continue to record biggest upward revisions as the drivers as we head into the final quarter of the year. The outlook continues to be rosy for 2014.”
Stephen Roycroft, IPA Northern Ireland Chairman and Deputy Managing Director, RLA Ireland, “It is particularly encouraging that increased national marketing budgets are reflecting the current optimism for the economy. It is important to ensure that that trend is reflected in Northern Ireland too, as a vibrant agency industry is vital to re-balancing the economy here.”
Peter Craven, IPA City Head for Manchester and Co-founder, Madhouse Associates, “The upbeat Bellwether results paint an encouraging picture for the UK economy, marking two years of continuous growth. Marketing budgets are still rising with the internet and main media being the biggest spenders. 2014 is turning out to be a great year.”
Andrew Wilson, IPA Birmingham City Head, WAA, “In this, the third quarterly Bellwether Report of 2014, it is heartening to see upward revisions of marketing spend in what is a reflection of both positive results and confidence in the future. Marketers are seeing a better return on investment, compelling them to assign more budget to longer term campaigns. This is further demonstrated by the report’s suggestion that marketing budgets look to be higher than those formed in initial setting processes that took place earlier in the year. Thus as the year progresses, impactful creative initiatives have demonstrated the value of the sector and its long term benefits. As we make our way into the final quarter of 2014, our recovery from the recession remains steadfast, and the UK is enjoying an extremely healthy trading environment. Extensive redevelopment projects taking place across Birmingham’s retail, hospitality and transport sector means the city and surrounding areas are set to prosper. With the redevelopment of New Street set to generate over £2bn in economic benefits, the region will grow ever more confident, which can only be a good thing for marketing spend and investment.”
Last updated 16/10/2014