The Q1 Bellwether Report, published by Britain's Institute of Practitioners in Advertising, reveals that current marketing budgets were revised upward for the sixth consecutive quarter in the period January-March 2005 - although the growth was less robust than in previous quarters.
Likewise, the sums budgeted were below those recorded in previous Q1 surveys and the weakest for that quarter in three years.
Marketers' downbeat outlook is driven by diminishing budget growth, scaled back in line with the erosion of profit margins by sluggish sales and high costs. Another component is the persistence of high oil prices - a factor particularly affecting the industrial and travel sectors.
Emulating previous quarters, direct marketing and internet show the strongest signs of growth for the coming year. Budgets for direct marketing and internet were revised up in Q1, whereas main media advertising, sales promotion and 'all other' sectors were revised down.
In particular, those companies setting new budgets in Q1 reported that media advertising and sales promotion expenditure was set below last year's actual spend.
By individual marketing channels, budget-setting trends during Q1 were variable ...
For the second quarter running, budgets for main media advertising were revised down. The trends did vary by sector, with IT and computing, public sector, consumer durables and financial services all reporting upward revisions to spend compared with industrial, retail and FMCG who saw the steepest downturns.
Sales promotion saw a net downward revision to current budgets indicated in Q1 as the number of respondents reporting downward revisions exceeded those reporting an increase. This decline is the first seen since Q2 2004 and can be blamed on weaker than average profitability.
Current budgets for direct marketing were revised up in Q1 2005. The survey highlighted a gain in share of total marketing for direct marketing. The upward revision was also the largest recorded by the survey to date, with 28% of companies reporting an increase compared to 11% recording a decline. The continued growth for direct marketing is the 7th quarterly improvement in succession and direct marketing now represents 23% of all marketing spend.
Budgets for all other marketing were revised down in Q1, reversing the upward revision seen in Q4. This trend indicates that the activities included in all other marketing, including PR, sponsorship and conferences, will see a more modest growth this year.
Internet continued to enjoy a period of buoyancy and once again saw the strongest rate of growth of all the marketing categories covered by the Bellwether and continued to gain share of total budgets.
The number of companies allocating 10% or more of their total budget to the internet rose from 11% in Q4 2004 to 13% in Q1 2005. The Bellwether shows that internet related marketing now accounts for approximately 4% of total marketing spend.
Comments Bellwether's author Chris Williamson
of NTC Research
: "The [data] suggests a moderation in the rate of growth of marketing spend for the year ahead compared to the particularly buoyant picture seen late last year, though total spend for 2005 remains set to exceed that of 2004."
ceo Sir Martin Sorrell
was cheered by at least one of the Bellwether trends: "Again, the [data] shows continued growth in advertising and marketing services spending in the UK, although at a slightly slower rate. In addition, the report clearly shows that marketing services, such as direct and internet, are growing faster than traditional media. Clearly, clients are looking for new media and technology alternatives."
IPA president Stephen Woodford
(who also helms independent London agency WCRS
) takes a pragmatic view of the numbers: "Media budgets are the most sensitive barometer of marketing people's views on consumer confidence … causing some companies and sectors to be more cautious about the coming year, until they can see the lie of the land.
"The slight dip we are seeing in this quarter's report should therefore be viewed as a minor course correction or a pause for breath in what is essentially a period of sustained growth for the industry."
For further information on the Bellwether Report click here.
Data sourced from Institute of Practitioners in Advertising; additional content by WARC staff