IPA Bellwether: Q2 Marketing Budgets Cut Again

15 July 2003

Total marketing spend falls at increased rate

The latest Bellwether Report from Britain's Institute of Practitioners in Advertising shows current total marketing budgets were revised downward on average in Q2 2003 for the fourth quarter running.

The cut was the largest since late 2001, contrasting with the easing in the rate of decline seen over the previous two quarters.

All types of marketing activity covered by the survey, with the sole exception of internet-related spend, were reported to have been revised down on average in Q2.

Some 29% of companies reported a downward revision to current marketing budgets; only 18% reported an upward revision. The resulting net decline signalled was the steepest since Q4 2001 – attributed to disappointing sales and revenue growth and, in particular, to a weaker than expected improvement in business conditions following the Iraq war.

Previous surveys have indicated that budgets for 2003 were set higher on average than actual spend in 2002. However, the Q2 survey suggests that these budgets have already been cut to some extent as business confidence has wavered.

The steepest downward revision to marketing budgets was seen for advertising expenditure, for which Q2 budgets were cut to the greatest extent since Q3 2001.

Two key factors were cited as the causes of reduced media adspend:

(1) Revenues and profits were often reported to have come in below expectations in recent months, leading to widespread cost cutting.

(2) Many advertisers reported a further shift in allocation of spend away from main media adspend towards activities such as direct marketing, where it was noted that smaller and more accountable campaigns could be operated with greater flexibility.

Despite the shift toward direct marketing and sales promotion, budgets for these disciplines were also revised down in Q2. The decline in direct marketing budgets was the first since Q3 2001, while the drop in sales promotions budgets was the steepest since the survey began three years ago. In both cases, reduced budgets were linked mainly to revenue targets being under threat from recent weak sales performance.

Internet-related spend continues to buck the trend. The only category of marketing spend monitored by the Bellwether survey to have been revised up in Q2 was that of internet-related activities. However, the extent of the upward revision was less than seen in the previous two quarters.

The report features original data supplied by a panel of over 200 UK marketing professionals in all key business sectors, drawn primarily from the nation’s top 1000 companies. It is widely regarded as a key indicator of the health of the UK economy. For further information, click here.

The next Bellwether Report will be released 21 October 2003.

Data sourced from: Institute of Practitioners in Advertising; additional content by WARC staff