Major UK Advertisers Cut Q3 Budgets, IPA Report Reveals

16 October 2002

The Bellwether Report, a quarterly survey of marketing budgets, published Tuesday by Britain’s Institute of Practitioners in Advertising, shows that clients revised downward their marketing expenditure during Q3 2002 – albeit not in as draconian fashion as the same quarter last year.

Bellwether, prepared by NTC Research on behalf of the IPA, reveals that …

• There have been substantial downward revisions to budgets every third quarter since the report was first published three years ago.

• Total marketing budgets were revised down in Q3, although, the extent of the downward revisions were less than seen at the same time last year. The cuts in budgeted spend were blamed on falling sales, deteriorating profits and an increased uncertainly with regard to the economic climate both at home and abroad.

• Media advertising budgets were revised down on average in Q3 although the scale of the revision was less than same time a year ago. Weak sales and economic uncertainty were both cited as key factors restraining adspend growth.

• Direct marketing and internet-related marketing spend were revised up in Q3, although only marginally.

• Although revised up, internet marketing spend fell as a proportion of total marketing spend among those companies allocating no marketing spend to internet-related activities – rising to a six quarter survey high of 29% in Q3. Also a simultaneous survey low was seen in the proportion of companies allocating in excess of 20% to internet related activities, which dipped to just 0.5%.

• Sales promotion budgets were revised down again in Q3 after having been revised up for the first time in six quarters in Q2 2002. The decrease reflects a cut in overall budgets rather than a shift to other marketing media.

• All ‘other marketing’ budgets (among them PR, conferences, sponsorship, corporate hospitality, entertainment, and ecommerce) were revised down in Q3 after having been revised up for the first time in two years during Q2 2002. In the majority of cases the downward revision reflects cost cutting in the face of weak sales.

Observes IPA president Bruce Haines: “These figures do suggest that the industry still has a way to go; however we have seen from previous Bellwether Reports that Q3 is traditionally a time when many marketers revise their budgets down.

“Still, uncertainty both at home and abroad are key factors for the current business sentiment expressed in this report. The evolving situation with Iraq and the state of some euro-zone markets will play largely into the business decisions of many UK marketers both this quarter and next.

“Good news however, is that television has seen growth for five consecutive months and BACC [Broadcast Advertisment Copy Clearance] figures show that on last year we are up 24% in the number of television commercials created, which has certainly got to be a positive sign for the industry.”

Data sourced from: IPA Online (UK); additional content by WARC staff