Marketing budgets fall in UK

17 January 2011

LONDON: Marketers in the UK reduced their budgets during the closing three months of 2010, but intend to heighten investment through most main media in 2011.

Trade body the IPA and accountancy network BDO regularly survey 300 companies from the top 1,000 corporations in the country, finding that 22% of contributors reported that budgets declined in the final quarter of last year.

This exceeds the 17% which delivered an increase on this metric, making a net balance of -5.4%.

While this result is the worst for around a year, it is still significantly better than much of 2008 and 2009.

The negative balance also reflects a growing pessimism about the financial climate among executives, as the difference between the number providing a positive and negative assessment reached 10.8%, down on 15.8% in Q3.

While describing the prospects for their industry as a whole, the share of interviewees arguing conditions had deteriorated in Q4 2010 stood at 32% in the fourth quarter, measured against 27% in Q3.

This could similarly be compared with scores of 28% and 25% respectively for those in an optimistic mood across these two periods in turn.

Over the course of 2010, expenditure levels were larger than the previous year and were revised upwards in the first and third quarters, and shifted downwards in Q2 and Q4.

The proportion of firms trimming traditional media outlay in the fourth quarter of last year was 6.4% bigger than respondents adopting the opposite strategy.

Sales promotion recorded a 0.6% drop and the "all other" category - featuring below-the-line activities such as PR and event marketing - registered a 5.5% contraction.

However, direct marketing saw a positive gap of 1.9% between the organisations boosting the resources available and businesses cutting back.

This amount climbed to 4% concerning online search, to the particular benefit of Google, which dominates the sector.

Elsewhere, totals moderated slightly to 2.6% covering the entire internet, including paid-for search listings, the channel's smallest leap for six quarters.

When asked to outline probable spending plans for 2011, the panel suggested budgets should prove more substantial than overall expenditure in 2010.

Main media, direct marketing and the web are likely to attract greater resources, while brand owners seek to lessen their reliance on sales promotion.

"That these latest figures reveal a decline in confidence is disappointing, but characteristic of the uncertain climate we find ourselves in," said Rory Sutherland, the IPA's President and vice-chairman of Ogilvy Group UK.

"At least we can draw comfort from those companies which reported an increase in spending in the last quarter of the year, and from indications that initial budget setting for 2011 is currently higher than actual 2010 spend."

Data sourced from IPA; additional content by Warc staff