UK marketers cut back

13 October 2009

LONDON: Some 28% of companies in the UK reduced their marketing spending in the third quarter of this year, while 13% increased their outlay over the same period, according to the latest Bellwether Report, produced by Markit for the IPA.

Based on a survey of marketing executives from 300 of the biggest firms in the country, the number of organisations trimming their expenditure was found to have grown for the eighth successive quarter during the period from July to September.

However, the net balance of –15% between the amount of firms cutting their outlay and those spending more constituted an improvement on the total of –28% recorded in Q2 2009, and on the figure of –42% posted at the end of 2008.

Main media advertising (including the internet), which accounts for around 30% of all expenditure, registered a downward revision of 10.4% in Q3, although this was the slowest rate of decline for 18 months.

Direct marketing, including direct mail, email and telemarketing, was also off by 5.5%, with one in five companies reducing their budgets in this area, while 15% diverted more funds to this channel.

Sales promotion, such as in-store promotions, coupons and price discounting, also fell by 4.7%, with just over 17% of organisations reining in their activity, while 13% devoted more resources to special offers and other similar strategies.

The Bellwether's "all other" marketing category, which covers everything from PR and event sponsorship to conferences, experiential and mobile, delivered a net decrease of 24.4% in Q3.

According to Market's analysis, this was a result, in part, of the "relatively rigid nature and high cost of some marketing activities contained in the category."

By contrast, the internet enjoyed an uptick of 4.5% in the penultimate quarter of this year, following nine months of negative growth.

Almost 21% of companies made an upward adjustment to their web expenditure – compared with 14% in the previous quarter – while 16% slowed their investment.

Within this, online search was up by 5.4%, while search engine optimisation also saw revenue levels expand after three quarters in the red.

The report argued the comparative strength of the web may be indicative of the fact that "firms opted to cut traditional marketing in favour of internet activities" in the third quarter, meaning the medium could have further increased its market share.

With regard to the broader economic climate, 47% of respondents said the financial outlook for their company had improved since Q2, while 17% took the opposite view.

This positive net balance of 30% amounted to the largest increase on this measure since Q4 2006, having previously slumped to a low of –58% in the final three months of 2008.

Despite this, the report argued that "survey respondents continued to be less upbeat about financial prospects for the industries in which they operate relative to prospects for their own companies."

As such, just 31% of the panel said the trading environment in their sector as a whole had got better, although only 24% argued conditions had deteriorated since the second quarter.

Data sourced from IPA; additional content by Warc staff