Marketing budgets in the UK are continuing to grow, according to the Bellwether quarterly survey published Tuesday by the Institute of Practitioners in Advertising.

The Q4 survey, produced by NTC Research, saw further upward revisions to marketing budgets, reporting continued growth of current budgets for the fifth consecutive quarter - the longest in the survey's five year history.

The most positive outcomes were recorded for internet-related marketing, direct marketing and sales promotion, which all saw upward revisions to their current budgets. Internet-related spend reached a new high in Q4, with the survey recording an estimated allocation of 3.5% of marketing budgets towards the medium.

The current situation for media advertising was, however, more gloomy and, in contrast to the previous three quarters, the medium saw budgets revised down on average in Q4.

This decline was attributed to an unexpected slowdown in sales for many companies which encouraged a shift of spend away from media advertising to lower cost activities, particularly direct marketing.

Looking towards 2005, of those companies which have already set their 2005 budgets, more than half have reported that budgets have been set higher than actual spend in 2004.

The resulting net rise signalled for the coming year is the strongest since the survey began and can be attributed to improved business confidence, new product launches and an unexpected upturn in economic growth from the winter lull.

Bellwether also charts the trends across all marketing expenditure sectors…

  • Media
    On average media advertising budgets were revised down in Q4 - the first cut recorded by the survey for the medium in a year. The downward revision was attributed to an unexpected slowdown in sales for many companies, which has in turn encouraged a shift in spend towards lower cost marketing activities, in particular direct marketing.
    However, 2005 looks set to be more positive with over half of the panel reporting an increase in budgeted spend for 2005, resulting in the largest net increase signalled for future spend since Q3 2000.
    Moreover, the rate of growth indicated for media ad spend exceeds that of all other marketing categories for 2005 surveyed by the Bellwether.

  • Sales promotion
    Current budgets for sales promotion were revised up on average in Q4. However, this increase was only slight and was less than the modest increase recorded by Bellwether in Q3.
    In particular consumer durables, financial services and fmcg sectors reported upgrades and attributed this growth to the need to offer incentives in the face of intense competition and also support new product launches.
    Budgets for 2005 were set higher than actual spend on average, but the rate of growth indicated was below that of total marketing budgets, which suggests that sales promotion may lose share during 2005.

  • Direct marketing
    For the sixth consecutive quarter, current direct marketing budgets were revised up on average. Not only was this revision the largest since Q1 2004, but the rate of growth also exceeded all other mediums apart from Internet-related spend, and suggests a preference for direct marketing over above-the-line marketing activities.
    Meanwhile, new budgets set for 2005 saw 44% of the panel reporting an increase compared to 10% reporting a decline, signalling the largest rise in the report history (but none the less a rate of growth weaker than that recorded for main media advertising).

  • Other marketing expenditure
    Current budgets for all other marketing activities were revised up in Q4, contrasting with the previous two quarters, which saw budget cuts. The upward revision was only marginal, however, with 12% of respondents reporting an increase compared to 11% reporting a decrease.
    New budgets set for 2005 looked positive for "all other marketing" with 34% reporting an increase to budgets in the coming year, outnumbering those reporting decreases by three-to-one.

  • Internet marketing expenditure
    Sustaining the trend of previous reports, internet-related marketing continued to gain share of total marketing budgets in Q4, with current budgets again revised up and showing a stronger rate of increase than all other types of marketing activity.
    Internet marketing now stands at approximately 3.5% of total marketing expenditure, and the number of companies allocating over 10% of their spend to the internet has risen to a new survey high of 10.5%.

    Comments Rupert Howell, chairman of McCann Erickson UK & Ireland: "I'm optimistic about 2005. I expect the first quarter to show cautious growth, but then the brakes to come off after the election is out of the way. The one area set to explode is internet advertising, with internet shopping being one of the main reasons for most retailers' poor Christmas showing."

    For more information on Bellwether click here.

    Data sourced from NTC Research; addtional content by WARC staff