The latest IPA/BDO Bellwether Report makes for grim reading if you’re a marketing professional.
The report states that marketing budgets have been cut once again for the third consecutive quarter, as businesses look to protect their profit margins amidst concerns over the gloomy economic outlook. Still, as depressing as that might sound, there is a chink of light on the horizon: direct marketing and internet marketing budgets have been increased slightly. So, it could be worse.
The latest survey states that 22% of UK companies have cut their overall marketing spend and do not expect to see any short-term improvement in the economy. Confidence in the UK economy is plummeting: confidence has dropped 9.5% in the last 2 years and now only 3.3% of marketing executives claim to see any signs of ‘green shoots’.
It’s slightly better news for direct marketing though: 20% of UK companies have reported an increase in their direct marketing budgets, but even they are pessimistic about the coming months. Internet marketing too has seen an increase, though this is at its lowest level for 2 years. Media budgets and sales promotion budgets saw the most dramatic downward revisions in spending. The ‘good’ news, if there is any, is that the level of these marketing budget cuts is at its lowest level compared to recent quarters. It now stands at 5.1%, as opposed to 5.4% in the first quarter of 2011.
So, what are the reasons behind these budget cuts?
According to Nicola Mendelsohn, IPA President and executive chairman, it’s simply down to a faltering economy and a little bit of business self-preservation:
“The economy is going sideways and this seems to be the way it is going in the advertising marketplace too. The decline in confidence doesn’t augur well, but is not surprising amidst a continuing climate of concern surrounding the financial and political outlook both at home and internationally. But we should take some comfort from the fact that the rate of budget trimming is at its lowest in three quarters, and that there are advertisers maintaining spend nevertheless.”
Andy Viner, head of media for BDO LLP added:
“Marketing spend has proven to be a good barometer of the economy in recent years. The latest IPA/BDO Bellwether report signifies renewed caution from marketing executives, as corporates continue to monitor discretionary expenditure to protect profit margins and strengthen balance sheets. Marketing budgets have now been revised downwards for the third consecutive quarter albeit at a slower rate, providing further evidence that the outlook will be tougher and more subdued for the remainder of the year, even when compared to previous forecasts only a few months ago.”
“The survey also indicates that confidence generally in the marketing services sector has dropped further in recent months. This is unsurprising against a backdrop of above target price inflation, muted pay growth and a generally uncertain economic environment.”
So is there anything positive to come out of this latest report other than an increase in the direct marketing budget?
Well, yes, in a sense, there is. Viner believes that there are better days ahead for marketing and online advertising, and the UK may benefit overall thanks in large part to the upcoming Olympics:
“Fortunately, the outlook for 2012 is looking more positive. There is certain to be an uplift in marketing expenditure connected with the 2012 London Olympics which will provide a welcome fillip to the marketing services industry after a challenging couple of years.”