Budgets slashed to reflect economic slowdown
Marketing budgets have been cut for the second quarter running with direct marketing spend particularly affected, according to the latest IPA Bellwether Report.
Companies have said that weaker than expected sales in recent months and concerns regarding the health of the economy have caused marketing budgets to be cut in Q1. The cuts have not been as deep as those recorded in Q4 of last year but the trimming contrasts with the high rates of budget growth demonstrated in the middle of 2007.
Direct marketing budgets have been revised down and registered the largest cut for the category in the eight year history of the Bellwether Report. Twenty per cent of companies polled reported a downward revision to existing budgets and only 13 per cent suggested they would increase spend.
Sectors trimming their DM spend include retail, FMCG, consumer services, government, media and industrial and utility while financial services, travel and entertainment and consumer durables showed upward revisions.
Main media budgets were left unchanged for Q1 but this largely reflects the inclusion of internet advertising in the category and online spend continues to see sizeable growth. Budgets for TV, outdoor, cinema and print are likely to have been revised down in the quarter, according to the report.
The sharpest cut to budgets was registered for the “all other” category, which includes PR, event sponsorship and market research.
The report finds that marketing expenditure in total is still predicted to rise in 2008 but the rate of growth is well below that signalled at the start of 2007.
Actual marketing spend did rise last year but the growth was well below that seen in 2006 with a fall in sales promotion spend the main cause. The category includes coupons, loyalty cards and in-store pos promotions. Direct marketing saw its weakest rise since 2001.
The internet accounted for 8.7 per cent of total marketing spend in 2007 and growth in online budgets recovered in Q1 after a weaker Q4. Some 27 per cent of respondents have revised their internet budgets up while only five per cent reported a decline.
Moray MacLennan (pictured), IPA president and chairman Europe of M&C Saatchi (pictured) said: “We should not be surprised perhaps, that budgets are being revised downwards in the current climate. It is however, a good moment to remind advertisers that those that maintain the strongest marketing spend will come out on top.”
Robert Lerwill, CEO of Aegis, added: “Let’s not lose sight of the fact that – as today’s report points out – marketing spend is still set to increase in 2008, with budgets ahead of 2007 levels.” But for all that we should not be complacent. Our industry must remain alert to fluctuations in economic growth forecasts and, as ever, keep a watchful eye on our client’s spending for any signs of change.”
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