'Gloom' Deepens for Marketing Budgets

UK marketing budgets have dropped for the third consecutive quarter, according to the Q2 2008 Bellwether Report, the quarterly survey of marketing spend, published today by the IPA. The downturn is now the most significant since that which followed the 9/11 attacks in late 2001.

The report says further cuts are likely later in 2008 due to low levels of corporate profitability compared to a year ago, raising the possibility of an absolute fall in marketing and ad spend for the year, given that initial budgets set in January were only slightly higher than 2007.

Second quarter marketing budgets rose for only 15% of companies surveyed, while 27% reported a decrease.

There were cuts in all sectors apart from online, and even the latter saw the smallest rise since 2003. 19% of companies reported a rise in their online marketing budget, and only 12% a decline - but this still compares unfavourably with the first quarter when the figures were 27% and 5% respectively.

The sharpest falls were in traditional media, which includes TV, press, outdoor, radio and cinema; followed by the 'all other' category which saw the biggest fall last quarter and includes research along with diverse other sub-sectors including PR and events. Some 8% of firms reported a downturn in 'All other marketing' while 20% reported a decline.

Direct marketing budgets saw their biggest downward revision since the survey began, and have now seen the longest period of sustained budget trimming of all categories, as companies convert campaigns from post to email.

Vertical sectors appearing to buck the trend with upward revisions to budget are government and charities, IT and computing and the financial services.

Chris Williamson, Chief Economist at analysts Markit and author of the Report, says rising costs and weaker-than-expected sales drove marketing cuts from companies looking to protect profit margins, adding: 'This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000. Even Internet marketing was not immune, seeing the smallest increase in spend for five years.'

IPA President Moray MacLennan acknowledged the 'increasing gloom' and suggested agencies do two things: 'firstly, focus even more closely on cost control and secondly, strive for even more original and innovative solutions so they can buck the trend.'

The Report is based on a survey of respondent - often Marketing Directors - in 250 companies, representing all key business sectors. The IPA (Institute of Practitioners in Advertising) is online at www.ipa.co.uk .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.