Marketing Budgets Conservative Due To Economic Uncertainty

Geny Caloisi

The latest IPA Bellwether survey reveals that many companies have reviewed their marketing budgets in the last quarter of last year, resulting on a minimal upward revision – net balance* of 0.6% (down from 3.4% in Q3).

Business optimism is falling further in the face of economic uncertainty, to levels seen prior to the onset of the 08/09 financial crisis. Marketing executives’ confidence for the industries in which they operate has fallen to an 11 quarter low: the net balance of -44.9% was down from -23.3% in Q3. Additionally executives reported that financial prospects for their own companies had deteriorated for the first time since Q1 2009.

However according to provisional survey data, budgets for 2012 look set to rise relative to 2011 actual spend, although the planned increase is weaker than any year prior to 2009.

Nicola Mendelsohn, IPA President, Executive Chairman and Partner, Karmarama says, “This rise in spend for a second successive quarter shows that many companies remain committed to invest in marketing at present. A further decline in confidence is hardly surprising due to the overriding mood of uncertainty for the year ahead. Yet despite this it’s encouraging that firms are still planning to increase their budgets in 2012. Moreover the impact of key sporting events such as the London 2012 Games and the Euro football championships will likely lead to increased buoyancy in the marketplace with a corresponding boost in marketing expenditure.”

According to the report, by sector, ‘all other’ (below-the-line) and main media spend were the only types to see a reduction, suggesting companies were keen to cut spending on traditional media in favour of online, price discounting and more direct marketing strategies and sales promotion, which can be good news for the Digital Out of Home industry.

Chris Williamson, Chief Economist at Markit and author of the Bellwether reflects, “Looking deeper into the data there are signs that companies have become increasingly reluctant to invest in traditional media campaigns, instead diverting money towards the internet and direct marketing. This reluctance reflects lower than expected sales and profits in recent months, as well as growing unease about the economic outlook.”

Pete Robbins, IPA Digital Media Group Chairman and Managing  Partner Agenda 21 commented, “Now that internet advertising has become mainstream it’s positive to note that against the economic outlook there are opportunities for growth, for example within social media, alongside search. And importantly, the impact of further technological developments around internet advertising is allowing more forward thinking clients to capitalise on the growing range of more accountable marketing opportunities.”

* net balance calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision

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