Marketing Spend up Again Despite Slump in Confidence

LONDON, January 19, 2012 /PRNewswire/ --

The latest IPA Bellwether survey published today (Thursday 19th January 2012) reveals that marketing budgets were revised up in Q4 for a second successive quarter, as companies sought to protect market share against competitors.  With 20% of companies reporting an upward revision compared to 19% that reported a reduction, the upward revision was marginal with a resultant net balance* of 0.6% (down from 3.4% in Q3).

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

Yet 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.

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. The downward revision to main media spend occurred despite strong support from internet advertising, which increased to the greatest extent of all sectors (net balance of 13.4%) and within this category search was revised up to the greatest extent in almost two years (net balance of 14.9% up from 9.3% in Q3).  Direct marketing and sales promotion were revised higher at marginal rates.

Says Nicola Mendelsohn, IPA President, Executive Chairman and Partner, Karmarama: "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."

Says Chris Williamson, Chief Economist at Markit and author of the Bellwether: "Companies held their marketing budget broadly unchanged in the final quarter of last year, a flat picture which probably reflects a similar stagnation of the overall economy. 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.

"However, it is encouraging to see that companies are planning to raise their marketing spend in 2012 despite seeing their financial prospects for the next three months falling to the worst since the height of the financial crisis in early 2009. It seems that many companies are looking to fight the prospects of a challenging year ahead with increased promotional activity."

Note to editors:

The Institute of Practitioners in Advertising (IPA) is the trade body and professional institute for UK advertising, media and marketing communications agencies. It was established in 1917 as a servicing body and to negotiate on behalf of its members with media bodies, government departments and unions. Its 249 corporate members handle over 80% of the UK's advertising agency business which has an estimated value (excluding press and TV production) of £17.7 billion.