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The survey shows business confidence towards marketing picking up throughout the year, with the rate of decline easing in the first two quarters of 2006 before showing a modest rise in Q3.
The survey is consistent with a further rise in GDP growth in Q3, driven by rising corporate profits, as marketing spend is upped in-line with improved sales and profits, and in support of new product launches. Yet despite the latest upward revision, 2006 is set to see the weakest growth of marketing spend since 2002.
Highlights of the Q3 2006 report:
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Initial budgets for traditional media were revised down for the eighth consecutive quarter, however the rate of decline slowed for the third consecutive quarter from the peak seen in Q4 of last year, to a marginal pace of 1.1% reporting a decline
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The initial 2006 budget setting for traditional media was the least buoyant for three years, and, due to budget cuts throughout the year, the sector may even see a fall in spend with the autos, media, FMCG and retails sectors reporting the most pronounced downgrades in Q3
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Internet marketing budgets continue to outperform all other sectors with 24.1% of companies raising budgets across all main business sectors, led by IT and computing, similar to the strong gains seen in previous quarters
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11.5% of companies now allocate more than 15% of their total budget to internet marketing, a figure which has more than doubled since 2000. However 49.2% of companies still allocate 1% or less of their spend to the internet, a figure which has fallen from 75% in 2000
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Upward budget revisions for DM were attributed to new product launches and events, plus past success with DM campaigns. Gains were most notably seen in the financial services, public and charities, travel and entertainment and FMCG sectors
Chris Williamson, Bellwether Report author, NTC Economics, comments: “The latest Bellwether data suggest that a recovery in marketing spend, and in particular adspend on main media, may be stronger in the second half of 2006 than are current expecting. This is not altogether surprising corporate currently at a 40-year high, funds available to marketing departments have risen more than many were expecting at the start of the year.”
 David Pattison, IPA President, Chief Executive, PHD (pictured): “The report paints an interesting picture of a modest rise in Q3 as business confidence in marketing has increased. The growth is driven predominantly by direct marketing and internet advertising at the expense of the more established media sectors, continuing the trends that we have seen over the last 18 months. Whilst any upturn is to be welcomed, the bigger picture is that 2006 is set to see the weakest industry growth since 2002.”
Wayne Arnold, Managing Director, Profero, Chairman, IPA Digital, adds: “The latest Bellwether survey continues to show increasing belief marketers are having in the internet as a communications channel. The report also indicates there is plenty of room for growth with 49.2% of companies still only allocating 1% or less to the internet. It is our belief we can expect to similar outstanding growth in the sector for some time to come.”
 Sir Martin Sorrell, Chief Executive, WPP (pictured), says: “It is good to see prospects improving as in other Western European markets like France and Germany. Direct and internet continue their strengthening trend, driven by new technologies"
Jim Marshall, Chairman, Starcom, Chairman, IPA Media Futures Group, says: "The survey shows that confidence in marketing and advertising is returning, yet with a high degree of caution. This is reflected with traditional media continuing to suffer as companies opt out of a commitment to long-term branding. Overall it gives cause for a reasonable degree of optimism, tinged with caution."
Amanda Phillips, Managing Director, Proximity, Chairman, IPA DM Futures Group, says: “Marketers have traditionally sought to deliver greater accountability from campaigns during periods of economic uncertainty, and this in turn has driven increases in direct marketing spend. The Q3 Bellwether figures reveal a significant uplift in spend on direct marketing and internet marketing, at the expense of traditional media. This suggests that marketers are having to make their budgets work harder through behaviour-changing media and are not so reliant on traditional advertising to get their message across.”
The Bellwether report features original data drawn from a panel of around 250 UK marketing professionals and provides a key indicator of the health of the economy. The survey panel has been carefully selected to represent all key business sectors, drawn primarily from the nation’s top 1000 companies.
The IPA is the industry body and professional institute for UK advertising, media and marketing communications agencies.
For more information visit the IPA website.
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