Digital marketing continues to lead the way in terms of ad spend and was revised up to the fastest rate since Q4 2011 with a net balance of +8.9 per cent according to the latest IPA Bellwether survey for Q1 2013.
The survey showed little change to marketing budgets overall with only a fractional increase registered. For Q1 a proportional number of companies reported rises and cuts with the resulting net balance reported as +0.1 per cent, down from +1.1 per cent in Q4 2012, but up from the -5.5 per cent reported in Q3 last year.
Companies were found to be more positive about their performance in Q1 than they were three months ago with net balance up 10 per cent at +16.8 per cent, from +6.8 per cent in Q4. Over a third (36 per cent) of marketing executives also stated that they planned to raise 2013 budgets in comparison to last year, though the planned rise in budgets is modest compared to pre-financial crisis levels. Additionally, just under a quarter (23 per cent) of marketing executive said they were anticipating a fall, the best level for two years recording a net balance of +13.5 per cent.
“Marketing spend has been revised up again, albeit marginally, and plans for the 2013 budget period are also more positive as companies expect to raise their budgets relative to last year. Moreover advertisers’ confidence about their own financial prospects has grown markedly and to the highest rate in twelve months,” commented IPA director general Paul Bainsfair.
Chris Williamson, chief economist at Markit and author of the Bellwether, explained: “An upturn in business confidence and corresponding increase in budgeted marketing spend for 2013 augurs well for the wider economy. However, while the Bellwether is suggesting the economy is recovering, it looks set to be another challenging year for businesses and the pace of economic expansion is likely to be modest. The hope among many companies is that increased sales and marketing activity will drive business growth, but firms will need to see convincing signs that demand and profits are improving in the coming months to prevent business confidence falling again and marketing budgets from being revised down as the year proceeds.”
Questions over financial prospects for the wider industry drew largely pessimistic responses from marketing executives, though the net balance of -11.1 per cent is the least for a year. The Q1 results round off a difficult year for marketing budgets in 2012/13, marking the fifth successive year of decline with provisional data so far revealing a worse performance than 2011 (net balance of -7.4 per cent versus -1.7 per cent in 2011).
In terms of sectors, internet advertising was found to be the strongest performer in Q1, with online search/SEO spend also up (+1.8 per cent) though this was the lowest increase since Q2 2009. PR reported growth with a net balance of +1.8 per cent and market research up +1.3 per cent.
The rest of the categories saw declines, though events, main media and sales promotions dips were all relatively marginal. Direct marketing saw a sharper decline (-3.6 per cent), with ‘other’ marking the lowest net balance at -8.9 per cent.
Current Office for Budget Responsibility (OBR) projections for GDP growth in 2013 are at 0.6 per cent, with household spending at 0.5 per cent and business investment to increase by just 1.9 per cent, meaning ad spend will also find itself under pressure. This information has been used to create a five year forecast chart, which shows a predicted fall of -0.3 per cent in ad spend this year. Though if the economy improves, as predicted, next year forecasted ad spend should grow at a rate of 2.3 per cent in 2014, accelerating to 4.4 per cent in 2017.
Bainsfair added: “While there is continued concern about the economic outlook, things do seem to be holding up. We will have to wait and see how the situation pans out as the year progresses.”