The second quarter BDO/IPA Bellwether Report reveals a cautious and uncertain picture. After a strong rebound in Q1, optimism and confidence appear to be waning, resulting in a slight downward revision to the rate of growth in marketing budgets compared to the start of the year.
Although the budget trimming was much less drastic than at the height of the downturn, the general uncertainty regarding the economic outlook continues. Almost 20% of the survey panel reported a downward adjustment to spend, versus 15% that noted an increase. Subsequently, the net balance measuring revisions to total marketing budgets fell from +4.5 on Q1 to -4.6 in Q2.
Marketing executives’ expectations for the industry in which their company operates were positive for the fourth quarter running in Q2. However, the degree of optimism was only slight, and the lowest in that sequence, as the respective net balance fell from +6.7 to +2.0 in the second quarter of 2010.
Main media budgets were revised down in Q2, following a modest upgrade seen in the previous quarter. Current year ‘all other’ (below-the-line such as PR and events) and sales promotion budgets were also revised down with the decrease in the latter the fastest in over 12 months. The only two categories to see upward adjustments were direct marketing and the internet.
Sir Martin Sorrell, Chief Executive of WPP comments: "The way we consume, the geography of economic growth, the way our industry works have all changed. Anyone who thinks things will return to where they were before 2008 is deluded. For some, there may be no comeback."
Says Rory Sutherland, IPA President, Vice-Chairman, Ogilvy Group UK: "That we are seeing a more cautious approach to marketing spend compared to Q1 is not surprising due to the uncertain nature of our economy at the moment, and in the wake of the recent budget. However, though this indicates a less optimistic picture than previously thought for this year, marketing spend is still set to increase."
The findings of this Report make it clear that the uncertainty over economic prospects continues and that corporates remain focussed on cost control against a backdrop of the risk of a double dip. On a more positive note, certain areas of marketing spend continue to grow, driven largely by technological factors such as the expansion in social media together with the desire of advertisers for increased measurability and accountability, as well as a lower cost of investment. Adjusting to these new trends is what we have to concentrate on to achieve outstanding results again in the near future.