Marketing budgets feel the pinch

UK plc’s marketing budget for 2008 has been revised downwards for the second quarter in a row, in a sign that the economic downturn is still hurting business confidence.

According to the Bellwether Report, weaker than expected sales, subdued consumer spending and concerns about the economy are to blame for cuts to marketers’ expenditure.

‘Below-the-line’ activities, like events, PR and market research, saw the sharpest cut to budgets - the steepest for two years, reveals the report, based on interviews with 250 firms.

Meanwhile, budgets for direct marketing have seen the largest fall in eight years, while those for sales promotion have taken the biggest tumble for two years.

Main media budgets were unchanged however, and are set to see the fastest growth in 2008, yet this has been due to the inclusion of the internet in this category which continues to rise heavily, suggesting that ‘traditional’ media were revised down.

Within the internet, spend on search rose at a slightly faster rate than total internet.

Although total marketing spend is still set to rise in 2008, (almost half of all companies have set their 2008 budgets higher than their 2007 actual spend), the actual growth of spend for the year is currently well below the growth signalled by initial budgets and considerably below that seen at the start of 2007.

“The latest Bellwether highlights the dilemma that faces the Bank of England, pointing to a combination of slowing growth but rising inflationary pressures” said Chris Williamson, Bellwether report author.

“Pressure on profit margins led to a further trimming of marketing budgets in Q1, with planned expenditure for 2008 now set to grow less than had been indicated by the survey at the end of last year.

“However, sales promotions are set to see the weakest growth for at least eight years, reflecting the need to withdraw discounts and offers as companies battle with rising costs.”

Moray MacLennan, president of the IPA, reflected: “We should not be surprised perhaps, that budgets are being revised downwards in the current climate. It is however, a good moment to remind advertisers that those that maintain the strongest marketing spend will come out on top.”

 

1st May 2008

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