Direct marketing defies advertising slowdown

‘Bottom-line’ concerns amid economic uncertainty combined between April and June to keep corporate marketing budgets from growing – representing the third quarter in a row of fewer pounds for promotions.

In a blow to marketing and PR workers, whose prospects appear to be brightening, the Institute of Practitioners in Advertising said more clients would be trimming their ad budgets than increasing them.

Although the cuts are the smallest for the last three quarters, confidence among marketing executives in their own companies dropped to the lowest level in more than two years, the IPA found.

The subtext is that companies spent the second quarter trying to protect their profit margins by reduce operating costs. In terms of the downbeat executives, IPA blamed high inflation, muted pay growth and the uncertain outlook.

“The latest IPA/BDO Bellwether report signifies renewed caution from marketing executives as corporates continue to monitor discretionary expenditure to protect profit margins and strengthen balance sheets,” said BDO’s head of media Andy Viner.

“Marketing budgets have now been revised downwards for the third consecutive quarter albeit at a slower rate, providing further evidence that the outlook will be tougher and more subdued for the remainder of the year, even when compared to previous forecasts only a few months ago.”

The gloomy assessment might come as a surprise to freelancers engaged on direct marketing (DM) projects as, compared to all other forms, budgets for DM increased.

In fact, the institute found that corporate investment in direct marketing grew at it its steepest rate in three quarters, indicating executives want flexibility, targeting and a measurable RoI in their advertising.

Internet ad budgets were also revised up, albeit at a slower rate, seemingly to the cost of more traditional channels, such as sales promotions and in-store discounts, which suffered the sharpest decline.

“As only one of two categories to see marketing budgets revised up in the second quarter, it is clear that companies are turning to direct marketing to provide return-on-investment (RoI) against marketing spend,” reflected the IPA’s Mel Cruickshank.

"And, although annual budgets are still revised down for the third year, it is at the slowest rate, which should give us comfort that we are moving into a more positive position than we have seen over this period of time."

Looking ahead, there is certain to be an uplift in marketing budgets thanks to the 2012 London Olympics, IPA said, which will provide “a welcome fillip to the marketing services industry after a challenging couple of years.”

 

25th July 2011

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