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Marketing budgets cut at fastest rate since 9/11

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Jul 15, 2008

Current marketing budgets have fallen for the third consecutive quarter in all sectors apart from the Internet, according to new data.

The Bellweather Report, a survey of marketing spend carried out by the IPA, showed the biggest budget cuts in marketing since the aftermath of the 9/11 terrosoist attacks in 2001.

The report cites disappointing sales, rising costs and growing economic gloom as the reason for companies cutting marketing budgets.

 

It also predicts further cuts later in the year brought on by the low levels of corporate profitability compared to a year ago.

All sectors of marketing saw budget cuts with the exception of the internet. However this saw the smallest quarterly rise since 2002.

 

Main media budgets saw the sharpest downgrades, particularly in traditional media (TV, press, outdoor, radio, cinema) with budgets dropping at the fastest rate since Q1 2006.

 

This was followed by ‘all other’ marketing (for example PR, events, research), with downward budget revisions indicating that growth will be the weakest here for at least five years.

Direct marketing budgets were revised down to the greatest extent in survey history, and have now seen the longest period of sustained budget trimming of all categories, reflecting cost savings by converting campaigns from post to email.

 

Although sales promotion again saw the biggest decline for two years it was the smallest of all categories suggesting the need to sustain price discounts as a way to drive sales growth.

Key findings from the latest Bellwether report include:


• In Q2, only 15% of companies reported increased total marketing budgets while 27% reported a decrease, so a net balance of -12.4%.


• Just 11% of companies reported an upward revision to their media budgets, compared to 24% reporting a decline, a net balance of -12.8%.


• Only 19% of respondents reported that their internet budgets were revised up, (down from 27% in Q1), 12% reported a decline (up from 5% Q1), a net balance of 6.2%.

Chris Williamson, Bellwether Report author, Chief Economist, Markit, said: "Rising costs and weaker-than-expected sales put pressure on companies to cut marketing budgets in the second quarter to protect profit margins. This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000. Even internet marketing was not immune, seeing the smallest increase in spend for five years."

Moray MacLennan, IPA President, Chairman Europe M&C Saatchi, added: “The report certainly reflects the increasing gloom of the past few weeks. There is a clear implication that the economy will slow further. Agencies cannot affect the short term economic outlook, but they can do at least two things; firstly, focus even more closely on cost control and secondly, strive for even more original and innovative solutions so they can buck the trend."


Source: www.ipa.co.uk


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