Promo budgets grow again says Q4 IPA Bellwether

January 19, 2012

Promotional marketing budgets grew again in the fourth quarter of 2011, although at a lower rate than in Q3, according to the latest Bellwether survey from the Institute of Practitioners in Advertising.

The bad news from the Bellwether, however, is that business optimism is falling further in the face of economic uncertainty, to levels seen prior to the onset of the 2008/09 financial crisis.

The Q4 2011 IPA Bellwether records a net balance for sales promotion of +0.6%, compared with +2.8% for Q3 (which was the first positive score for the sector for 15 quarters).

Chris Williamson, chief economist at Markit and author of the Bellwether, says: “It is encouraging to see that companies are planning to raise their marketing spend in 2012 despite seeing their financial prospects for the next three months falling to the worst since the height of the financial crisis in early 2009. It seems that many companies are looking to fight the prospects of a challenging year ahead with increased promotional activity."

The net balance is produced by taking the percentage of companies in the survey which said budgets had decreased away from those who said budgets had increased. The overall balance, across all channels the IPA measures, was also 0.6%, as was the result for direct marketing.

By sector, ‘all other’ (below-the-line) and main media spend were the only types to see a reduction, suggesting companies were keen to cut spending on traditional media in favour of online, price discounting and more direct marketing strategies.

Internet advertising grew the most of all sectors, with a net balance of 13.4%. Within the internet category, search was revised up to the greatest extent in almost two years (net balance of 14.9%, up from 9.3% in Q3).

Marketing executives are very gloomy about the prospects for 2012, however. Their confidence has fallen to an 11 quarter low: the net balance of -44.9% was down from -23.3% in Q3. Additionally, executives reported that financial prospects for their own companies had deteriorated for the first time since Q1 2009.

Annie Swift, chief executive of the Institute of Promotional Marketing, says: “Marketers are still increasing their budgets in all the sectors that can deliver real behaviour change, which includes search and other online advertising, direct marketing and what the IPA still insists on calling ‘sales promotion’. That’s excellent news for our members and for the wider promotional marketing industry, although we certainly shouldn’t be getting complacent – confidence is worryingly low.”

The IPM defines promotional marketing as marketing that changes behaviour and which can be communicated via any channel, including traditional sales promotion, direct marketing, online, press, TV and other media. The IPM estimates that as much as 84% of direct marketing now includes promotional content, while almost all digital marketing will be promotional rather than pure brand advertising. Furthermore, the growth of the Internet and mobile as media means TV, radio, press and posters ads can be instantly linked to relevant incentives.