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Bellwether report signals growth for promotional spend

Wednesday April 19, 2017 at 9:40am

With a report that indicates growth in both promotions (+1.2%) and increases in direct spending, predictions for 2017/2018 look positive for the industry.

Key points:

  • Run of marketing budget growth extended to four-and-a-half years
  • Internet and main media advertising record strongest increases in budgets
  • Company financial prospects strengthen...
  • ...underpinning positive projections for growth in 2017/18
  • UK economic resilience leads Bellwether to predict rise in adspend in 2017

Following stagnation at the end of 2016, the Bellwether survey for the first quarter of 2017 indicated a solid upward revision to budgets related to direct marketing*.

Latest data indicated that a net balance of +5.3% of companies raised their direct marketing* budgets since the previous quarter. That was the best reading recorded by the survey since the first quarter of 2015, although growth in this category continues to lag wider marketing budgets.

Marketing executives are predicting further growth in the coming financial year. A net balance of +7.5% of companies signalled positive projections for direct marketing budgets for the 2017/18 financial year, with a little over 27% of companies indicating expectations for an upward revision against around 20% that are predicting a fall. 

 

Source: IPA Bellwether Q1 2017 Report

Main media advertising also enjoyed a strong upward revision to budgets during the first quarter of 2017. The respective net balance jumped to +10.7% during Q1, up from +5.1% in Q4 2016 and the best recorded by the survey for just under three years.  

Elsewhere, direct marketing budgets increased to the greatest extent for two years following stagnation in the previous quarter (net balance: +5.3%, from 0.0%), while there was a noticeable slowdown in the events category. Latest data showed the respective net balance declined to +4.9%, from +12.3% in the previous quarter and the lowest reading recorded by the survey for over a year.   Other categories that registered an increase in marketing spend included sales promotions (+1.2%) and PR (+1.1%). However, ‘other’ (-4.5%) and market research (-9.9%) both recorded deteriorating budget positions relative to those at the end of 2016.

Adspend forecast to grow  

With the UK economy showing considerably more resilience during the second half of 2016 than was generally envisaged by economic commentators, this momentum is now forecast to carry through into 2017.   Although GDP growth is expected to slow in the first quarter of the year, the economy seems to have sufficient momentum to grow at a solid pace in 2017 (the OBR are expecting a rise in GDP of 2.0%).

The Bellwether therefore predicts that this will help lift adspend by 0.6% in real terms over the year as a whole (previous forecast: -0.7%).   Further out, Bellwether predicts a stagnation in adspend in 2018, before growth recovers in 2019 and 2020 to rates of 1.8% and 2.3% respectively. However, given the difficulties in trying to predict the effects on the economy of Brexit negotiations and subsequent UK departure from the EU in 2019, current forecasts remain especially uncertain.

Paul Bainsfair, Director General, IPA: “Once again the Bellwether shows that while the impact of Brexit remains uncertain, marketers are continuing to invest in marketing. Furthermore, despite the current, turbulent digital ecosphere, it is clear that marketers are attracted to the cost-effectiveness of digital advertising and its ability to reach and accurately target their consumers.”  

Paul Smith, Senior Economist at IHS Markit: “The Q1 2017 Bellwether survey paints a picture of a solidly growing UK economy,with companies continuing to show a willingness to commit increased resources to marketing and capitalise on current positive sales trends.  

“Given the prevailing backdrop of Brexit-related economic uncertainties, a key question is whether the resilience in spend shown post referendum can be maintained. At present, marketers seem confident, with both sentiment around their own company financial prospects and budgets for the year ahead remaining inside positive territory.   “But perhaps reflect of the relative limbo we find ourselves in ahead of the start of negotiations between Britain and the EU, degrees of confidence remain historically low and panellists continue to note plenty of threats to the outlook.”  

Carey Trevill, Managing Director IPM comments   “The latest IPA Bellwether report reflects the increasing optimism and the release of marketing budgets that we in the promotional marketing sector are seeing at the end of the first quarter of 2017. Brand marketers have realised that holding back marketing plans is bad for long-term brand health.”  

“Promotional marketing – marketing which aims to change behaviour by offering the target audience an incentive or reward – is incredibly powerful, and now permeates almost all marketing communications, including online, mobile and direct.”  

“The relatively small rise in the index for Sales Promotion does not cover the vast majority of what the promotional marketing industry delivers for brands and companies and fails to take into account the integration of promotional techniques across all marketing channels and the development of new areas such as experiential and shopper marketing.”


 For further comments, please contact the IPM on 020 3848 0444

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