Marketers braced for slump

Nearly half the UK’s marketing managers expect to miss their current sales targets, while confidence among marketers has fallen to its lowest ever level, an authoritative new survey claims. The findings have added fuel to calls by business leaders for a further cut in UK interest rates.

More importantly for marketers, nearly one in five of the companies which responded to the survey said they would be cutting the number of staff they employ in sales and

marketing.

The study, the latest Marketing Trends Survey from the Chartered Institute of Marketing, found that sales projections for this year have fallen slightly compared with last year: but despite the fact that forecasts have been revised downward, 44 per cent of those surveyed still expect to fail to meet them, with many now viewing them as either “unrealistic” or “very challenging”.

Meanwhile, the CIM Sales Plan Confidence Index has dropped to 90.2, its lowest ever figure, suggesting that marketers have a very gloomy view of the UK economy in the short term.

Just under half the companies which responded to the survey are happy with the current size of their marketing and sales functions, while 36 per cent actually plan to recruit more staff, a slight fall on the 38 per cent recorded in April. However, 18 per cent plan to reduce their marketing or sales departments, more than double the seven per cent which were contemplating cuts in April.

However, while marketing departments may be in danger of shrinking, marketing expenditure should increase by an average of 4.9 per cent during the current financial year, compared with the planned 3.1 per cent increase reported in the April survey. The biggest area of growth for marketing resources will be spending on the Internet and intranets, where budgets will increase by 8.2 per cent. Direct mail budgets are predicted to grow by 4.2 per cent, lead generation by 4.6 per cent and marketing information systems by 6.5 per cent.

Increases in marketing budgets are expected across the board, although other sectors are likely to see more modest growth than those mentioned above.

Steve Cuthbert, director-general of CIM, says that this lack of confidence in the UK economy “means that companies need to protect themselves by focusing on customer satisfaction”

He observes that 62 per cent of those surveyed said that “improving customer loyalty continues to be the focal point of their strategy”.

Douglas McWilliams, chief executive of the Centre for Economics & Business Research, which conducted the survey on behalf of CIM, says: “The slowdown of the UK economy is now impacting on both the manufacturing and service sectors. Little inflationary pressure, weak demand, a projected sharp fall in bonuses and hence in average earnings, show the continuing need for UK interest rates to be reduced.”

McWilliams points out that if companies miss their sales targets, they will end up with excess inventory – which in turn means that “the shelves became overloaded, and demand is currently being met from these excess inventories rather than from new production”. He adds: “Typically, such an inventory cycle takes up to 24 months to work its way through the supply chain”: this suggests that demand during 1999 will continue to be weak, as excess inventory works its way through the UK economy.

In six out of the 13 industry sectors surveyed – including food; drink and tobacco; vehicles and transport equipment; and utilities – more than half of the marketing managers contacted by the CEBR expect to miss their sales targets. The most bullish marketing managers are to be found in the retail sector, where less than a third of marketers expect to miss their sales targets.

The bigger the company, the less confident its marketers. While more than half of respondents from companies with sales over 100m think they have little chance of achieving their forecasts, the figure drops to only a third for companies which turn over less than 1m.

On average, companies are planning for growth in sales during the current financial year of 7.3 per cent, while they achieved growth of 7.5 per cent during the year just completed. The projections of 7.3 per cent growth are significantly lower than the 8.0 per cent companies were expecting at the time of the last survey, in July.

The Sales Plan Confidence Indicator is calculated by looking at responses to the question, “How do you assess your organisation’s sales plan?” The October Index, at 90.2, while the lowest level yet recorded, is in line with the downward trend obvious since July 1997, when the Index was 94.8.

Methodology

The MTS was conducted by postal questionnaire between September 23 and October 2 1998. The survey was sent to UK resident members of CIM, and all respondents were in a position to provide detailed information regarding their organisations’ marketing and sales policies.

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