Bellwether reports first rise in budgets for 18 months

Marketers have increased their budgets for the first time in 18 months, according to the Institute of Practitioners in Advertising’s (IPA) Q3 Bellwether Report, released today.

The quarterly survey of marketing spend reveals a modest upward revision to budgets – with online ads and direct marketing having the strongest gains – and marks an end to budget cuts seen in the past five quarters.

Marketing spend is being increased in line with improved sales and profits, and in support of new product launches, according to the IPA. However, the trade body adds that 2006 will see the weakest growth in marketing spend of any year since 2002. Traditional media budgets were revised down for the eighth consecutive quarter, although the rate of decline has slowed for the third quarter in a row.

The report outlines a net balance of 2.6% of companies reporting an increase in total marketing budgets: 22% increased budgets against 19% reporting a decline.

Meanwhile, internet marketing budgets continue to outstrip those in all other sectors, with 24.1% of companies raising budgets across all main business sectors, led by IT and computing. Some 11.5% of businesses now allocate more than 15% of total budgets to online marketing.

Direct marketing budgets showed the largest gain for 18 months, with a net balance of more than 10% of companies showing an increase.

David Pattison, IPA president and chief executive of media group PHD, says: “The report paints an interesting picture of a modest rise in Q3 as business confidence in marketing has increased. The growth is driven predominantly by direct marketing and internet advertising at the expense of the more established media sectors, continuing the trends that we have seen over the past 18 months.”

Jim Marshall, chairman of both Starcom and the IPA’s Media Futures Group (pictured), adds: “Confidence in marketing and advertising is returning, yet with a high degree of caution. This is reflected with traditional media continuing to suffer as companies opt out of a commitment to long-term branding.”

WPP Group chief executive Sir Martin Sorrell (pictured) says: “It is good to see prospects improving as in other Western European markets like France and Germany. Direct and internet continue their strengthening trend, driven by new technologies.”