‘Bold marketers will come out top after economy improves’

Companies that continue to invest in marketing despite uncertainty over the state of the economy will benefit from improved market share in the long-term, according to the authors of the latest IPA Bellwether report.

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The advice comes as the report showed marketing budgets were set higher in the third quarter as companies spent heavily on direct response channels such as DM and sales promotion to boost volumes (see chart 1 below).

More than a fifth (21%) of the 300 marketers polled revised their budgets up in the fourth quarter, compared to 17% that cut spend. The net balance, 3.4%, is an improvement on the 2.2% registered in the second quarter.

Chris Williamson, chief economist at financial information service Markit and author of the report, says that investment in direct marketing and sales promotion by brands looking for a short-term volume increase “in the face of weak demand” helped lift spend.

Retailers, driven by the major supermarkets, have been investing heavily in price cuts to entice reluctant shoppers struggling with rising bills.

Increased marketing spend lifted marketers’ confidence in the prospects for their own company, Bellwether found (chart 2), but fear of a double dip recession and a further drop in consumer confidence damaged belief in their own sectors’ prospects (chart 3).

More than a third (39%) of the marketers asked said the outlook for their own industry was worse than in the previous quarter, while 16% reported an improvement. The net balance, -23.3%, was down from the -10.9% reported in the first quarter.

IPA president Nicola Mendelsohn urged marketers to continue to invest in marketing despite uncertainty over the state of the economy.

She adds: “It is important that the advertising industry should do all it can to be as upbeat as possible to meet the challenge that we face. This rise in spend demonstrates that many companies are trying to buck the downward trend.

“It is a move in the right direction and shows that businesses understand that those that maintain the strongest marketing spend will come out on top.”

Chart 1

Chart1

Chart 2

chart2

Chart 3

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