Marketing budgets inch up but worries remain

Marketers are starting 2013 slightly more optimistic than they finished 2012 with budgets set to increase and hopes for the financial prospects for their companies higher than they were last year, according to the latest Bellwether report. However, worries over the still subdued UK economy and the brittle confidence of consumers have prompted analysts to warn such optimism could soon disappear.

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The poll of senior marketers from 300 companies, a respected barometer of confidence in the industry, found “cautious optimism” within the industry about the prospect finance directors will set budgets higher over 2013. More than a quarter (28 per cent) asked were expecting improvements in the performance of their own companies compared with 22 per cent more pessimistic.

The net balance of 6.8 per cent was a marked uplift on the -3 per cent reported by Bellwether in the third quarter and the best return in three quarters.

Increased optimism over budgets and company performance was likely driven by a swing in reported spend in the fourth quarter. Seventeen per cent of those polled spent more on marketing in the final three months of 2012, compared with the 16 per cent revising budgets down (See chart 1).

Chart 1

Although modest, the 1 per cent net balance is significantly better than the -5.5 registered in the third quarter.

Of those companies increasing budgets social media, display and banner advertising and online video continued to appeal with spend up 5.6 per cent, but for market research the only channel to enjoy greater investment in the fourth quarter. The decline in spending on traditional media – TV, press and radio – was arrested with budgets flat over the period, while the rate of decline in direct marketing investment slowed, down 1.3 per cent compared to a fall of 6.2 per cent in the third quarter (See chart 2).

Chart 1

The more positive outlook expressed by some was offset by gloomier predictions about the prospects for the UK economy. Flat GDP growth, stuttering consumer confidence and faltering spending in 2012 coupled with forecasts of slight if any improvement in 2013 have left marketers nervous about prospects for their industry. Over 29 per cent were more pessimistic compared with just 12 per cent more optimistic.

Chris Williamson, chief economist at Markit and author of the Bellwether report, says: “The initial increase [in 2013 marketing budgets] is one of the smallest seen over the past 12 years, with only 2012 seeing a more downbeat start to the year.

“Companies remain cautious about raising expenditure on marketing activities due to weaker than expected sales and profits last year and ongoing uncertainty about the economic outlook at home and abroad.”

The Bellwether report mirrors the forecast for advertising spend offered by the Advertising Association/WARC report earlier this week. The duo predicted spend would climb to £17.2bn in 2013, compared to the £16.8bn spent in 2012.

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