Bellwether shows shaky confidence

Marketers are losing confidence in their business prospects as weak sales continue to hit profit margins, says the latest Bellwether report.

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Confidence dropped sharply in the second quarter with the percentage of respondents less positive about the financial future facing their industries climbing from 25 per cent to 35 per cent.

The net balance when the proportion of respondents that are growing more confident is factored in shows a dramatic drop from one per cent in Q1 to -16.8 per cent.

Bellwether

Focusing on marketers’ prospects for their own company, some 30 per cent of those polled reported financial prospects had deteriorated compared to the previous quarter with 32 per cent growing more optimistic. This meant a drop of 17 percentage appoints from a two year high last quarter to 2.1 per cent.

The negativity is reflected in the attitude to marketing spend, with total marketing budgets revised down for the first time in a year, according to the quarterly report.

Bellwether

The data shows weaker than expected sales in Q2 have pushed margins down and put pressure on to cut costs. However, the rate of budget cuts was only small, with a net balance of -1.1% of companies signalling a reduction in marketing spend.

The Bellwether data leaves a question mark over whether actual spend in the UK will increase this year.

Where marketers are spending their budget also reflects priorities and with a big increase for sales promotion initiatives, the strongest rate of growth in five years (+4.5%), it seems that short term sales are a priority at the expense of brand building.

Bellwether

Internet advertising and search spend were also both revised up in the second quarter while budgets for main media, direct marketing and “all other” dropped.

The figures contrast with Nielsen data on global ad spend in Q1 released this week that shows a percentage rise for all traditional media, save magazines, year-on-year.

Chris Williamson, chief economist at Markit and author of the Bellwether report, says that “typical risk aversion” was to be expected given the state of the economy and adds: “It is reassuring to see that confidence is nothing like as negative as we saw late last year and any upturn in business optimism should soon feed through to higher marketing spend, and the Olympics should also provide a boost in the third quarter.”

The Bellwether is based on a questionnaire of 300 UK based companies and respondents are primarily marketing directors “or similar”.

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