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Marketing Spend Down in Q2 as Business Confidence Weakens

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Marketing Spend Down in Q2 as Business Confidence Weakens PR Newswire LONDON, July 12, 2012 LONDON, July 12, 2012 /PRNewswire/ -- The latest IPA Bellwether survey published today (Thursday 12th July) reveals that marketing budgets were revised down for the first time in a year in Q2 reflecting pressure to cut costs as profit margins continued to be hit by weaker- than-expected sales, and amid concerns regarding the future path of the economy. However the downward revision was marginal, with 23% of companies reporting a reduction compared to 22% that reported a rise, the resultant net balance* was just -1. 1% (down from 1% in Q1). However the Q2 downward revision suggests it will remain a close call as to whether total marketing spend will increase this year, as had been the plan at the outset. (And final data is now in for 2011 actual spend, revealing a decline, albeit marginal at -1.7%.) And business confidence waned in Q2 compared to the surge seen three months earlier. Marketing executives' views on the prospects for the industry in which they operate saw the net balance* drop sharply from 1% to -16.8%. And in relation to their own companies' prospects a net balance* of 2.1% in comparison to 19.1% in Q1. General business optimism was buoyed at the start of the year amid hopes the global economy had turned a corner.
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Marketing Spend Down in Q2 as Business
Confidence Weakens
PR Newswire
LONDON, July 12, 2012
LONDON
,
July 12, 2012
/PRNewswire/ --
The latest IPA Bellwether survey published today (Thursday 12th July) reveals
that marketing budgets were revised down for the first time in a year in Q2
reflecting pressure to cut costs as profit margins continued to be hit by weaker-
than-expected sales, and amid concerns regarding the future path of the
economy. However the downward revision was marginal, with 23% of
companies reporting a reduction compared to 22% that reported a rise, the
resultant net balance
*
was just -1. 1% (down from 1% in Q1).
However the Q2 downward revision suggests it will remain a close call as to
whether total marketing spend will increase this year, as had been the plan at
the outset. (And final data is now in for 2011 actual spend, revealing a decline,
albeit marginal at -1.7%.)
And business confidence waned in Q2 compared to the surge seen three
months earlier. Marketing executives' views on the prospects for the industry in
which they operate saw the net balance* drop sharply from 1% to -16.8%. And
in relation to their own companies' prospects a net balance
*
of 2.1% in
comparison to 19.1% in Q1. General business optimism was buoyed at the start
of the year amid hopes the global economy had turned a corner. The
subsequent slide in confidence highlighted by this survey reflects in part the re
emergence of heightened uncertainty emanating from the escalation of the
euro debt crisis.
* net balance is calculated by subtracting the percentage reporting a
downward revision from the percentage reporting an upward revision.
By sector, internet advertising budgets were revised up to the greatest extent
of all categories with a net balance of 5.1%, although this was the lowest for a
year. Within internet advertising, online search/SEO spend was also revised up
and to a higher extent (net balance of 7.4%). Sales promotion budgets were
revised up with the strongest rate of growth in nearly five years (from 0% to
4.5%). Main media was revised down, as was direct marketing and 'all other'
(below-the-line) (see chart 2 attached for more detail).
Says Nicola Mendelsohn, IPA President, Executive Chairman and
Partner, Karmarama
: "With renewed concerns surrounding the economy
both at home and abroad, in particular the problems surrounding the eurozone,
it's not surprising the signs are less encouraging. However given this situation,
things do seem to be holding up nevertheless, spend is down but only very
marginally at -1.1%. Business optimism has also dropped from the high seen in
the first quarter, but not compared to the low levels seen in late 2011. We shall
wait and see how things evolve and if caution continues, but look forward to
key events like the Olympics which we expect will provide a welcome boost."
Says Chris Williamson, Chief Economist at Markit and author of the
Bellwether:
"The second quarter saw some fairly typical risk aversion creeping
in to marketing plans as the economic outlook dimmed and sales often
disappointed. Business confidence has taken a step back again, having perked
up briefly at the start of the year, which has caused companies to review their
planned spend on marketing this year. The focus has been on cutting back on
main media advertising, direct marketing and below-the-line activities and
reallocating that money towards sales promotions and the internet, both of
which are often cited as a means to quickly grow sales, especially in a downturn
when customers are particularly cost conscious.
"The downturn in confidence is not surprising given recent events in the euro
area, which is the UK's main trading partner, and gloomy domestic economic
news in recent weeks. However, it is reassuring to see that confidence is
nothing like as negative as we saw late last year and any upturn in business
optimism could soon feed through to higher marketing spend, and the Olympics
should of course also provide a boost in the third quarter."
Note to editors:
The Institute of Practitioners in Advertising (IPA) is the trade body and
professional institute for UK advertising, media and marketing communications
agencies. It was established in 1917 as a servicing body and to negotiate on
behalf of its members with media bodies, government departments and unions.
Its 249 corporate members handle over 80% of the UK's advertising agency
business which has an estimated value (excluding press and TV production) of
£17.7 billion.
For further information:
IPA
Danielle Davies, PR Manager, IPA +44(0)207-235-7020
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