U.K. Marketers Keep Spending Despite European Debt Fears

IPA Annual Bellwether Study: Most Extra Money Goes to Online, Direct, Sales Promo

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U.K. marketers are maintaining -- and even increasing -- their communications budgets, but their overall confidence is falling as the European debt crisis deepens.

According to the Institute of Practitioners in Advertising's latest Bellwether Report, companies are less optimistic about the financial prospects for their own industries than they have been since the full impact of the recession was felt in early 2009, two and a half years ago.

Nicola Mendelsohn, president of the IPA, said, "The decline in confidence reflects the uncertain financial climate that businesses are operating in. Yet it's important that the advertising industry and the U.K. should do all it can to be as upbeat as possible to meet the challenge that we face."

The Bellwether Report surveys marketers about their budgets each quarter, asking if they are spending more or less than they had planned. In this report, marketers in all categories said they had revised budgets upward, due mostly to new-product launches and the need to maintain market share.

The report found that 40% of respondents said they believe the outlook for the advertising and marketing industry is likely to worsen, and only 16% thought it would improve. More than double the number of marketing executives have adopted a negative outlook on the prospects for the ad industry in the third quarter compared with the second quarter.

For the first time since the second quarter of 2007 marketers were planning to increase budgets in all sectors: above the line, online, direct marketing and sales promotion.

Chris Williamson, author of the Bellwether, said: "U.K. companies are tackling the adverse economic climate with increased marketing activity, in an attempt to boost sales in the face of weak demand. The increase in marketing spend helps to explain why companies became a little more optimistic about their own prospects but were pessimistic about prospects for their industries."

Ms. Mendelsohn added, "The 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 shops that maintain the strongest marketing spend will come out on top."

The Bellwether showed that most of the extra money is being targeted at online advertising, direct marketing and sales promotion. This is despite a recent independent report by Ebiquity, commissioned by TV marketing body Thinkbox, which claims that TV advertising earns $1.70 for every $1 spent, compared to $1.48 for radio, $1.40 for press, and $1.06 for static display and 45 cents for outdoor.

Other findings suggest that TV outperformed rivals in generating sales. Press advertising's effectiveness was only 37% of TV's effectiveness, while radio achieved 19% of TV's uplift, online static display 15% and outdoor 9%.

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