IPA Bellwether: Client budget growth rebounds from two-year low

IPA Bellwether: Client budget growth rebounds from two-year low

A net balance of 6.5% of marketers revised their total budgets higher in the April-June quarter – calculated by 23.5% spending more than planned minus 17% spending less than planned.

This was up from the 5% net balance reported by the Q1 2018 survey, which was the lowest score since Q1 2016.

There was a notable recovery in main media budgets between the first quarter, when the net balance of minus 2.1% was the first negative reading since Q3 2016, and the last quarter, when it turned postive again at 4.9%.

Paul Bainsfair, the IPA director general, highlighted television’s part in the recovery. “You only have to look at the recent hype surrounding Love Island and the World Cup to realise that consumers are deeply ensconced in screen-based activity,” he said.

“As the evidence shows, television is the most effective medium for advertisers to build their brands and adding digital media to the mix enhances the effectiveness of traditional media. It therefore makes infinite sense that advertisers are investing their money here.”

Internet budgets racked up their ninth year of continous growth with a bang, reporting the second strongest upward revision since 2008 with a net balance of 22.7%. However, mobile advertising did not share in the boom with a net balance of minus 0.7%.

The other growing categories in Q2 2018 were events and sales promotions, while declining categories included direct marketing, market research and PR.

Joe Hayes, economist at the report compiler IHS Markit, offered a more pessimistic view of the latest report, observing that “despite the pick-up in marketing budget growth, the latest pace remains weak”.

He added: “The latest growth is partly defensive in nature. Margins are being tested by increasing competition and firms are raising budgets largely to sustain market share and profits. As such, there appears to be clear downside risks to spending available to marketing executives.

“The annual marketing budget forecasts made by panellists at the beginning of the year signalled expectations for the slowest rate of growth in five years. The current impasse in Brexit negotiations, combined with reports of rising operating costs, justifies this less opportunistic view.”

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