News: SP fares better in downturn, reports Bellwether

Sales promotion budgets have suffered less than other areas of marketing because of the need to drive sales during a downturn, according to the latest Bellwether Report.

Overall, marketing budgets have been revised down for the third quarter in a row, and to the greatest extent since the 9/11 terrorist attacks nearly seven years ago.

While SP budgets fell for the second consecutive quarter, it was the smallest downward revision of all the categories of marketing spend covered in the report.

The only category to see an upturn was the internet – one of the media channels for sales promotion – although even this was the smallest increase since 2002.

Bellwether Report author Chris Williamson, chief economist at Markit, said that the relatively positive outlook for SP “suggests that companies are more reluctant to reduce sales promotion budgets than main media advertising, direct marketing and ‘below the line’ spend, in many cases reflecting the need to sustain price discounts and other incentives to drive sales growth”.

The Bellwether Report, the quarterly survey of marketing spend published by the Institute of Practitioners in Advertising, defines sales promotion as mainly price discounting, with other areas of SP spend covered by categories such as the internet.

The worst drops in budgets were in “traditional media” such as TV, press, outdoor, radio and cinema. Direct marketing budgets were revised down again, although this is partly because Bellwether classifies email marketing under internet spend.

“Rising costs and weaker-than-expected sales put pressure on companies to cut marketing budgets in the second quarter to protect profit margins,” said Williamson. “This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000.”

Commenting on the report, IPA president Moray MacLennan (pictured), chairman of M&C Saatchi Europe, said: “The report certainly reflects the increasing gloom of the past few weeks. There is a clear implication that the economy will slow further.

“Agencies cannot affect the short-term economic outlook, but they can do at least two things: firstly, focus even more closely on cost control and secondly, strive for even more original and innovative solutions so they can buck the trend.”

Anthony Wreford, deputy chairman of Omnicom Europe, added: “The performance of agencies will vary considerably according to their own client base. Agencies with, for example, a high percentage of client spend from retail and FMCG will undoubtedly be having a harder time than say an agency with more institutional work such as government, technology or top-quality financial services.

“Internet spending will continue to grow as more clients see the importance of this form of communication and the ability to use this medium, like PR, in a tactical context.”