All sectors of marketing reported budget cuts with the exception of the online, but even the industry's perennial star performer experienced its smallest upward revision since 2002.
Traditional media -- TV, press, outdoor, radio and cinema -- was worst hit, with budgets dropping at the fastest rate since the first quarter of 2006.
This was followed by "all other" marketing, which includes PR, events and research. Downward budget revisions indicated that growth will be the weakest in these areas for at least five years.
The Bellwether Report cites disappointing sales, rising costs and growing economic gloom as the reason for companies cutting marketing budgets.
It also forecasts the likelihood of further cuts later in the year brought on by the low levels of corporate profitability compared to a year ago.
In the second quarter of 2008, only 15% of companies reported an increase in total marketing budgets, while 27% reported a decrease.
Just 11% of companies reported an upward revision to their media budgets, compared to 24% reporting a decline.
Digital was not immune from the distress affecting other areas of marketing, with only 19% of companies reporting that their online budgets were revised up, down from 27% in the first quarter; while 12% reported a decline, up from 5% in the first quarter.
The biggest slash to marketing budgets was seen in the travel and entertainment, retail, consumer durables and FMCG sectors.
Chris Williamson, the author of the Bellwether Report, said "Rising costs and weaker-than-expected sales put pressure on companies to cut marketing budgets in the second quarter to protect profit margins.
"This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000."
Moray MacLennan, the president of the IPA and European chairman of M&C Saatchi, advised agencies to act with prudence and strive for innovation in order to ride worsening economic conditions.
He said: "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."
Comments
This is not a surprise and has been on the cards for quite sometime. Agencies can not directly control how much a client is going to spend in any twelve month period, this usually determined in advance. However agencies can, and do make their clients budgets go further, but there are still agencies wasting money on services that could be found cheaper if they shopped around.
Too many agencies are still paying too much for production services. Not every agency has a department that can handle production and all the pitfalls that go with it. So they outsource and this can be costly. Although pre-press and print production is not glamorous, it can be very expensive and can make a huge dent in any marketing budget. If agencies want to continue to win new business, they have to look at ways of reducing costs for their clients, but not in a way that is detrimental to the creative output.
Agencies need to start shopping around for outsourced services. There are plenty of small companies out there who have the same expertise and knowledge as some of the better known production companies. If agencies take the time to shop around, they will find that they can save £1,000s on production.
Gary O'Donnell
Vio Worldwide.
It is going to be a big challenge for agencies to deliver more innovative media solutions at a time when the resources to do this may need to be cut back. We are finding more and more agencies see www.getmemedia.com as a cost effective tool for them to very quickly find some of the more innovative and interesing media ideas and case studies in the market. Getting more from less in terms of media agency and media owner resources will be the key challenge for the industry in the short term. Ian Benton Getmemedia.com
As the Bellwether report reveals we are indeed seeing a revision in spend on direct marketing. However, we predict that online will remain relatively immune as the results are so clearly quantifiable. For example with Google, if you're spending £1,000 a month for £5,000 return on investment, why would you cut that solid revenue stream?
Direct marketing is great, but campaigns can take a long time to put together and deploy, anything from eight to twelve weeks for example. Online / digital campaigns offer far more flexibility as online marketing is far more agile and can be adjusted, ramped up, even paused instantly. Moreover, digital campaigns can quickly be tweaked and optimised for a greater, more directly measurable effect.
One way to shore up ROI during a difficult economic period is to put the brakes on brand-building and perhaps rely on brand inertia. For example, if you're Barclaycard, people aren't going to forget that you're Barclaycard during a downturn. Instead invest money into performance media such as pay per click, affiliate, email, etc. And if you're worried about any erosion of your brand recognition you can track this using tools such as Google Trends.
Which is it? Focus on cost control or strive for innovation? I'm not sure you can do both. After all, it's hard to focus on the big picture when you're being paid by the brushstroke.
Agencies that stay fearless, continue to challenge their clients and deliver great results will buck the trend. But there's no substitution for keeping your house in order. It's the perfect time for the hungry, fast-moving, adaptable and talented smaller agency to steal the march on their larger cousins.
Marketing cutbacks (report, July 14) could trigger a downturn in consumer
demand, if we take no counter-measures to improve the mess we’re all in. We’ve
become busy fools - re-work, waste and pandemonium are blighting agencies and
clients alike, and yet marketing is a key driver of demand. Research shows that
we can get 10-20 per cent efficiency gains, or more, without harming consumer
demand, if we sort out the disordered systems and illogical processes that
annihilate our brilliant creative ideas.
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Comments
David Llewelyn-Jones - 14/07/2008
ouch.
Gary O'Donnell - 14/07/2008
This is not a surprise and has been on the cards for quite sometime. Agencies can not directly control how much a client is going to spend in any twelve month period, this usually determined in advance. However agencies can, and do make their clients budgets go further, but there are still agencies wasting money on services that could be found cheaper if they shopped around. Too many agencies are still paying too much for production services. Not every agency has a department that can handle production and all the pitfalls that go with it. So they outsource and this can be costly. Although pre-press and print production is not glamorous, it can be very expensive and can make a huge dent in any marketing budget. If agencies want to continue to win new business, they have to look at ways of reducing costs for their clients, but not in a way that is detrimental to the creative output. Agencies need to start shopping around for outsourced services. There are plenty of small companies out there who have the same expertise and knowledge as some of the better known production companies. If agencies take the time to shop around, they will find that they can save £1,000s on production. Gary O'Donnell Vio Worldwide.
Ian Benton - 14/07/2008
It is going to be a big challenge for agencies to deliver more innovative media solutions at a time when the resources to do this may need to be cut back. We are finding more and more agencies see www.getmemedia.com as a cost effective tool for them to very quickly find some of the more innovative and interesing media ideas and case studies in the market. Getting more from less in terms of media agency and media owner resources will be the key challenge for the industry in the short term. Ian Benton Getmemedia.com
Deborah Francis - 14/07/2008
As the Bellwether report reveals we are indeed seeing a revision in spend on direct marketing. However, we predict that online will remain relatively immune as the results are so clearly quantifiable. For example with Google, if you're spending £1,000 a month for £5,000 return on investment, why would you cut that solid revenue stream? Direct marketing is great, but campaigns can take a long time to put together and deploy, anything from eight to twelve weeks for example. Online / digital campaigns offer far more flexibility as online marketing is far more agile and can be adjusted, ramped up, even paused instantly. Moreover, digital campaigns can quickly be tweaked and optimised for a greater, more directly measurable effect. One way to shore up ROI during a difficult economic period is to put the brakes on brand-building and perhaps rely on brand inertia. For example, if you're Barclaycard, people aren't going to forget that you're Barclaycard during a downturn. Instead invest money into performance media such as pay per click, affiliate, email, etc. And if you're worried about any erosion of your brand recognition you can track this using tools such as Google Trends.
Rory Sutherland - 14/07/2008
Which is it? Focus on cost control or strive for innovation? I'm not sure you can do both. After all, it's hard to focus on the big picture when you're being paid by the brushstroke.
Gellan Watt - 17/07/2008
Agencies that stay fearless, continue to challenge their clients and deliver great results will buck the trend. But there's no substitution for keeping your house in order. It's the perfect time for the hungry, fast-moving, adaptable and talented smaller agency to steal the march on their larger cousins.
Robert Shaw - 17/07/2008
Marketing cutbacks (report, July 14) could trigger a downturn in consumer demand, if we take no counter-measures to improve the mess we’re all in. We’ve become busy fools - re-work, waste and pandemonium are blighting agencies and clients alike, and yet marketing is a key driver of demand. Research shows that we can get 10-20 per cent efficiency gains, or more, without harming consumer demand, if we sort out the disordered systems and illogical processes that annihilate our brilliant creative ideas.