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Sales promotions budgets are cut for third quarter running says Bellwether Report

LONDON - Sales promotions budgets saw another reduction over the past quarter, the Bellwether Report has found, making it the third quarter in a row that there have been cuts.

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The good news for the industry was that the cuts were not as dramatic as those seen in the second quarter of the year, with a balance of 2.2% of companies making cuts. This compares with the 5.6% cut recorded during the last Bellwether Report. Declines were seen in business services, media, autos and consumer durables.

The figures, published by NTC Research on behalf of the IPA, show that although across-the-board marketing growth is set to show an increase for 2005-2006 as a whole, there have been downward revisions to budgets over the past quarter. These have been blamed on disappointing sales and profits, linked to weaker consumer spending and high energy costs.

After being unchanged in the second quarter, direct marketing budgets were on average revised up in the third. The upgrade to budgets contrasted with the cut to total marketing spend recorded during the quarter and suggests a shift away from media adspend and sales promotion.

However, it was internet spend that showed the strongest growth for any category, with 27% of companies surveyed saying they had spent more on internet marketing in the third quarter, while only 3% said they had cut online marketing budgets.

The Bellwether Report says that internet now accounts for around 4% of total marketing spend, up from under 2% five years ago.

The figures show that for TV, radio and press, 22% of companies cut their media adspend budgets for the fourth quarter, while only 16% increased them. The worst cuts were in the retail, FMCG, media, and IT and computing sectors.

The Bellwether Report suggests that as companies turn away from expensive traditional media, cheaper methods of marketing, such as direct marketing and online marketing, appeared to benefit.

Sir Martin Sorrell, chief executive of WPP Group, said: "The Q3 Bellwether report confirms what we have been seeing in the UK, and indeed France and Germany -- clients spending cautiously overall, particularly in traditional media, and increasing spending in the direct, internet and interactive media."

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