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Budget cutting continues as media loses out to online

LONDON – Overall marketing budgets have been revised down for the third successive quarter, according to the latest Bellwether report, with media budgets cut the most in the report's six-year history.

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With a balance of 8.2% of companies spending less than planned in the last quarter of 2005, the report made for worse reading than last quarter's 4.2%.

The figures, published today by NTC Research on behalf of the IPA, show that fewer companies revised down budgets than in the previous quarter. However, the balance was worse because fewer companies revised budgets upwards and more companies left them unchanged.

The industrial, retail, consumer goods and media sectors all fell victim to downward budget revisions, blamed on the need to cut costs due to weak sales and poor profits. Only business services and the public sector managed upwards revisions.

However, planned product and brand launches have supported new budgets set in the second half of last year. On average, 21.3% of companies increased their marketing budget.

Sir Martin Sorrell, group chief executive of WPP, said: "IPA Bellwether again confirms what we are seeing in the UK -- a tough market, even in comparison to western continental Europe. New-media activities, however, continue to show stronger growth."

This quarter brought a sharpening of the trend for clients to cut media spending and up direct marketing and online spending.

On balance, 17.3% of companies cut their media spending during the quarter while 3.4% increased direct marketing spending and 20.9% increased online spending.

The trend is also evident in media's declining share of total spend from 2004 to 2005, revealed in this quarter's survey. From a 37% share in 2004, media fell to 34% in 2005, while direct marketing rose from 23% to 26%.

Sales promotion maintained a 14% share and the "all other media" category, which includes online, PR, market research and corporate communications, was also steady at 26%.

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