Bellwether reports biggest cuts to marketing budgets since 9/11

Marketing budgets have been revised down for the third consecutive quarter, and to the greatest extent since the 9/11 terrorist attacks in 2001, as the doom and gloom pervading the industry builds momentum, according to the latest IPA Bellwether report.

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 (pictured), 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."