IPA cautious in spite of marketing spend hike

Britain's recession-battered ad industry was drawing cautious cheer this week from a survey claiming to detect the first tentative signs of returning confidence among clients.

But researchers responsible for the IPA's latest Bellwether report have cautioned that although signs of an end to the gloom are apparent, the upturn is very fragile.

The rising optimism is based on survey results showing that one in four companies revised their marketing budgets upward for the second quarter of this year. The net increase is the strongest since the survey began at the start of 2000.

But there's little sign of this being translated into media spend, which has been revised downward for the sixth successive quarter.

Hamish Pringle, the IPA's director-general, warned: "It would be wrong to get over-excited about this. The best that can be said is that it provides a glimmer of good news."

The report is based on questionnaires sent to more than 200 UK-based companies which have agreed to provide quarterly information on their advertising and marketing activities.

Chris Williamson, who authored the report for NTC Research, said it provided some further evidence of recovery in business confidence and marketing spend from the lows of late last year.

But he added: "The fact that media advertising budgets continued to be cut, albeit at a much reduced rate, reflects reluctance among advertisers to commit spend due to the ongoing uncertainty regarding the economic outlook. Although signs of a bottoming out of marketing adspend are apparent, a question-mark still hangs over the strength of the current upturn."

IPA executives believe the findings of the latest survey suggest advertisers are concentrating on retaining the loyalty of existing customers rather than making strenuous efforts to attract new ones.

This is borne out by the fact that direct marketing budgets were revised upward for the third consecutive quarter with nearly one in four companies putting more resource behind DM activities.

Similarly, sales promotion budgets are also rising while the continued depressed media spend suggests advertisers are still shying away from big product launches.

At the same time a continued rise in internet-related activities, which now account for about 2 per cent of client budgets, are a result of consumers becoming more comfortable with the technology and what Pringle described as "older and wiser advertisers, who have learned from the previous dotcom disaster.

The IPA believes clients, still reeling from the effects of last year's terrorist attacks in New York and a shaky US stock market, have had their confidence hit further by scandals surrounding companies such as Enron.

However, the IPA claims agencies that have insulated themselves by offering a range of communications services are managing to ride out the economic storm.

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