Analysis: CAF Agency Barometer gives glimpse of upturn

The Communications Agencies Federation has published the first in a series of quarterly snapshots into the state of the industry. Peter Simpson finds the heads of its three constituent parts in upbeat mood

It's not a boom, but there are grounds for optimism, was last week's comment by Communications Agencies Federation (CAF) chairman Graham Lancaster, following the results of the body's first quarterly Agency Barometer survey (PRWeek, 3 October).

Boardroom resignation that budget cuts would remain the order of 2003 and 2004 was slowly making way for a much-welcomed - if reserved - positive outlook.

Agency chiefs from the PR, advertising and marketing specialisms were among 170 CEOs quizzed on present and planned budget commitments, new business, income forecasts, confidence and employment.

The majority said activity levels were up in the new business market, resulting in higher income forecasts and a recovery in recruitment. And more than 70 per cent of PR chiefs said they felt more optimistic for the current financial year and into the next, suggesting PR is the sunniest specialism in the communications sector.

The findings were in stark contrast to the influential, benchmark Bellwether Report released exactly a year ago. Carried out by the Institute Practitioners in Advertising (IPA) in October 2002, the report found hopes of an early recovery were severely dampened by the fact that the majority of advertisers surveyed had revised their marketing budgets downwards.

A year on, the CAF Barometer survey - which claims to offer a truer representation of the three trade specialisms - suggests the majority of agencies are feeling more optimistic about the business climate for their own agency. Most said the new business market was now 'busy'.

Once again, the advertising sector saw the greatest net declines in budget commitment; while advertising specialists and larger agencies had the lowest confidence. One of the CAF's key findings is that smaller agencies - those deemed not to be 'advertising specific' - have turned the corner.

Another trend is that more and more companies appear to be turning their backs on traditional media, declaring it too expensive.

The beneficiaries of this shift are direct marketing and PR. One-to-one messaging is seen to be as effective as one-to-many. And third party endorsement is proven to be highly effective and makes good business sense.

The chairmen of the CAF's three constituent bodies - the Marketing Communications Consultants Association, the PRCA and the IPA - take differing views on what to learn from the survey.

'Tactical brand-building such as PR necessitates better investment for clients,' says MCCA chairman Matthew Hooper. He helped launch the CAF survey, hoping it would give a greater insight to clients as to the state of the comms industry. In the past five years, a plethora of technologies such as the internet, digital-interactive TV and mobile communications has opened up tactical brand-building opportunities.

'Ad budgets have been slashed against the backdrop of the current economic cycle, and clients are looking at other ways to get their message across.

PR and marketing, which have quick returns, are becoming key in the tactical branding mix,' adds Hooper.

Hamish Pringle, chairman of the IPA, says the CAF findings might not give a true representation because it has yet to build data to compare the results to. 'I do not believe the survey shows there is a fundamental shift away from traditional media branding methods. I don't think one can say one comms specialism is rising at the expense of another. You cannot afford to be partisan,' he says.

Rather, there is a blurring of the lines between brand media and response media, Pringle claims. 'The two are converging. Most adverts these days have response media woven in with either a coupon, or telephone number or website. Clients now think of buying in a mix of direct marketing, advertising and PR. The three trades have to make clearer the terminology to clients who want to buy in an integrated communication mix.'

PR has taken a hammering, so any sign or report of a recovery in any survey must be welcomed, says Pringle.

No one can deny that advertising spend dwarfs that of direct marketing and PR, and will perhaps always be used as the benchmark for the health of the comms industry. Results from Q2 2003 showed ad spend in the UK was down 1.8 per cent - to £3.4bn.

'Physical ad spend is on a different scale from direct marketing and PR. But there is a shift towards direct marketing, mainly because of the recession.' says PRCA chairman Lancaster.

He believes the CAF allows true representation of the three comms trades.

'PR's presence in the boardroom is now at least equal to advertising because of its importance to a company's reputation and its ability to speak to clients,' Lancaster adds.

Half the PRCA's members took part in the CAF survey. Lancaster says it has to establish itself over the next two or three quarters to show trends effectively. But it did show that PR firms have improved their client budget forecast. 'And that has to be good news,' he concludes.

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