Marketing budget growth has hit a one-year high, as companies react to the ongoing cost-of-living crisis.
That’s according to the Quarter 1 IPA Bellwether Report.
Surveyed UK companies are showing a “greater appetite for marketing activities” with sales promotions being the top performing sector over the period.
Overall, total marketing budget growth is at its strongest since the second quarter of 2022, with +8.2% of firms registering upward revisions to their budget. That compares to +2.2% in the final quarter of last year.
12.9% of firms registered budget cuts and around two-thirds (66.0%) recorded no change in spending.
“Against a backdrop of consumer and economic frailty, it remains encouraging to see net growth in total marketing budgets,” said Richard Aldiss, Managing Director, McCann Manchester and IPA Chair for England & Wales.
“With marketing spending growth at its strongest since Q2 2022, including an increase in main media advertising budgets. Brands that are seizing opportunities to appeal to new audiences and grow market share may also be fuelling the optimism we see in expected increases to total marketing spend in the year ahead.”
Main media marketing, which includes online advertising activity and budgets for big-ticket campaigns on TV, recorded its strongest expansion in spending since Q1 2022 (net balance of +5.8%, from +4.4%).
Breaking down the category:
Online (+10.5%, from +6.3%);
Video (+7.9%, from +13.7%);
Audio (+1.7%, from 0.0%);
Published brands (-1.9%, from -3.9%)
However, Out of Home fell to -12.4%, from -8.8%.
The strongest growth came from Sales promotions, with a net balance of +8.8%, from -4.0%. That’s a rise at the strongest pace in nearly 20 years, as firms invested in supporting customers through the cost-of-living crisis.
“At Reputation, we have been talking to many of our clients about the importance of investing in brand loyalty during these turbulent times, so I’m pleased to see this spike in sales promotion activity reflected in the latest IPA Bellwether report,” said Camille Flores-Kilfoyle, Head of Marketing, EMEA at Reputation.
“The cost of living crisis has meant consumers are having to really think about every penny they spend. Sales offers show that your company understands customers’ current challenges and prioritises loyalty. In turn this leads to a positive brand reputation and enhanced retention.”
Events also continued to see growth in the wake of Covid-19, +6.3%, from +5.7%.
Direct marketing spending also rose at the start of the year (net balance of +4.2%, from -0.6%).
Elsewhere there were falls:
Other marketing activity not already accounted for (net balance of -5.8%, from -10.1%).
A net balance of -0.6% of firms cut their PR budgets (from -1.9%), while market research spending’s net balance was of -3.2%, from -8.8%.
“So far, so positive! Marketers are continuing to invest through the downturn. One watch out though: plan revisions appear to be down weighting brand investments and shifting towards sales promotion,” added Alex Uprichard, Managing Director, IMA-HOME and IPA City Head for Leeds, Yorkshire and Humberside.
“Consumers will welcome sales promotions, as inflation keeps prices high. However, neglecting brand investment for short term gains is a risky business. Let’s hope pricing for the moment does not over-power building for tomorrow.”
Looking ahead to 2023/24, data showed companies were “strongly positive” about the future.
More than a third (36.6%) of respondents expected a greater total marketing spend in real terms, with 16.9% anticipating cuts.
+14,5% expected events marketing spend to rise in 2023/24, the greatest level of optimism among the 7 categories.
Main Media advertising was also positive at +13.5% as were sales promotions (+6.3%) and Direct Marketing (+1.4%).
Less positive were PR and other marketing activities, which were expected to be unchanged, while market research was the only segment where budgets are set to be reduced (net balance of 0.7%).
“Given the tumultuous economic and societal conditions we have seen in the past three years, the latest Bellwether Report appears to point to a marketing industry in optimistic control of its future,” explained Emma Cranston, Client Services Director at Ozone.
“Looking forward to the second quarter, we’re expecting bumper interest in content around the King’s Coronation, a home-crowd Eurovision, and the lead up to major sporting events like the FIFA Women’s World Cup kick-starting in mid-July. Not only will these significant events deliver really engaged audiences, they also have the ability to truly shift the mood of the nation, and savvy brands are already aligned with them. We are hopeful the shift of seasons will lead to a further improved outlook – with the cost of living crisis dominating the winter, it’s great to have some reasons to be optimistic in the months ahead.”
The report is based on a questionnaire of around 300 UK companies.
