Marketing budgets tighten as cost of living crisis hits UK economy

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The latest IPA Bellwether report makes gloomy reading for marketers as the financial outlook is at its “most downbeat since the start of the pandemic.”

The figures, which are based on questionnaires sent to 300 UK-based companies showed that +2.1% of respondents were still revising their marketing budgets up this quarter. However, that’s down from +10.8% the previous quarter.

This was blamed on rising cost pressures, such as energy bills and general prices for goods and services rising sharply, plus high inflation leading to consumers’ purchasing power to deteriorate.

“The slow pace of budgets, although being recorded on an upward trajectory doesn’t come as any big surprise when we look at the current geopolitical situation and inflation increases. With the cost of living crisis weighing on the nation, the financial outlook as we know is challenging,” said Richard Aldiss, IPA City Head Manchester and North and Managing Director at McCann Manchester.

“How can our industry respond to the current climate? Now more than ever we need to work with our client partners to balance short term goals with more longer term objectives, With pace and agility to ensure we adapt to the here and now whilst reinforcing the value of effectiveness, knowing that the strategies we adopt now will shape future success.”

Of the 7 categories of marketing spend monitored by the Report, only events saw growth in Q3, but even this had slowed from +22.2% to +4.5%.

Main media marketing budgets fell for the first time since Q1 2021 to -3.1%, from 0.0%.

Published brands fell the most, -11.2%, then Out of Home, Audio and Other Online Advertising. Video did see growth from +0.8% to +8.7%.

Public Relations budgets also fell for the first time in a year, with a net balance of -4.8% while Direct Marketing had a smaller reduction, to -0.6%.

The report’s authors S&P said that a recession is likely to have started in Q3, but it is likely to be “short and shallow.”

“We know from analysis of additional S&P500 data and new data from the FTSE 100 benchmarks that strong brands are a critical strategic asset that deliver value and that their budgets are an investment not a cost,” said Paul Bainsfair, IPA Director General.

“Furthermore, we see from this data that strongly branded companies recover quickly after a crisis and retain their performance. We appreciate, however, that while increasing or maintaining investment in marketing during these tough economic times is generally the ideal thing for companies to do, it is not necessarily the easiest thing to do – as these latest Bellwether results imply. But there are ways around this.

“Instead of slashing budgets that can lose brands their customers’ awareness and subsequent market share, our experts would advise that after optimising their pricing and promotions strategy, which would usually include supporting with brand advertising, companies tweak their brands’ marketing budgets subject to their geography, portfolio, channels and media – all of which will have variations that can also be optimised accordingly. Equally, we’d advocate a longer-term approach that steers away from heavy sales activations which can erode brand loyalty and lose companies profit.”

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