Companies are expecting to increase their marketing spend to support brands through the anticipated economic downturn.
That’s according to the Q4 2022 IPA Bellwether Report. The survey of 300 UK-based firms looks at planned spend across the marketing sector to predict trends.
Firstly looking back at 2022, during the fourth quarter, around a fifth of respondents said they had upwardly revised their total marketing spend (20.2%), while 18% pointed to budget cuts. This led to a positive net balance (2.2%) for the 7th successive quarter.
Q4 2022 broken down by category
Events continued to be on the rise post-Covid and was the top performing category in this quarter, showing a net balance of +5.7%, up from +4.5%).
Main media marketing returned to growth after recording -3.1% in the previous report. This period its net balance was +4.4%. Within this category, online was +6.3% (from +9.3%). Audio remained unchanged, but published brands (-3.9%) and Out of Home (-8.8%) saw declines.
These negative trends continued across the remaining categories:
- Direct marketing (-0.6%)
- PR (-1.9%)
- Market research (-8.8%)
- Other marketing activities (-10.1%)
Budget Outlook for 2023/2024
39.% of surveyed firms said they expected total marketing budgets to be higher in 2023/24, with just 15.3% envisaging spending cuts.
This was indicated by growth across each sector, particularly events, which recorded a net balance of +18.0%.
Main media marketing was also expected to be strong, with a net balance of +13.4%.
- Sales promotions (+7.9%);
- Direct marketing (+5.8%)
- PR (+3.7%)
- Other marketing activities (+2.4%)
- Market research (+2.0%)
“The most recent data from Bellwether highlights some interesting insights into how brands and businesses are reacting to the current climate and navigating the much-reported economic downturn,” said Richard Aldiss, Managing Director, McCann Manchester and IPA City Head for Manchester and the North West.
“It is of course heartening to see that businesses are expanding marketing budgets in response and that budgeting forecasts point towards growth. These budgets will of course need to work harder than ever, with even greater scrutiny on return on investment.
“It is encouraging to see many North West brands reporting steady performances over the last quarter, demonstrating the region’s business resilience. In a region that is known for its excellence in performance marketing we have to make sure we are also promoting and delivering the capabilities and strengths in longer term brand strategy and effectiveness.
“The year ahead will of course be challenging but as an industry there is a huge opportunity to demonstrate our value and ability to be strong business partners for our clients.”
However, business sentiment among those surveyed remained pessimistic, due to high inflation, increased interest rates and low consumer confidence.
41.8% of respondents said the financial prospects within their specific industry as a whole have worsened when compared to the three months prior.
Only 8.7% of companies were optimistic on the outlook for their sector.
Adspend is also expected to weaken in 2023, but growth is expected to resume in 2024.
Bellwether authors S&P expect GDP to shrink in 2023 by 0.8% as household incomes are squeezed by inflation. S&P are currently predicting a “short and shallow recession in the UK” with moderate growth returning in 2024.
“Given the immediate outlook for the UK economy has deteriorated since the previous Bellwether Report, this quarter’s results are most welcome. While understandably cautious, they are nonetheless in positive territory,” added Paul Bainsfair, IPA Director General.
“We can see that the companies that can are holding their nerve and continuing to invest in marketing through the downturn, with supporting anecdotal evidence from the report also revealing that a lot of companies who are concerned about losing market share to competitors have either maintained or increased their spend accordingly. This indicates that marketing is being used both defensively and offensively.
“It is particularly good to see positive revisions to main media budgets this quarter which is helping to drive the overall upward figure, fuelled particularly by investment in video advertising. As our evidence shows, this will stand brands in good stead during a downturn as brand-building advertising has a proven ability to maintain a brand’s pricing power and protect its profit margins.”
