UK companies have moved from promotions to brand-building as main media budgets drive marketing spend.
The latest IPA Bellwether Report did, however, find that adspend is predicted to fall in real terms until 2025.
The Q3 report is based on a survey of around 300 UK-based companies and found that 21.1% of those questioned increased their total marketing spend in the first 3 months to October, 15.8% downgraded their budgets.
This led to a net balance of +5.3% – this is the weakest quarter of marketing budget growth since the final quarter of 2022.
While it has slowed, it does extend the current sequence of upward revisions to 10 successive quarters – this time, led by main media spend.
This had a net balance of +7.4%, compared to -2.5% in the previous quarter.
“As storm clouds gather over the UK economy, it’s encouraging to see total marketing budgets hold firm in expansion territory,” explained Joe Hayes, Principal Economist at S&P Global Market Intelligence and author of the Bellwether Report.
“We saw last quarter that firms had become concerned by persistence of the cost-of-living crisis, which drove a record rise in sales promotions spending. In the latest quarter, however, firms have gone back to brand-building, with anecdotal evidence suggesting that this move has been made both defensively and offensively. With demand conditions coming under pressure, companies will have to position themselves strongly to stand out from their competitors.”
Within main media, other online advertising methods that aren’t captured by the other sub-categories rose sharply (net balance of +9.1%, vs. +8.3% previously) as companies engaged with new innovative tools such as artificial intelligence.
Video (+0.9%, from +3.2%) and published brands (+0.8%, from -5.0%) were the other areas of expansion within main media, whereas audio (-10.8%, from -8.0%) and out of home (-12.1%, from -7.1%) saw contractions accelerate.
Events continued to be an area of marketing budget growth in the third quarter, with a net balance of +5.9%.
Other areas of budget growth included direct marketing (net balance of +4.3%, from +7.3%) and public relations (+4.0, from -1.9%).
Areas where there were spending cuts were: market research (-1.5%, from -2.9%) and sales promotions spending (-1.5%, from +13.4%).
“The Q3 2023 Bellwether Report suggests a more considered approach to our circumstances is emerging,” said Alex Uprichard, Managing Director, IMA-HOME and IPA City Head for Leeds, Yorkshire and Humberside.
“Main media advertising and events budgets are increasing, reflecting a desire to steal competitor market share through brand building and driving loyalty with face-to-face experiences. Sales promotions are reducing, indicating tactical short termism is beginning to scale back. At the same time, businesses are seeking efficiency and innovation, for example via AI and technological solutions. There is also increased interest in purpose driven business models – with sustainability moving up the agenda.
“It all points towards the fact that businesses are starting to bed in for the long haul, strengthening their foundations and making strategic choices for the future, rather than the right now.”
According to S&P Global Market Intelligence’s latest forecast, the UK economy is set for a “shallow recession” and adspend is expected to fall in 2023 and 2024 and only return to growth, in real terms, in 2025.
“This quarter’s Bellwether Report brings focus to those brands that are pro-actively navigating the current economic climate with an increase in main media marketing investment, an eye on stealing market share and a focus on customer loyalty,” added Richard Aldiss, Managing Director, McCann Manchester and IPA Chair for England & Wales.
“Advances in technology (AI), and sustainability goals are also unlocking opportunities in products and services, further fuelling the need and benefit of longer-term, strategic planning. It remains a challenge for businesses and marketeers, to balance the needs of today whilst also looking beyond tomorrow to capitalise on the opportunities a future-facing strategy presents.”
