Advertising Digital Publishing
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UK marketing budgets continue to grow: IPA Bellwether Report

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Preliminary 2023/24 budgeting points to strong growth next year

UK companies are still expanding marketing budgets to support their brands through the impending downturn. The main media category returns to growth; events budgets expand again. Indeed, preliminary 2023/24 budgeting points to strong growth next year.

While the UK economy is already expected to have entered a technical recession, the latest Q4 2022 IPA Bellwether Report published today shows total marketing budgets still grew during the final three months of 2022.

Around one-fifth of survey respondents upwardly revised their total marketing spending in the fourth quarter (20%), while 18% registered budget cuts. Overall, the net balance recorded in positive territory for the seventh successive quarter (+2%) and marked the longest uninterrupted sequence of growth for four years. 

At a glance need to know (percentage figures rounded up):

  • Events were the top-performing Bellwether category in Q4.
  • In terms of the breakdown for main media, the data showed video (net balance of +14%) and other online (net balance of +6%) driving growth. 
  • Audio budgets were unchanged (net balance of 0%),
  • Published brands and out of home saw declines (net balances of -4% and -9%)
  • Direct marketing and PR budgets were cut modestly, whilst sales promotions and market research saw budgets contract.

Paul Bainsfair, IPA Director General, commented, “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.”

Noticeable is the huge increase in forecast video spend, within main media, at +13.7%, the highest since this metric was tracked, with “other online” also seeing increases. 

Amy Lawrence, Digital Director, MediaCom & Chair of the IPA Digital Marketing Group

Industry reaction

Future plc’s UK Group Commercial Director, Clare Dove, comments, “Brands that spot trends and strategically tap ready-to-spend groups will be able to grow when others are in the weeds. For example, we’ve supplied brands who are hesitant to continue spending on social media platforms right now, due to a lack of trust, with the first-party data they need to find consumers’ interests and passions and target them effectively.

Continued data innovation will ensure marketers remain confident they will reach relevant audiences at scale and optimise the journey to purchase for faster conversion.

Clare Dove, UK Group Commercial Director, Future plc

Oscar Wall, General Manager – EMEA, for subscriptions platform Recurly adds, “Interestingly, events were the top-performing sector in Q4, further cementing the fact that consumers are looking to meet face to face. In fact, based on a Recurly study, 48% of UK consumers surveyed say the last two years have had them rethink the subscription services they use, with streaming video (69%), Retail (42%) and Food (22%) services as the top subscriptions used today. Yet as the pandemic restrictions eased, UK consumers are most eager to spend their time and money on in-person shopping (40%), in-person entertainment and events (36%) and international travel (34%) – brands and businesses in these industries should be considering ways to capitalise on revenue and loyalty drivers.”

Chris Hogg, Chief Revenue Officer at Lotame shares his concerns, “It’s worrying to see publishers lose a share of media budgets. This is tracking with forecasts from our recent Beyond the Cookie survey, which found that half of UK marketers expect to reduce their programmatic spend in 2023, versus a third expecting an increase. Where is the money going instead? Many marketers — reluctantly — plan to invest more in walled gardens.

Publishers still have a strong pitch to marketers: an opportunity to reach valuable consumers in a safe, high-quality environment that is less cluttered than social platforms and search results. Investing in first-party data collection and collation, identifying unknown users, and expanding audiences through tactical collaborations should be priorities for publishers seeking to bolster their value proposition in this increasingly competitive market.

Chris Hogg, Chief Revenue Officer at Lotame

Josh Partridge, Head of EMEA, Yahoo comments, “One factor that marketers need to consider is the changing way audiences interact with advertising, in particular digital out-of-home advertising. Factors such as new working patterns, rail strikes or extreme weather (as seen recently) will all have an impact. Campaigns need to be adjusted accordingly to minimise ad spend wastage whilst maximising audience traffic – leading to a more efficient marketing budget overall.”

Context, data, and privacy are uppermost in mind

Nick Reid, SVP & Managing Director EMEA, DoubleVerify says “Brands who are focused on riding through the current uncertainty will want to ensure their ads are delivered in the right contextual environments, with comms that reflect the day-to-day experience of their audiences. This focus on suitability from an ad environment perspective is equally as important as the way these campaigns are measured and optimized, and with the increase of digital video spend, attention will be at the forefront of this in 2023.” 

Ben Cicchetti, VP, Corporate Marketing, InfoSum, adds, “Brands with clear data collaboration strategies and strong direct media partnerships will have more opportunities to reach unique audiences and tap into growing formats – such as video, which outperformed all other segments in Q4. The result will be a better return on ad spend (ROAS).

“It’s also essential to avoid costly missteps; consumer awareness of privacy issues is higher than ever – the technology platforms they use must put privacy at the centre of everything, while allowing them to maximise opportunities.”

Andy Ashley, Global Marketing Director, SmartFrame Technologies comments, “The outlook for the future is largely positive, highlighting brands’ understanding that communication is crucial, especially in times of uncertainty. However, it’s clear any new solution must be part of a larger strategy to improve transparency throughout the industry – it is not enough to simply engage consumers. With more oversight of ad placement and environment as well as privacy-safe interactions, businesses will be able to continue optimizing their strategies and stay agile in challenging times.”

Video, analytics and flexibility

Julie Lock, Regional Leader, UK Marketing at HubSpot, says, “According to our annual Top Marketing Trends report, 90% of marketers who use short-form video will continue to invest in it next year, and one in five marketers plan to use it for the first time in 2023. However, while marketing generates interest and attracts customers, it’s the customer experience that ultimately determines a sale. Without proper alignment between sales and marketing teams, efforts can be ineffective. By ensuring both teams are working towards the same goals and using the same insights, businesses can convert leads into revenue.”

James Dale, Managing Director, SINE Digital, adds, “As a digital-first agency, we’re intrigued to see an increase in spend on events and a downturn in OOH campaigns. We are also seeing a huge demand for data-driven analytics. There’s never been a more pressing time to spend wisely within marketing budgets but also be more flexible in the strategy of where campaigns are being delivered in an ever-changing environment impacted by many socio-economic factors.”

Sam Benkel, Managing Director, Retail Media Northern Europe, Criteo says, “It’s likely we’ll see media efficiency become a far greater topic of conversation over the coming months and diversifying spend across ad-supported streaming, retail media, audio, and even the metaverse will be key – marketers need to be where consumers spend their time online and closer to the point of sale.”

Businesses have built up a level of robustness following 2.5 years of permacrisis and very few companies will now be going into this year assuming there won’t be obstacles to overcome. The past two years has no doubt made organisations more resilient and understand that they can’t afford to completely switch off advertising spend, as it’s increasingly difficult to return to peak levels from a standing start if competitors have been active throughout testing times.

Matt White, VP EMEA at Quantcast

Maor Sadra, CEO, INCRMNTAL, sums up, “The challenge is knowing which marketing activity to cut and which to keep. The problem many marketers have is that they aren’t utilising tools to effectively evaluate the true impact of their spend across all channels to see which campaigns are performing and which are not. By using the correct platforms that offer on and offline measurement however, struggling brands can successfully reduce spend without impacting revenue, which is critical at a time when many businesses need to make cutbacks.”  

Defending price premiums

Elliott Millard, Head of Planning, Wavemaker UK says, “There is an apparent tension in the Bellwether data – respondents are simultaneously pessimistic about the financial situation of the UK and their own businesses whilst optimistic about their ability to invest in marketing. In a market where the cost of living is biting, and many media channels are inflationary (this is as much about social as it is about TV), that feels like a disconnect. However, digging into the areas of forecast investment allows us to reconcile this tension. 

The industry is so often focused on topline growth that we forget the power of marketing to impact price sensitivity. When consumer spending is squeezed, at the same time as supply chain constraints and increasing cost of production, it is arguably more important to defend price premium for profit than topline growth. 

This is reflected in the mediums that are seeing the most growth. Events, for example, help to drive trial and maintain a premium proposition. Broadcast media, especially video, can create a shared belief in a brand’s power, making downtrading or private label alternatives less appealing. In this way, that apparent tension is actually a pragmatic and strategic approach to maintaining overall profitability in tough times.”

Abigail Cunningham, Client Communications Director, UniLED Software, adds, “Coming into Q1, thankfully, I see signs of more optimism. Many brands and agencies are understanding the importance of continuing to invest in OOH to protect the health of their brand for the long term, but also seize the opportunity to achieve a higher SOV and competitive edge. This will drive the sales and results they need to survive this year’s challenges and return to growth faster and in better health.

As a result, there is definitely a shift in perception this time, with the attention movement putting more value on the role of OOH in driving both long-term brand metrics as well as shorter-term results which tend to get more focus for budgets when there’s a downturn.”

Susan McKay, CMO International at Dun and Bradstreet concludes, “It’s encouraging to see that many UK marketers are expecting budget growth, despite the uncertain economic climate. Data-driven marketing has enabled marketers to prove return on investment and make the case for increased spend. Our research supports this sentiment as 79% of business leaders surveyed said they are boosting investment in data quality for this purpose.

“However, data quality is still a concern for many companies, with only 28% fully confident in their ability to target audiences. To overcome this, businesses must prioritise a first-party data strategy and focus on data accuracy and quality to help them make informed decisions. With the impending ban on third-party cookies, companies must also rely on first-party data to understand customer buying behaviour and improve personalisation. This will enable them to implement effective account-based marketing strategies and drive growth in the coming year.”