Just 24 hours after Gartner painted a Hieronymus Bosch-style portrait of a marketing industry still in the grips of Covid hell, the latest Bellwether Report has revealed the sector has actually broken out of those shackles, with total budgets up for the first time in 18 months and to the sharpest extent for over two years.
And for the first time since the opening quarter of 2017, Bellwether panellists also registered an upward revision to their direct marketing budgets during Q2.
Of the surveyed companies, 14.4% registered budget growth, compared to 13.7% that noted a reduction. Although seemingly miniscule, the resulting net balance of +0.7% was still a marked improvement since the first quarter of 2021 (-11.8%) and signalled the first upward revision in over four years. Even so, 71.9% of respondents left their budgets unchanged.
Overall, a net balance of +6.0% of surveyed companies expanded their total marketing budgets during the second quarter. Just over one-in-five (21.2%) panellists registered growth, compared to 15.2% that reported a decline.
This is the first time since the fourth quarter of 2019 that total marketing expenditure has been revised up.
Furthermore, it is the sharpest increase since the beginning of 2019 and a notable contrast to the net balance of -11.5% of firms last quarter that had recorded spending cuts. The latest results bring to an end a five-quarter sequence of continual cuts to overall marketing spend.
According to anecdotal evidence from the survey panel, strong vaccination uptake and the end of virus containment measures supported expectations of an economic recovery. Many firms are also anticipating strong sales as consumers unleash demand which has been pent-up over the course of the pandemic.
That said, some still erred on the side of caution and were uncertain of the impact of new strains of the virus. Others were also concerned that consumer behaviours may not return to what they were before the pandemic and were unsure on the best way to position their business in this event.
Other than direct marketing, PR also saw an upturn with a net balance of +1.8% of firms growing their expenditure in this space (up from -8.0% in Q1). The key segment of marketing, main media, also recorded growth in the second quarter. A net balance of +1.3% of businesses raised their main media budgets (up from -8.2% previously).
Within main media, video (+4.2%, from +3.3%), audio (+1.1%, from -9.0%) and other online advertising (+11.0%, from 0.0%) all grew, while there is still some way to go for published brands (-6.1%, from -22.2%) and out of home (-7.5%, from -24.1%) whose budgets were downwardly revised once.
Marketing expenditure for sales promotions (-0.7%, from -16.2%), market research (-9.6%, from -17.8%) and “other” (-2.5%, from -14.7%) were all cut. And, given the continued restrictions on large gatherings that were in place during the second quarter, it is perhaps little surprise that events budgets (-24.7%, from -43.2%) registered by far the strongest decline of the monitored forms of marketing.
When it comes to old chestnut of industry confidence, the survey signals further robust optimism among Bellwether panel members towards both their industry-wide and company-specific financial prospects, as was also the case in the opening quarter of 2021.
With +45.9% of panel members becoming more optimistic regarding their company’s financial prospects compared to three months ago, and only +11.4% signalling pessimism, the resulting net balance of +34.6% indicated a strong overall level of confidence.
Although the net balance is slightly lower than in the first quarter (+36.6%), it is nonetheless the second-highest reading since the first quarter of 2015.
Similarly, financial prospects at the broader industry level remain firmly in positive territory during the second quarter of 2021. A net balance of +21.1% of surveyed companies were more bullish compared with three months ago. Again, the level of optimism was robust overall and only bested by the reading in the first quarter (+26.2%), which was the strongest for six-and-a-half years.
In light of the UK’s successful vaccination programme and phased re-opening of the economy, Bellwether is now anticipating a much stronger expansion in GDP this year, followed by a robust rate of growth in 2022.
Indeed, increased savings during the lockdowns are likely to fuel a brisk recovery in household spending once the Covid-related restrictions end, and the extended furlough scheme has delivered resilient labour market conditions.
Consequently, Bellwether anticipates 2021 and 2022 will record strong rates of growth in adspend. It has pencilled in expansions of 7.5% and 6.0% respectively as businesses recover to their pre-pandemic levels of activity. Beyond the next 18 months, it foresees adspend growth moderating to 2.7% in 2023 once the UK economy has recouped the pandemic-related losses, and then adspend growth of 1.2% and 2.4% in 2024 and 2025 respectively.
However, there are a number of risks to these forecasts. New variants of Covid could undermine the effectiveness of the vaccine, and job losses once the furlough scheme ends could impact consumer spending. There are also strong fiscal challenges on the horizon, given the immense cost of economic support during the pandemic, which is likely to see tax burdens on businesses and households increase.
IPA director general Paul Bainsfair said: “For revisions to UK marketing budgets to bounce back so quickly and strongly, following their nadir at the height of Covid-19 restrictions in Q2 2020, is very welcome news. As the vaccination rollout continues at pace and UK plc gears itself up for growth, we encourage companies to ramp up their advertising to make the most of post-lockdown, pent-up consumer demand.”
Even so, industry chiefs, have warned brand owners that without a solid data-driven strategy, those returning budgets risk being wasted.
Trade Desk UK vice-president Phil Duffield commented: “If the last five quarters have taught us anything, it’s to expect the unexpected. Consumer behaviours may never return to the predictable patterns we once knew, so decision-makers will need to remain agile in their approach.
“This is where the beauty of data-driven advertising truly lies – in its ability to allow marketers to remain nimble and flex campaigns as needed. Marketers who invest in data no longer have to fear that months’ worth of planning has been thrown down the drain, as adaptability is baked into strategies from the outset.
“I’m optimistic that marketers who adopt the right tech – with the capability to adapt spend according to what’s working and what isn’t – will have plenty of reasons to be positive going forward.”
Treasure Data director of marketing EMEA Andrew Stephenson concurs: “As budgets increase, particularly in areas such as video, audio and online advertising, brands risk firing blind and creating ineffective campaigns unless marketers have a true view of their customer.
“The need for a solid data management strategy has never been so important. Brands are operating in a fundamentally different landscape following the pandemic, and connecting online and offline data will be critical to delivering a quality experience that keeps customers coming back.
“With consumer spending expected to boom and marketers regaining the floor to do what they do best, there’s rarely been a better opportunity for brands to unlock that deeper understanding with data and set themselves up for success.”
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