DM budget boom still on hold as uncertainty spreads

DM disciplines 3The direct marketing industry is still awaiting the predicted boom times, promised at the beginning of the year, with the latest IPA Bellwether Report showing that economic uncertainty is “crippling” the entire marketing sector.
While the Q3 report does show that the net balance of UK companies have revised their marketing budgets up this year (21% of the panel recorded an upward revision while 11% of recorded a cut), 70% of the panel recorded no change in budgets – including DM spend – since Q2.
Although this signalled a stagnation in overall spending on direct marketing, it was a relative improvement on the previous survey’s five-quarter low of -4.7%. However, the Bellwether shows Q3 data marks a difficult first half of the 2017/18 financial year for DM budgets and raises doubts that the category will experience growth over the year as a whole.
Data earlier in the year showed a net balance of +7.5% of companies forecasting growth in direct marketing budgets for 2017/18.
Marketers cited the hard to quantify impacts of the Brexit negotiations and the UK’s future departure from the EU as the primary sources of uncertainty. This was coupled with reports of reduced sales and investment and a desire to keep costs lean.
Digital marketing is still driving budget growth for the entire marketing industry, with a net balance of +17.0% of companies increasing their Internet spend, lower than the previous quarter’s decade high of +22.7%, but nonetheless indicative of healthy expansion.
Within Internet, marketing budgets related to search/SEO rose to a greater degree as signalled by the respective net balance improving to a seven-and-a-half year high of +16.3% (Q2: +15.6%). Mobile advertising also rose to a stronger degree in Q3 (net balance: +5.8%, from Q2’s +3.0%).
Other Bellwether categories to enjoy positive net balances during the third quarter included events (+9.4% versus +2.1% for Q2) and PR (+7.2% from +2.1% in Q2)
Dr Paul Smith, director at IHS Markit and author of the Bellwether Report, said: “The latest Bellwether survey is characterised by uncertainty, which is reported to be weighing on investment and household spending. The net result has been relatively sluggish sales growth, with companies responding by adopting a more cautious approach, in many cases freezing budgets at levels recorded three months ago.
“Looking ahead, financial prospects remain broadly subdued as concerns about Brexit continue to weigh on sentiment. Combined with ongoing squeezes on spending from rising costs, these headwinds are likely to continue to undermine growth in the final quarter of 2017.”

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