Marketing budgets are back in the intensive care unit – despite being giving the kiss of life in the first quarter of 2019 – with the latest IPA Bellwether report showing a return to the flatlining of Q4 2018.
The report, which blames the axis of evil of Boris Johnson, Jeremy Hunt and Brexit for continued economic uncertainty, signals a stalling of growth. The 20% of panel members reporting greater marketing spend was completely offset by those cutting expenditure, while the remaining 60% kept budgets unchanged since Q1.
The “evil threesome” has created hesitancy among clients and delayed decision making, the report claims, while panel members have also raised concerns that difficult conditions domestically are damaging consumer confidence and impacting consumption.
Businesses are also wary of headwinds from external sources, particularly spillover effects into UK markets from global trade disputes and weaker growth at key export destinations such as Europe and Asia.
Nevertheless, marketing executives were given extra discretion over Internet-based advertising in the second quarter, as signalled by a net balance of +11.5% of firms reporting budget growth (+17.2% in Q1). Within Internet, search/SEO budgets also grew solidly (net balance of +9.9% from +14.2%).
Main media advertising budgets were also given a boost in the second quarter. Overall, a net balance of +5.6% of companies reported greater main media marketing budgets (+5.2% in Q1).
Sadly, direct marketing has not been quite so resilient, with the net balance falling to -9.0% (-3.5% previously), the lowest level in over ten years. While that might sound dire, this figure is derived from two-thirds of panellists observing no change in direct marketing budgets, around 21% recording cuts, and 12% reporting greater available expenditure.
And, before everyone rushes off to Beachy Head, Bellwether’s definition of “DM” is predominantly direct mail, which – depending on who you believe – is either down in the dumps or flying high. The only other disciplines it covers are email, telemarketing, door-to-door, catalogues and SMS. Bellwether still does not include the huge growth areas of the industry, such as technology, data and insight.
Bellwether panel members remained negative regarding financial prospects in the second quarter, casting more downbeat assessments towards both industry-wide and company-own finances than seen during the opening quarter of 2019.
With precisely 34% of marketing executives reporting a pessimistic outlook towards finances in their industry, compared to approximately 8% that were optimistic, the resulting net balance (-25.6%) signalled the second-most negative assessment since the fourth quarter of 2011 (surpassed only by the Q4 2018 reading of -28.6%). Furthermore, this was down from a net balance of -22.6% seen in Q1.
Looking forward – rather than dwelling on the gloom – Bellwether remains cautious towards 2019, expecting only a modest 1.1% annual increase in adspend over the year as a whole.
Various factors underpin its reservation, namely ongoing Brexit uncertainty, but also recent developments in the UK economy, which this year so far have largely been negative. There is a real possibility that the UK economy will contract in the second quarter, and the Bellwether panel comments, as well as latest Bellwether data, highlight that businesses are looking to contain costs and shield against challenging demand conditions.
Nevertheless, Bellwether believes businesses will be eager to accelerate marketing efforts once uncertainty has cleared, and subsequently see 2020 onwards being more positive on the adspend front. It expects growth of 1.8% in 2020, followed by stronger rates of increase in 2021 (2.0%), 2022 (2.2%) and 2023 (3.1%).
IHS Markit economist and report author Joe Hayes, said that developments in the wider economy during Q2 have shown that more intense challenges lie on the horizon for UK businesses. He added: “Firms have adjusted to this, belt-tightening in some cases and withdrawing into a wait-and-see approach once again. Given the economic and political uncertainties that remain at large, a neutral stance towards budget setting appears fully justified.
“That said, Internet marketing remained a bright spot. We see continued growth in the digital space, with panellists pointing to ongoing drives through technological improvements and social media channels.”
Meanwhile, Kantar media division UK & Ireland chief executive Mark Inskip reckons the report shows that brands simply cannot afford to be complacent.
“Despite no visible increase in budgets and a negative financial outlook, marketers must prioritise an approach that meets consumers on their terms, seamlessly fitting advertising content into the experiences their audiences are already enjoying across different platforms.
“Accurate campaign measurement sits at the heart of that success – only by being able to accurately track audience responses and reactions across all platforms, whether paid, owned or earned media, will marketers be able to maximise their investments and truly demonstrate their ROI.”
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