Sector turns corner, dare we plan on Roaring Twenties?

gatsby 2Marketers might not want to tempt fate by shouting it from the rooftops but the UK ad market finally appears to have turned a corner, with the decline in budgets slowing and a new sense of optimism emerging that things are getting better.

According to the Q4 2020 IPA Bellwether Report, UK marketing executives saw another decline in budgets during the final quarter of last year. Two-fifths (40.4%) of marketers recorded a decline in spend, compared to 16.4% who noted an increase, meaning there was a net balance of -24.0% of Bellwether panellists recording a contraction.

Although marked overall, the latest reduction in budgets was much weaker than those recorded in both the second (-50.7%) and third (-41%) quarters, when the economic impact of Covid-19 was most severe.

For direct marketing budgets – defined as direct mail, email, telemarketing, door-to-door, catalogues and SMS – 31.3% of firms registered a reduction while 17.4% saw an increase; a net balance of -13.9%, although a marked improvement from -25.3% in Q3.

For those who enjoy a touch of schadenfreude, most other sectors have been much harder hit; events budgets saw a net balance of -62.9%, followed by outdoor advertising at -36.7%, published brands at -29.0%, and sales promotion on -26.5%.

Main media advertising, which includes TV, also struggled, hitting -21.8%, while online was the only category within main media to record a positive net balance revision, at a measly +0.7%, up from -6.5% in Q3.

The preliminary outlook for adspend in 2021/2022 suggests that budgets are likely to recover in the next financial year. A net balance of +12.0% of firms expect their total marketing budgets to be upwardly revised. If realised they would represent a significant turnaround from the steep declines seen throughout 2020.

Initial estimates for 2021/2022 point to a fast recovery in direct marketing budgets, with a net balance of 3.3% of surveyed firms planning to increase adspend, second only to main media on +4.6% of firms.

And while the IPA’s direct marketing category is hardly representative of today’s data-driven marketing industry – spend on digital tech, data and analytics is not included – the report does at least indicate that the direct mail market should bounce back soon.

Sentiment regarding marketers’ own-company financial prospects has also improved. A net balance of +18.1% of firms were more confident of an improvement compared to three months ago (Q3: -3.9%), marking the first positive outlook since the end of 2019. The result followed severely negative readings in the first half of 2020 when Covid-19 lockdown.

IPA director general Paul Bainsfair said: “It is no surprise that Q4 sees UK marketing budgets remain in negative territory. We are still in the grip of the pandemic and the impact of Brexit is uncertain, with some marketers citing concerns regarding the potential for tariffs, and increased paperwork, delays and costs.

“While the situation remains bleak for now, the Q4 2020 Report does, however, reveal significant promise of green shoots ahead. Budget plans for 2021/2022 are into positive territory. As the vaccination roll-out continues, as the lockdowns begin to ease and as firms adapt to post-Brexit rules, perhaps we can dare to ready ourselves for the ‘Roaring Twenties’ after all. Those brands that have withstood the storm, kept their voices heard and their subsequent market share up, will be the ones consumers turn to first in the good times.”

Merkle UK chief executive Anne Stagg insists it should be reassuring that, despite the current lockdown, there are shoots of recovery. She added: “We can be cautiously optimistic for the year ahead – which will include the roll-out of the vaccine and, fingers crossed, the easing of lockdown. The industry has proved robust, despite budgets, as it’s rapidly evolved to meet the developing needs of a much-changed world last year.

“As the market recovers into this year, marketers will need to focus on nurturing one-to-one relationships with their customers and delivering personal experiences at scale. With the high street’s shutters down, digital investment has leapt ahead and will continue to be a core growth driver even when we leave lockdown.”

Meanwhile, Kantar (Media Division) UK & Ireland chief executive Mark Inskip believes at this time it is even more critical for marketers and their partners to show they really understand what makes people tick – their motivations, their fears and their hopes – and can predict future trends, including what patterns of behaviour will stick long after the lockdowns ease and what new ones will emerge.

He added: “Slashing marketing budgets can seem like an easy solution for a business under pressure, but it is often a false economy. Brands that remain visible, accessible and relevant will be front of mind when consumers reach for their wallets as the economic recovery picks up in the next financial year.”

Finally, Syzygy director of data and experience technology Anthony Magee reckons that the latest Bellwether findings expose why brands need to be laser focused more than ever on marketing effectiveness.

He continued: “Brands have heavily invested already in emerging addressable TV and digital media as a higher proportion of their media spend. So, this should be a wake-up call for those more traditional high spending brands who are now having to rework their strategies to bring their mix up to date.

“Alongside comes a warning about dropping spend for market research, often the first area to feel the axe. A deep understanding of customers should be the foundation for marketing (and product) decisions. Remove this knowledge and you are flying blind. This calls for more focus on rapid, addressable, actionable insight that generates creative ideas and channel choices, and less investment in slow, generic research that has no bearing on real world marketing decisions.

“The pandemic has proven an accelerator for brands making decisions based on fulfilling demand to survive versus vanity projects that often have limited evidence. Brands we’re working with are also taking this time to be more prudent with budgets to, yes save money but also to revisit and establish their new/updated brand purpose, messaging and what this will then mean for advertising and experiences.”

He added: “Pent-up urges to shop and spend could be realised in the latter half of the year. For brands and marketers, it raises the question of ‘how ready are you?’ – and what do your media plans look like as consumer behaviours shift suddenly?

“With the shift in demand and consumer expectations, brands will only invest in marketing tactics and initiatives that either have a clear immediate ROI, and critically also address the shift in consumer behaviour. Increasing digital ad spend, reducing investments in new launches or experiences that are ‘nice to have’ may take a backseat to tactics that provide a distinctive advantage.”

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