Where will we be in 2023… with marketing spend?

new_disciplines2This time last year, the UK marketing industry was still on course to achieve the fastest advertising recovery from Covid of any major European market – and the largest rise on record – with spend being upgraded once more and forecast to grow 24.8% to reach £29.3bn – smashing July’s projection by 6.6%.

That was according to the Advertising Association/WARC Expenditure Report which forecast that the crucial Christmas advertising season would be a major contributing factor, driving total investment for Q4 2021 to £7.9bn, again the highest level ever recorded.

However, within weeks it had all unravelled, with the post-Covid recovery facing strengthening headwinds triggered by high inflation and a squeeze on household budgets, supply chain disruptions and labour shortages.

The situation was made all the more precarious by Russia’s invasion of Ukraine, which  accentuated and extended the already-damaging cost of living crisis.

Even so, UK marketing budgets continued to hold firm and were revised up to a near eight-year high in Q1 2022, according to the IPA Bellwether Report, although it revealed a curious mix of optimism and caution that all businesses were living with, with Covid behind us, yet the war in Eastern Europe and inflation spiking sharply.

Joint founder Richard Exon said: “As trust in our Government and its lawbreaking leaders continues to erode, businesses and brands have a vital role in keeping the UK show on the road.

“The squeeze on real incomes will create more price sensitivity in most categories, creating a sharp sense of competition between brands. Those brands that continue to invest in compelling marketing, product and service innovation and great customer experiences will win disproportionate advantage.”

It was a theme that would continue throughout the year.

In May, a study by Toluna showed an overwhelming 93% of Brits said they were being impacted by higher grocery prices, while 80% said they were feeling the pinch when purchasing clothes and 74% on electrical goods (such as computers, phones, and home appliances).

These sectors were followed by eating out at a restaurant or pub (74%), mobile phone packages (67%), music and TV subscriptions and takeaways (66%) household subscriptions, such as cleaning products and coffee and tea (59%).

Brands were warned they were failing to recognise that many UK consumers were – and still are – in a period of unprecedented uncertainty, especially those with young families, and this required new kinds of customer insight and response.

Ogilvy Consulting managing director Paul English summed it up: “Today’s consumer plight needs to be seen through new lenses, with the application of natural language analysis, and cognitive segmentation, marketers can understand the human drivers behind the data.

“Most important is to understand the palpable sense of dread consumers are feeling about the future, feeling antagonised by the ‘we’re all in it together’ messaging and triggered by half-hearted price promotions.”

Metrix Data Science released its own solution to the cost of living crisis, in the form of a new profiling tool which identifies 14 separate groups of people. Dubbed StrappedUK, the tool is designed to help marketers with offer product selection or simply how to talk to individual groups. One of the first to take up the tool was DVLA, which is using it to pinpoint drivers who could have problems paying their road tax.

And, just when things appeared to be settling down for the summer, up popped Liz Truss as the new Prime Minister and all hell broke loose again.

In the first days of her administration, the marketing industry urged Truss to help businesses through the tough times ahead as well as develop a strategic industrial strategy that would benefit the UK’s leading advertising, creative and professional services sectors.

Then came the “mini Budget”, sending the markets into a frenzy.  Just two months – and an ensuing disastrous economic meltdown – after welcoming Truss as the second UK Prime Minister this year, marketing and business leaders were hoping it would be third time lucky with the appointment of Rishi Sunak to Number 10.

Two days later and relative normality had returned when the Advertising Association/WARC Expenditure Report forecast the sector would grow by 9.2% in 2022 to a total of £34.9bn – including a near £10bn boost in Q4 thanks to the Qatar World Cup and Christmas.

It revealed that UK adspend rose by 8.8% in Q2 2022, to a total of £8.6bn, while adspend during the first half of the year was up 14.4% at £16.7bn.

However, the UK’s ad market is facing a slowdown and is predicted to grow by just 3.9% in 2023, to a total of £36.2bn, while online advertising’s share of total adspend is set to grow to 74% for 2022 and is expected to cross the three-quarters threshold (75.2%) in 2023. The crucial point, however, is that the market is still growing.

Advertising Association chief executive Stephen Woodford said: “Looking forwards, political and economic stability is much-needed, given the inflationary and recessionary forces impacting all businesses. As companies navigate these pressures, we see them continuing to prioritise advertising investment to protect their brands in exceptionally challenging market conditions.”

It seems that the message is finally getting across – and hopefully will continue in 2023 and beyond – that those businesses which carrying on investing in marketing during tough times fair far better. After all, the data doesn’t lie…

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