IPA Bellwether: industry reaction
After six consecutive years, UK marketing budget growth finally came to an end in the final quarter of 2018, according the latest IPA Bellwether report.
Although there is evidence some marketers still feel some level of optimism for 2019, Brexit chaos has dampened both business and consumer confidence, driving down budgets and restricting marketing resources.
Here, industry experts share their views on the findings.
The Bellwether report presents some worrying figures, and not just for the ad industry, but the economy itself. With consumer confidence heading in the wrong direction and ‘Brexit inflation’ having not yet been passed on, businesses are anticipating a squeeze, and the first mistake businesses under pressure will make is to reduce their advertising spends.
We’ve been here before. The cycle of recession seems to crop up around once every 10 years, and as from the threatened recession of the millennium, and the very real recession of 2008, advertising’s hit is rapidly followed up by its rise.
Yet, we should take particular note and learn from the last experience where advertising came back to grow at a stronger rate than ever before. Businesses felt the pain of going quiet and have been ramping up and playing catch up ever since – if they even survived, that is.
The latest Bellwether report reflects the higher cost of doing business for a large number of brands in the face of fluctuating exchange ranges, rising costs for oil and transportation as well as changing import/export market conditions. Such pressures existed through a large part of 2018 and the remaining uncertainty around Brexit applies further pressure to businesses being able to forecast performance effectively, often driving more risk averse environments when considering expenditure on marketing and advertising.
It is not, however, all doom and gloom as we should note main media being the only category forecasting modest growth in 2019/2020.
Within the mix it’s interesting to see the first reduction in search advertising, as this usually reflects greater investment into short term performance, so such a reduction may give us some positive reassurance regarding greater investment into longer term brand growth.
Overall, it’s a period of significant turbulence in which understanding the real drivers of behavioural change and how they influence advertising strategy could not be more important. Advertisers have a significant opportunity to tap into the mood of their consumer base and turn this into an opportunity to drive greater brand salience.
In an uncertain time for UK businesses, it is perhaps not surprising that growth has stalled. It’s likely that uncertainty will be the new normal for some time to come, and therefore marketers need to be able to prove to stakeholders that their advertising spend produces fantastic results for the business, and encourage increased investment.
The UK has always been a world leader in marketing innovation and more now than ever, marketers need to continue embracing experimentation in their strategies and ignore the temptation to use again what’s worked in the past. Only through continued innovation will the ad industry demonstrate that, even in a difficult climate, advertising investment is a business value-add, not a ‘nice to have’.
While the numbers don’t paint a cheery picture, perhaps advertisers should see the coming year as a chance to rethink what the practice can achieve – creative work that brings brands to life and connects with people.
Creativity and innovation can help brands cut through the digital noise – and in the best cases, change the world. Advertisers shouldn’t be thinking in terms of which channels to deliver through – people certainly don’t when they consume media – but what type of truly connected experience to deliver consumers.
Many advertisers may be considering following the trend of in-housing in the face of these numbers. But they should resist this – without objectivity, creativity will inevitably suffer. What gets lost with in-housing is the input of an unbiased provocateur who has objectivity that comes from being removed from the business.
In a complex and rapidly-changing world, with so many variables, it’s time for advertisers to ride this tough period out and double down on building brands that people love. Storytelling is never just one-sided, so it’s up to us to ensure we are stepping up and truly partnering with our clients, to ultimately leave an impression on the brand – and the bottom line.
Amidst all of the current chaos, it comes as no surprise that we’re starting to see the brakes go on. The net drop of -6.5% in ‘main media’ is a telling factor and I’m sure that in many cases the bigger ticket off line (and less directly-measurable media) is logically the first place to shave things without marketers risking an obvious return on investment on the balance sheet.
However, what may be more telling is the apparent slow down in overall ‘internet budgets’ as, to date, digital channels have always been perceived as the masters of driving short term return. The bravest businesses going into 2019 will be those that manage their business’ expectations on short term returns vs the opportunity to actually drive significant scale and volume amidst a deflationary ‘main media market’.
To us the most telling indicators for 2019 will be whether there is a re-correction in the balance between these two elements…or will the digital channels actually win out and continue to grow? A few years ago we would have all backed a retrenchment to digital at times like this, but given all the issues around those channels and their ability to build incremental sales at true volume, it might just not be the case this time around.
At times like this we all point to the obvious opportunities to be had to by maintaining or increasing budgets, but for 2019 I think it’s going to be much more complicated than that.
Unsurprisingly, we’re seeing Brexit have a significant impact on marketing budgets, and this latest IPA Bellwether report reveals an industry exercising caution. As a result, we’re seeing a downward revision to main media budgets, as brands look towards short-term activations instead of brand-building to shore up market share.
Happily, Out-of-Home (OOH) is an effective medium for both short term and long term activations, providing a significant opportunity for growth at a time when the industry is facing a lot of uncertainty.
Not only can brands draw on OOH’s traditional strengths of brand fame and national reach, but by leveraging the dynamic capabilities of Digital Out-of-Home (DOOH), brands can also reach customers on the move in real-time. It will also be interesting to see how marketers use OOH to drive cross-channel effectiveness in the year ahead.