IPA Bellwether: budgets cut for first time in seven years
The recent “underwhelming performance” of marketing budgets continued during the third quarter, with UK businesses recording a slim reduction in spending availability.
According to the Q3 IPA Bellwether Report, published today (17 Oct) a net balance of -0.5% of firms registered downward revisions to their total marketing budgets during Q3.
Although this is the first time in seven years that marketing executives have observed cuts to their allocated spending, the net balance was unchanged from Q2.
However, the IPA said it still demonstrated “the underlying tone of hesitancy” that dominated UK business decision making for the most part of the year.
Nearly two-thirds of the Bellwether panel (64.1%) reported no change to their overall marketing budgets in the third quarter.
Low consumer confidence was said to have generated “hesitancy towards spending”, leading firms to hold back on big-ticket marketing drives and tighten the purse strings.
Others indicated that, in the interest of cost efficiency, they had re-allocated budgets to online and social media-based campaigns, keeping total budgets unchanged in the process.
Approximately 18.2% of firms cut total advertising expenditure, while 17.7% reported budget growth.
“The latest Bellwether survey spells further disappointment for the UK marketing industry, which is suffering, just like the rest of the economy, as a result of spending delays, firms placing projects on hold and subdued business confidence,” said Joe Hayes, Economist at IHS Markit and author of the Bellwether Report.
Hayes added that UK economy has endured a tough year so far and firms have subsequently withdrawn discretionary spending to protect profit margins.
“Perhaps the most discouraging sign is to see firms sitting on the fence regarding main media advertising, which is a vital form of long-term brand building, following resilient budget growth in the two previous quarters,” he said.
“Overall, as long as political and economic uncertainties remain at large, it will be surprising to see noteworthy boosts to marketing spending.”
The continued shift towards digital marketing was once again highlighted as the internet category remained the top performer in the third quarter.
A net balance of +11.1% of firms observed budget growth here (+11.5% previously). The development of new online tools encouraged firms to boost internet budgets available to marketing executives.
Data driven campaigns and a greater push towards social media advertising also underpinned the continued rotation into the digital space.
Within search/SEO, which lies within the broader internet category, however, the net balance declined to +6.1%, from +9.9%, its lowest since Q4 2018.
Meanwhile, mobile advertising budgets were reduced for the first time since the end of last year. The net balance dipped into negative territory (-0.6%) following stagnation in the second quarter (+0.0%).
However, main media advertising budgets were placed on hold during the third quarter (+0.0%) following some relatively solid upward revisions in the first two quarters of the year (+5.2% and +5.6% respectively), signalling a reluctance among firms to commit to big-ticket marketing campaigns.
“It’s a false economy to cut one’s ad budget when things look uncertain,” warned Paul Bainsfair, director general, IPA.
“The evidence shows that far from being prudent, it can have a negative long-term effect on growth. Companies that hold their nerve consistently, and that invest in the 60:40 ratio of longer-term brand building to shorter-term sales activation, outperform the market.”