Marketing free-fall slows but too early for green shoots, says IPA
The record-breaking erosion of UK marketing budgets slowed in Q3 of 2020, according to the latest figures from the IPA Bellwether Report, although a -23.3% fall in spend on advertising is still predicted for the year as a whole.
The Q3 2020 IPA Bellwether Report indicates that a net balance of -41% of panellists saw their marketing budgets cut in the third quarter (up from -50.7% in Q2). The result represents the second-quickest decline since the survey’s inception in 2000, only superseded by the reduction in the second quarter of this year.
In Q3, over half of respondents (52.6%) recorded a decrease in budgets from three months ago, compared to only 11.6% that saw an increase.
When explaining falling marketing budgets panellists cited reduced revenues as a result of the COVID-19 crisis, and the need to cut costs in order to maintain profitability.
Ongoing social distancing measures meant that many firms were still operating below full capacity in the third quarter, particularly some services companies that rely on face-to-face client engagement.
Faced with reduced cashflow, businesses reported lower budgets in each of the seven monitored marketing categories. Direct marketing and main media advertising however saw the softest budget cuts with -25.3% of firms recording downward revisions in both categories, compared with -41.6% and -51.1% respectively in Q2.
Underlying data for the main media category signalled that funds available for ‘other online’ campaigns (-6.5% from -35.1% in Q2) were the least affected of the five sub-categories. This was followed by video (-16.1% from 39.3% in Q2), audio (-32.0% from 50.0% in Q2), published brands (-38.5% from 49.2% in Q2) and out of home (-50.0% from 61.2% in Q2) respectively.
Events remained the hardest hit type of advertising, with a net balance of -64.1% of firms registering downward revisions compared to last quarter (up from -76.6% in Q2). Overall, just 3.8% of panellists saw an increase in available spend for events, while over two-thirds (67.9%) recorded a decline.
Looking forward, Bellwether author, IHS Markit still anticipates a robust recovery in economic conditions during 2021, as firms continue to adapt to a ‘new normal’.
This would translate to a +4.6% expansion in GDP and a Bellwether forecast of a +11.3% rise in adspending, followed by a steady trend towards long-term growth rates.
These outcomes, however, hinge largely on positive outcomes regarding the evolution of the pandemic and the development of Brexit negotiations before the end of the transition period at the end of this year.
Paul Bainsfair, IPA director general said: “While Q2 marked the nadir for UK marketing budgets, we had hoped for a slightly sharper rebound this quarter than we see here. With a second wave of COVID-19, coupled with ongoing Brexit negotiations, including bracing for no-deal, I think green shoots in the immediate term are increasingly unrealistic. We are at the mercy of these macro trends and we can’t know for sure right now whether it will be a V-shaped, U-shaped or perhaps a W-shaped recovery.
“What we do know, however, is that the evidence proves that those who can invest in marketing during the downturn will reap rewards in both the short and longer term. They will increase their brand recognition, strengthen their brand positioning and get ahead of the competition. In fact, because many advertisers do not heed this advice, just maintaining spend at normal levels leads to a greater share of voice and in turn greater brand share.”