Marketers usually cut back budgets when times get tough – as they seem to be following the Brexit vote – but the new IPA quarterly Bellwether Report says they’re actually planning to spend more, chiefly on digital. This despite doom and gloom about their financial prospects.
So in Q2 2017 there’s been:
*The largest expansion in marketing budgets for just under a year and largest revision to internet budgets in almost a decade
*Optimism regarding company financial prospects lowest in four-and-a-half years
*Industry financial prospects turn increasingly negative
*Brexit, political uncertainty and rising inflation provide biggest threats to outlook
*Modest growth in adspend predicted in 2017 before stagnation in 2018
In detail The Q2 survey showed that around a third of the survey panel recorded an increase in internet marketing budgets (32 per cent), against a little over nine per cent of panellists that recorded a fall. That provided a resulting net balance of +22.7 per cent, which was up sharply from Q1 2017’s +16.9 per cent and the highest reading since Q3 2007. Within internet, search/SEO (+15.6 per cent) and mobile (+3.0 per cent) both continued to record upward revisions to growth. The increase in spending related to search/SEO was the highest recorded by the survey for two-and-a-half years.
Other categories to record upwards revisions to budgets include main media advertising albeit to a softer degree than Q1 (net balance: +9.8 per cent, down from +10.7 per cent); PR (+2.1 per cent); and events (+2.1 per cent). Down were direct marketing (-4.7 per cent) and market research (-6.2 per cent). Sales promotion took the biggest hit, down -10.7 per cent.
With no update from the Office for Budget Responsibility (OBR) since the previous Bellwether survey, the report’s annual adspend forecasts for the years through to 2020 are unchanged. Driven primarily by an underwhelming performance in business investment, which is forecast to be depressed by the ongoing uncertainty caused by the UK’s decision to leave the European Union, Bellwether expects adspend to rise by just 0.6 per cent in real terms during 2017.
Also weighing on adspend performance will be softness in consumer spending with signs from high frequency indicators of consumption that rising inflation and an associated squeeze on household purchasing power is already weighing on consumer spending. This is expected to continue throughout the rest of 2017 and into 2018, and is a primary factor behind the expected stagnation of adspend next year.
Bellwether anticipates a modest recovery to take place during 2019 and 2020, with adspend forecast to rise by 1.8 per cent and 2.3 per cent respectively.
IPA director general Paul Bainsfair says:: “The election result has thrown further uncertainty into an already volatile environment. It is inevitable that this has had a knock-on effect on UK plc. Specifically for marketers this has meant a desire, where possible, to seek out more activation-driven advertising. As evidenced strongly in this latest Bellwether Report, this has resulted in a further move towards advertising in the digital space.
“While it is good to see spend up in internet, it is worth remembering that IPA studies have consistently shown that the most effective marketing results from a 60:40 brand building (emotional) to sales activation ratio (rational).”