Interviews, insight & analysis on digital media & marketing

IPA Bellwether report: more industry reaction (part three)

The UK advertising industry has been reacting to the latest IPA Bellwether report, which showed that overall marketing budget growth slowed during Q3.

Michael Richards, Managing Director, alan, believes that while the Q3 2022 IPA Bellwether Report makes quite gloomy reading at first glance, there are nuggets of opportunity buried within. He said: “Budgets both client side and for customers are squeezed, but there is renewed interest in the likes of energy saving and eco friendly products alongside growth in events and online and video advertising.

“Now is the time for businesses to really look at their offerings and how they can remain true to their core but flex to be truly customer centric. Be bold. Be brave. Find your provocative truths around what you do and how you do it and there are rewards to be reaped by brave marketers willing to break the mould.”

Alex Charkham, Chief Strategy Officer, Fuse, commented: “While spend on sport and entertainment partnerships doesn’t form a specific part of the analysis, we can take some confidence from the positive story found in both heightened ad spend and the growth of events over the third quarter. The appeal of sport and entertainment partnerships – sometimes considered a ‘luxury investment’ by many brands – has grown in the last few years due to factors impacting advertising effectiveness, particularly the inflating cost of media and audience fragmentation.”

Charkham added: “The growth of events is also another signal that businesses and customers alike value live moments – a huge part of sport and entertainment’s appeal. Despite the pending recession and cost of living challenges, we believe that sport and entertainment will be something that people will want to pursue and prioritise. As a result, brands will be asking more questions about how to capitalise on the increasing appeal and relevance of ‘passion point marketing’.”

Richard Robinson, Managing Director, Econsultancy, said: “The Q3 Bellwether may just be remembered as the quarter the tortoise finally overtook the hare, with growth declining to a significantly slow 2.1% (a far cry from the halcyon days of 10.8% in Q2). The effect is already clear with employment prospects declining by 17ppt since Q2 & a whopping 22ppt since Q1 as companies reign in their plans to hire, and start to plan based on static headcount at best, and an increasing number looking to make reductions. 

“Of note events, such as the recent Festival of Marketing, are outperforming the market as marketers and agencies look for ways to network, learn and engage with best practice post-pandemic. In parallel brands & brand leaders are unsurprisingly looking to digital channels to find more targeted, budget-efficient, communication models with traditional advertising falling for the first time since Q1 2021 with online advertising & video growing by 5ppts & 6ppts respectively.”

Emre Fadillioglu, CEO of Storyly, believes that the IPA Bellwether report remains an important barometer for the state of marketing activity within the UK, with media spend fluctuations also providing indicators for broader communications trends: “While it is disappointing to see marketing budgets fall for the first time since early 2021, it is hardly a surprise as economic headwinds started to be felt in Q3. 

“One notable area of continued growth is video. This is being driven by continued format innovation. In 2022, eMarketer announced that time spent on TikTok exceeded YouTube for the first time, at over 45 minutes per day. Closely followed by  Instagram Stories, YouTube Shorts, and Snapchat Spotlight, amongst others, this explosion in short-form content has driven brands to re-evaluate how video is incorporated into their marketing strategies. Audio-visual marketing may have started in TV, but with the continued growth and innovation in online video revealed in the IPA Bellwether report we can be sure it will remain one of the dominant marketing channels for a long time to come.”

Caution required

Gabrielle Stafford, CMO at Supermetrics, said: “Enormous marketing budgets solve a lot of problems but whenever economic turmoil hits, marketers across both large and small brands are desperate to explore the ways to get more bang for their buck. However, as the IPA has previously warned, marketers must be cautious of pulling back on spend as it can often do more harm than good. While overall marketing spend is set to grow – albeit at a slower level – this is still encouraging reading (at least for now), but it requires brand consistency and presence across all channels. And usually, this doesn’t equate to dropping budgets, but maintaining or increasing them, particularly in periods of economic downturn.

“That’s why it’s important to let data-driven insights drive the marketing plan. For instance, marketers should always study the demographics of each channel’s audience and match their customer avatar or persona with their knowledge of the major advertising and social channels.”

Matt White, VP EMEA at Quantcast, commented, “Given the current economic climate, many will be surprised to see that advertising spend has increased yet again. It’s often not as simple as marketing and advertising teams switching off activity when times are tight though, as we’ve seen here. Some will see times of turmoil as an opportunity to double down on investment to stay ahead of the competition, while others will no doubt have started booking in their campaigns for the FIFA World Cup coming up in Q4.

“The number one reason ad spend has increased again is aligned to the TV market – and in particular, CTV. During the cost of living crisis, people throughout the UK will have made a concerted effort to enjoy quiet nights-in to save for more difficult times ahead. Simultaneously, CTV offers the viewer more content than ever before. With increased content comes cheaper advertising rates, which then drives more investment. All ships rise and advertising teams are taking advantage.”

Inken Kuhlmann-Rhinow, Senior Marketing Director, EMEA at HubSpot, commented: “Sluggish ad spend reflects the cost of living squeeze being felt across the board. It’s encouraging that spend has just slowed and not disappeared altogether. Ad spend remains a key area for business growth and is vital for maintaining strong customer relations – and knowledge of what makes the customer tick underpins this.  

“Getting to know your customer and providing them with a seamless journey from start to finish is what will keep them returning and recommending. But it is increasingly difficult to capture their attention within a flooded market of brands fighting for focus. Advertisers have a tricky but not insurmountable task ahead and putting in the work to invest in your customer relationships means you are investing in your company too.”

Nick Reid, SVP & Managing Director EMEA, DoubleVerify, commented: “There is never a time where responsible investment and the return on that investment is not important. But at this time of economic uncertainty, advertisers and marketers are challenged to make sure they are not only able to measure the impact of their digital investment, but to optimise the performance of their campaigns based on those metrics. Maintaining brand equity and avoiding media wastage – all in a privacy-friendly way – is key. Looking towards the future, effectively capturing and measuring consumer attention and understanding how this drives outcomes for brands, will be paramount. IPA Bellwether’s data only reinforces the need to secure consumer attention at scale, helping advertisers get bang for their stretched ad buck.”

Navigating incertainty  

Simon Wardropper, CEO of Realtime Agency, said of the latest Bellwether report: “Right now, inflation is impacting lower-income households at a higher rate than high-income households as the cost of everyday staple goods and services (such as energy, clothing, and food) are quickly rising. The first thing to note is that marketers of these everyday goods may not see as severe of an impact on results as marketers of simple luxuries or non-essentials. Although these sorts of goods have previously been accessible to less-affluent households, they won’t be as much during this time. 

“Rather than cut budgets, which often can have a disproportionately negative impact on algorithm efficiencies, share of voice, and business revenue, we’d instead recommend restructuring spend and pacing. For instance, the World Cup is set to overlap with Black Friday and holiday shopping periods this year – three very expensive times to advertise. If you can afford to scale down during these hot periods, front-load budget prior to these events, or even reserve until Q1, do so. Measurement will also be massively important here for marketers. Cookie-based attribution modelling (like multi-touch attribution) is progressively becoming more unreliable and can lead to ill-informed placement of budget due to incomplete data sets. We would recommend testing a non-cookie-reliant attribution method now, such as marketing mix modeling, to ensure you’re best placing your brand to see high returns on investment. 

“Lastly, we’d recommend that marketers be conscious of empathetic and helpful messaging that will ensure their consumers’ dollars stretch further – for instance, we’re seeing supermarkets – such as Sainburys and Asda – begin using content educating consumers on how to keep food fresh for longer.” 

Rik Moore, Managing Partner of Strategy, The Kite Factory, said: “The key watchword off the back of this Q3 2022 IPA Bellwether report is ‘navigation’.

The challenges the report highlights are writ large across the ‘Threats’ verbatims from panellists. However, there is nuance here, and some green shoots to recognise – be that encouraging renewed interest in eco-friendly and energy saving products, through to continued growth in online and video advertising, plus resurgence in the events sector.

“This is where ‘navigation’ comes in – if we can help clients identify and turn those green shoots, wherever relevant, into new opportunities and competitive advantage, this will contribute their ability to weather the storm and come out the other side stronger.”

Farhad Divecha, MD and Founder of AccuraCast, added: “There is a lot of negative news out there, driving uncertainty. Historically we’ve seen organisations cut back marketing spend on traditional media and maintain or increase spend in digital, particularly in performance marketing. While that’s great news for an agency like AccuraCast, I would caution advertisers from cutting their investment in branding (top of funnel activities) and focusing purely on sales (bottom of funnel activities). That sort of short-termism feels comfortable during uncertain times, but tends to be costly in the long term, because you emerge from a recession (or pandemic) with a weakened brand.

“Instead, businesses should find opportunities to differentiate themselves, grow market share – especially where the competition pulls out or eases off on spend – while also maxing out the performance potential.

One important additional point to consider is tech. Over the past few years, especially during the pandemic, we’ve seen brands winning by investing in the right sort of marketing technology, typically tech that allows scale, automation, and differentiation. All economic signs point to a recession, which means once again advertisers need to identify ways to do more with the same or smaller budget, and the best way to do this is with better tech.”

Jeremy Hine, CEO, MullenLowe Group UK, commented: “Given the squeeze on profit margins caused by the cost of living crisis and rising energy prices, it’s unsurprising to see business leaders approaching their financial futures with renewed caution. With further reluctance toward increasing marketing spending over the coming months, now is the time for advertisers to revise media strategies in line with consumer attitudes so that campaigns are targeting audiences with hyper-relevance. Those that don’t have a clear strategy will find it hard to resonate with audiences in an impactful and meaningful way.

“Brands need to appear in touch with current economic challenges and place consumers at the heart of what they do. With the festive season approaching and the marketing spend for big-ticket campaigns dwindling, brands need to reflect the psyche of the nation through authentic and true-to-life communications.”