The latest IPA Bellwether Report showed that UK marketing budgets continue to grow in the face of economic pressure. However, pessimism remains around the future prospects.
Here’s what more leading voices from across the industry make of the report.
James Coulson, Managing Partner, Consultancy of Kepler EMEA
“In these continuing ugly times for geopolitics, domestic and global economies, brands have kept their optimism capped. A persistent downbeat view of their own sectors, and only marginal net increases in self-confidence (which on closer inspection is underpinned by a substantial range of positive and negative confidences – not good for market stability) doesn’t look to be changing any time soon.
“In saying this, a positive change since Q2 is that brands appear to be more pragmatic. This is shown in a significant move away from short-termism in their marketing approach – as shown by Q2’s surge in price promotion activity – replaced by a long-term investment perspective.
“It’s clear to see recession marketing theory being put into practice as brands invest to ride it out. Reinvesting in channels that lost out in the DR surge, for the purpose of longer-term objectives, shows sense from the Bellwether marketers (and I imagine, an effort to really squeeze every drop of value out of the impending Christmas spending boom).”
“The findings from the latest IPA Bellwether underscore that marketing is an investment – not a cost. Indeed, during a downturn, the most successful marketers will be those who have placed a strategic emphasis on brand building through long-term investment in smart technology.
“It comes as no surprise that AI is highlighted as a pivotal catalyst of growth. Leveraging AI-based technology can enhance advertising efficiency, helping to maintain lean but efficient marketing budgets. What’s more, working with solutions that deliver high-quality advertising and precise targeting reduces ad waste and optimises ROI. As we anticipate a contraction in ad spend through 2024, this technology will be crucial for navigating these evolving marketing dynamics and ensuring brands still make their mark in a tricky economic climate.”
Hugh Fletcher, Global Head of Consultancy and Innovation at Wunderman Thompson Commerce & Technology
“While the report signals an emphasis on brand-building, brands must tread with caution and not overcommit. With Black Friday around the corner, most consumers will gravitate towards deals that can offer them a way to save money. Customers want items at the right price, irrespective of the source, increasingly turning directly to brands online and sometimes bypassing marketplaces like Amazon altogether.
“As digital channels proliferate, brands are challenged to discern which platforms truly resonate. The rise of quick-to-market brands like Prime underscores the fragility of brand equity in today’s market. Brands need to be mindful of not spreading themselves too thin across all available avenues and instead focus on those that can cement market presence.
“Upping ad spend during recessions has often proven to gain share of voice, assuming organisations can survive the economic headwinds in the first place. And when funds might be better spent improving services and offering enticing deals, overspending on brand building may prove detrimental.”
Tim Geenen, co-founder and CEO at Rayn
“Despite the challenging economic climate, main media marketing spend has risen this quarter, putting the industry in good stead for the coming year.
“We have seen AI progress rapidly in 2023 and it is cited as both an opportunity and a threat in the report. Nevertheless, it will continue to be an important tool to address and reach audiences. But for marketers to achieve the right results it needs to be implemented correctly. By utilising in-the-moment insights, marketers can reach consumers with enough precision and with the right ad.
“But for savvy marketers who want to ensure their marketing budget is spent in the right places, they would be wise to invest in audiences that are verified Customer-validated audiences which will prove to be crucial when budgets remain tight.”
Julie Lock, Marketing Director, UK&I at HubSpot
“As unpredictable as the UK economy remains, marketers are fiercely defending their brand territory, having seemingly broken through the slump and charging full steam ahead into the busy peak period.
“Now is not the time to pull back, however, but to pivot and adapt. Marketers must leverage tools to ensure their brand has the biggest impact and the loudest voice. This begins at the very start of the chain, prioritising long-term customer satisfaction and loyalty, and using tools such as those built on AI to create personalised content and data insights in seconds.”
Kathryn Roberts, Senior Sales Manager at AMA
“Whilst this quarter’s Bellwether report saw a net decrease in audio budgets, this shouldn’t take away from the fact that 85% of budgets remain unchanged despite their exceptional growth over the past few years.
“Spending on digital audio advertising has surged by over 80% since 2020, due to the proliferation of audio channels and popularity of streaming, online radio and podcasts. This has resulted in an increasing number of advertisers incorporating digital audio campaigns into their strategies. Taking the looming recession into account, dynamic audio advertising serves as a more cost-effective option than other forms of digital advertising and is better at connecting consumers with personalised content at the most opportune moment. What’s more, audio has the ability to truly engage audiences with highly personalised ads that resonate with the listener in exactly the right moment, making it a hugely promising investment channel for advertisers.
“With AI transforming audio advertising even further through elements such as greater contextual targeting and enhanced personalisation, we expect to see its popularity as a channel continue to grow.”
Steve Phillips, CEO and co-founder of Zappi
“Understandably, difficult economic circumstances in the UK continue to dictate marketing strategies, but it’s critical that we don’t lose sight of the big picture. While brands are rightly concerned about budgets and ROI, short-term, defensive tactics aren’t a replacement for long-term brand building as teams shape their 2024 plans.
“Despite market research spending continuing to decline, there are still reasons for optimism. Brands are finding that reduced spend does not mean reduced access to insights. In fact, more teams are turning to agile platforms that enable them to do more with less and drive more insights – not just data – into their businesses. Now is the time when brands need more, not less, insight into what their consumers want and many are meeting the challenge head-on.”
Dominic Woolfe, UK Managing Director at EXTE
“Given the current economic climate, it’s really encouraging to see advertisers beginning to redress the balance between brand building and short-term performance and promotional activity. It’s now imperative to move away from marketing tactics that aren’t aimed at championing awareness and driving success for brands in the longer term.
“Context, creativity and content are three key areas that advertisers should be focusing on when it comes to brand building. Predictive AI can, and has, been used for several years to help make advertising more efficient. However, generative AI is set to open up endless possibilities when it comes to creativity. This is huge news for advertisers, as creativity continues to be the single biggest factor in determining whether a campaign is successful or not. Ensuring ads reach the right audiences in the right context is, of course, imperative, but if the creative isn’t on point, however good your targeting technology is, it still won’t hit the spot.”
Tom Ghiden, Managing Director at JOAN London
“Businesses are continuing to tread carefully due to the looming economic challenges in 2024. However, amidst the uncertainties, there are several opportunities we can seize to ensure the value of marketing and advertising remains clear.
“One significant positive indicator is the rise in main media marketing budgets. This uptick signals a greater focus on reaching consumers through marketing messages, which is a testament to the industry’s determination to adapt and connect with audiences, even in challenging times. Companies are showing a considerable effort to protect brands, particularly those legendary brands that have thought about the longevity of their brand, to capitalise on competitor hesitance. Agencies willing to invest in their brand’s resilience can emerge stronger when the economic clouds finally clear.
“Another exciting prospect for expected growth over the next few years is the role of AI in our industry. Rather than fearing these advancements, we should set the stage in 2024 and embrace these opportunities to make the most of our resources. AI can help us stretch smaller budgets and breathe life into creative work, making it even more compelling and engaging for our target audience.
“In the face of economic challenges, brands should channel their efforts into these opportunities. By doing so, they can not only weather the storm but also emerge more resilient and creative than ever before.”
Patrick Reid, Group CEO at Imagination
“It is heartening to see the events industry’s enduring resilience, as evidenced by marketing budgets rising for the seventh consecutive quarter. This trend demonstrates marketers’ recognition of the profound impact of in-person elements within hybrid brand experiences, as well as the growing emphasis on using experiences to engage both existing and potential customers.
“Nonetheless, it is important to note that the rate of growth in this sector has slowed, with a net balance of +5.9%, the slowest since the end of 2022, down from the previous quarter’s one-year high of +9.8%.
“Looking ahead into the fiscal year 2023/24, it’s crucial for marketers to remain agile. Sound budget management, a commitment to innovation to distinguish themselves in a competitive market, and careful ROI tracking will all be pivotal factors for achieving success in this dynamic landscape.2
Justine O’Neill, Senior Director at Analytic Partners
“Not only are main media marketing budgets continuing to expand, they are also rising at their strongest pace in over two years. We have seen countless times that advertising creates long-term value for brands. The brands that increased or maintained investment during turbulent times have seen on average 63% stronger ROI, and 60% growth in incremental sales and longer-term brand building.
“Though there are storm clouds gathering over the UK economy, dimming the positive mood, brands can prepare themselves for stormy weather with scenario planning. This can make all the difference in marketing and media planning – literally being prepared for another very hot, or very wet summer, can be the key to success for an ice cream company.
“While uncertainty prevails, scenario planning allows them to not just plan for a recession – or not. When reviewing their budgets and activities for next year, other factors must be taken into account as well, including pricing, TV usage, economic trends, demand and weather. Past events can be used as a blueprint for this, such as the insights on long-term growth after economic downturns, which can help navigate going forward. Experiments and proxies can help fill the blanks of new channels, data or unknown events.”
Alex Charkham, Chief Strategy Officer at Fuse
“As we continue to navigate through a turbulent macro-economic environment, it’s encouraging to see total marketing budgets remain steady. However, we are seeing a shift from the record rise in promotions spending last quarter – driven by brands to help consumers with the cost-of-living crisis – to a move back towards brand building tactics, as businesses navigate increased industry competition. While there’s plenty of evidence to suggest that brands who prepare long-term strategies tend to be more recession proof, this is easier said than done during economic downturn. Typically, during this time, belts will be tightened and short-termism will take over. Of all marketing strategies, sponsorship tends to be one that takes the hit in recessionary times. However, due to major events such as the Euros and the Olympics taking place next year, brands who effectively lean into these cultural moments will reap the benefits.
“When it comes to events, the seventh successive upward revision to events marketing budgets instil confidence in the industry (despite growth being the softest since the end of 2022). Given the recent summer of sport, it’s hardly surprising that marketers are continuing to recognise the importance surrounding live events and the huge audiences it can attract. The opportunity for brands and marketers to engage with big sporting moments is evolving, particularly in women’s sport where we have seen investment increase 20% YoY.
“Finally, it’s disappointing to see a downward revision to budgets relating to market research. While research can be costly, it can also be imperative to driving crucial change to the way we market and advertise. For example, Fuse recently conducted a study with System1: The Sport Dividend: Unlocking Incremental Brand Growth Through Sport Sponsorship, which revealed that a range of activations associated with sport sponsorship, from advertising to digital content, has the potential to drive stronger growth than traditional, brand-led communications. Industry research like this can have positive implications for creative quality and media spend for brands of all sizes across B2B and B2C.”
Anthony Pey, Head of Marketing Effectiveness at MediaLab
“The trends in this latest Bellwether report reinforce some of the patterns we have observed around the somewhat gloomy-ish and stubborn economic period we found ourselves in – one that we have internally coined “The Era of considered consumption” here at Medialab.
“In many recent econometric studies that we have undertaken, we’ve evidenced that media is an effective force in mitigating declines caused by falling consumer confidence and that gains are being made against brands that aren’t investing. We see a repeating pattern that audio-visual media (such as video – up 0.9% in the Bellwether report) are strong emotive and income drivers (when measured correctly), with highly targeted, or innovation-heavy digital placements acting in a strong combination for effective returns.”
Andrew Stephenson, Director of Marketing EMEA & India at Treasure Data
“Whilst budgets remain positive, the latest IPA Bellwether shows growth has slowed – signalling another potentially difficult period for marketers in the next quarter and beyond. Amidst persistent inflationary pressures, marketers face the twin challenge of balancing dwindling consumer spending, whilst delivering against rising consumer expectations. And with major consumer milestones like Black Friday and Christmas a matter of weeks away, it’s a race against the clock as marketers have no time to get lost in consumer data.
“Building and maintaining brand loyalty is the name of the game, and businesses that provide an invisible customer experience by pre-empting customers’ needs will be best placed to retain or grow market share as the cost-of-living crisis endures. Attaining this new gold standard of customer experience hinges on mastering data management, so brands have to get data smart or risk losing out in the golden quarter.”
Maor Sadra, CEO at INCRMNTAL
“The greatest challenge for marketers going into 2024 is not the looming recession but the new privacy reality. As Google moves forward with Privacy Sandbox for the Web and Android Privacy Sandbox for Mobile, Apple is also set to completely eliminate user-level tracking with Privacy Manifest.
“Forward thinking brands have been focusing on increasing efficiencies and adapting to the new paradigm of marketing measurement without available user-level data for a while now. These are the companies that will see successful ROI from their advertising investments next year.
“Yet the many, many brands that are yet to adapt to the new reality, and continue to focus on workarounds for user-level tracking rather than fixing the core problem of measurement, will struggle significantly. It’s likely to result in budgets being funnelled into different tactics in an ad hoc manner, as brands desperately try to make sense of their advertising success without any data or analytics.
“Q4 is the last chance saloon for brands that are serious about shielding themselves from these changes. But unless greater investment is made in privacy-safe measurement solutions now, next year’s IPA Bellwether reports could paint a very different picture of the industry.”