22 October 2017 Business

Marketing spend at standstill says IPA report

The influential IPA Bellwether Report points to economic uncertainty for the the stagnation in marketers' spending plans.

The latest IPA Bellwether Report, covering the three months to the end of September, describes a sector paralysed by uncertainty.

Budgets have not been revised, in either direction, and the uncertainty over Brexit is to blame, says the report, recording the findings of 700 professionals across the marketing world. It means that marketing spend has increased, to the benefit of the internet in particular, but in many sectors there is stagnation. Overall marketing spend for 2017 will show a slight (0.7%) increase with no growth at all predicted for 2018.

IPA director general Paul Bainsfair says: “What strikes us most from this quarter’s report is the extent to which UK companies – and their marketing budgets – are caught up in wider economic and geo-political uncertainty. The vast majority are in a seeming state of paralysis, reflected in the fact that almost 70% of UK marketers have not revised their budgets one way or another from this quarter to last.”

Spending on the internet, events and PR increased, while spend on market research fell. Spend on the print dominated sectors of direct mail, sales promotion and mainstream media showed no movement at all.

There were reports that internet marketing budgets had been increased at the cost of reduced spending on traditional print media advertising, says the report. There are still perceived advantages in terms of cost and return from digital marketing which is fuelling this development.

However, Bainsfair warns: “Recent evidence has revealed that the most effective way to attract more customers is through increasing market penetration. Furthermore, the most effective approach to achieving this is through using a 60:40 ratio of brand building, mass media, supported by more targeted sales activation media.

“So while we acknowledge the benefits of internet advertising and welcome the growth in internet advertising budgets, we wouldn’t recommend sole investment in online at the expense of of offline. A careful balance is required.”

The increased spend in digital is heading towards video, social media and targeted email. This is clearly harmful to spending in mainstream media which reported a 0% change in spending for the panel, down from a 9.8% planning to increase spend in the previous quarter. It casts into doubt earlier expectations where a net balance of 11.5% of participants had expected to increase their ad spend in the year as a whole.

Likewise those expecting to increase spend on direct marketing were cancelled out by those anticipating a decrease in this channel. This again casts doubt over expectations that the sector would experience growth this year.

Nevertheless marketing budgets remain substantial and according to Chris Duncan, managing director of the Times Newspapers arm of News UK, there are reasons to remain hopeful. “In the past, periods of economic uncertainty have had a heavy impact on marketing budgets,” he says.

“Despite anxieties around Brexit, currency fluctuations and inflation, it’s encouraging to see that marketing continues to be a key driver of business growth with 89% marketing budgets being held or grown and only 11% being cut. To an extent, this could be seen as recognition in British business that communicating to your customers about the value of the products and services you provide is not a discretionary spend.”

Set against the wider economy there are also positives from the increase in tourism to the UK as the country becomes more affordable to overseas visitors, from the increase in house building and in experiential marketing, set against concerns from the retail and automotive sector. Rising inflation will reduce consumers’ ability to spend and forced them to seek out value, considered another influence in the shift to digital spending because of its immediacy.

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Marketing budgets paralysed

Marketing budgets paralysed

Marketers are continuing to focus on digital channels as overall budgets remain stagnant in the face of uncertainty caused by Brexit. The IPA's Bellwether Report calls for a balanced mix when deciding on how to market products and services.

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