• Marketing budgets up in 1Q 2019

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    The net balance of marketing executives reporting upwardly revised budgets increased to +8.7% in Q1 2019, up from a +0.0% reading for the final quarter of 2018 and the highest since Q3 2017.

    That’s according to the latest IPA Bellwether report, which says around 21.6% of panel members observed spending growth, compared to 12.8% registering budget cuts.

    The quarterly report says that while the Brexit uncertainty that is shrouded over the UK’s political and economic climate continued to prompt belt-tightening and a delay in decision-making, other companies took a more pro-active approach and looked to push resources into their brands, enhancing digital marketing methods and expanding presence on social media platforms.

    Firms were also wary of rising competitive pressures, leading some to diversify product offerings as part of efforts to enter new markets and attract new clients. As such, there were reports of boosting marketing spend as a defensive mechanism to protect brand reputation.

    Nevertheless, the IPA Bellwether says unfavourable global economic conditions, coupled with fears of falling business and consumer confidence prompted caution over discretionary spending in some cases.

    The best performing category of the Bellwether survey was internet, which saw its net balance jump from +2.1% to +17.2%. Firms showed a strong appetite to enhance their digital footprints, with Search/SEO spending (+14.2% from -3.9%), as well as targeted advertising on mobile (+3.6% from -2.4%) all receiving boosts. A renewed drive for big-ticket advertising campaigns was also apparent during the opening quarter of 2019, with main media marketing returning to growth (+5.2% from -6.2%). Events was the third and final Bellwether category to register expenditure growth (+3.4% from +2.6%).

    However, market research, sales promotions and direct marketing budgets were all revised lower during Q1, with net balances of -4.2% (from -4.7%), -3.7% (from +3.8%) and -3.5% (from -5.6%) respectively.

    Marketing executives erred on the side of caution with their forecasts for marketing spend for the 2019/20 financial year. A modest net balance of +3.4% anticipate budgets to grow during this period, which was notably weaker than past forecasts made before a new financial year and the lowest since 2009.
    Although approximately 26% of panellists foresee growth, the remaining 74% expect cuts or no change. Compared to this time last year, a net balance of +18% of firms anticipated budget growth for the 2018/19 period.

    Positive expectations were centred on main media marketing campaigns and advertising at events, which yielded net balances of +4.8% and +2.5% respectively. Some companies expect that brand-building initiatives seen during the most recent quarter will continue through the coming financial year, as they look to defend their brand and stave off tough competitive pressures. Plans to launch new products in some instances were also seen as opportunities for marketing budget growth.

    Nevertheless, firms were much more downbeat for the remaining Bellwether categories. Negative outlooks were recorded for other marketing (-13.1%), PR (-7.0%), sales promotions (-5.3%), market research (-4.0%) and direct marketing (-1.8%).

    Marketers’ confidence levels remain significantly negative

    Following the first downbeat outlook towards own company financial prospects since Q3 2012 during the previous Bellwether survey, latest data showed no signs of an improvement. A net balance of -2.7% of surveyed marketing executives indicated a pessimistic assessment towards their company’s finances, compared to -0.9% during the final quarter of 2018, thereby indicating a stronger degree of negativity.

    Industry-wide financial prospects also remained pessimistic during the first quarter. Although the net balance of firms casting a downbeat assessment was slightly lower than previously, registering -22.6% (- 28.6% in Q4 2018), it still signalled one of the most negative industry-wide outlooks since the global financial crisis.

    Paul Bainsfair, IPA Director General, said: “This sharp increase following Q4 2018’s flatlining signals that UK marketing budgets have received a much-needed kiss of life in an economy gripped by Brexit uncertainty. The smart marketers realise that to grow their businesses, they must invest in them, particularly in mass reach, long-term media. While the forecast for the year ahead remains uncertain given the seemingly endless Brexit negotiations, those that want real competitive advantage should follow the proven rule that if you increase your share of voice above your share of market, you should expect to experience growth.”

    Joe Hayes, Economist at IHS Markit and author of the Bellwether Report: “A return to growth in marketing budgets during the opening quarter of 2019 may come as a surprise given the uncertainty that shrouds the UK political and economic climate has only built further since the previous Bellwether Report. However, some companies began to show a determination to step up brand-building and protection in these challenging times, taking a pro-active, yet defensive approach in the face of business belt-tightening and weakening consumer confidence. That said, cautious undertones were still apparent in budget plans for the 2019/20 financial year, with panellists providing only modest growth expectations in available marketing spend. In fact, the outlook was the most subdued since 2009.”

    AUTHOR

    Stuart O'Brien

    All stories by: Stuart O'Brien