Total UK marketing budgets have continued to grow despite the financial pressures of the ongoing cost-of-living crisis, with significant investment in sales promotion activity.
Published today, the Q1 2023 IPA Bellwether Report revealed that total UK marketing budget growth is at its strongest for over a year, despite an “intensely challenging economic environment”, both domestically and globally.
UK businesses have shown an increase in confidence and continued willingness to support their brands, reflected by their investment in media marketing budgets. More than 21% of businesses increased their marketing budgets in the first three months of the year, with 12.9% cutting spend and around two-thirds (66%) remaining static.
Sales promotion is the top performing category as companies dedicate resources to help customers facing squeezed household budgets and high levels of inflation.
“This is a positive start to the financial year for marketing budgets, all things considered,” said IPA director general Paul Bainsfair.
“As the cost-of-living crisis continues, it is understandable for companies to offer sales promotions to help their customers’ tightened purse strings. To ensure brand loyalty isn’t eroded and to protect the long-term health of their brands, however, such activity must be coupled with investment in longer-term brand building media.
“We are pleased, therefore, to see that while investment in sales promotion activity has spiked this quarter, investment in main media advertising was revised up to its strongest level since this time last year.”
Budget plans for the 2023/24 period are also showing optimism among marketing executives as financial prospects are on the up, despite industry-wide pessimism on the UK’s overall economic outlook.
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Joe Hayes, author of the IPA Bellwether Report and senior economist at S&P Global Market Intelligence, said the data survey highlights the “resilience of UK businesses who have endured both a pandemic and a period of plunging consumer confidence and multi-decade high inflation”.
“Total marketing budget growth broadened out during the opening quarter, showing that more companies are tapping into their marketing resources to help them successfully navigate through economic turbulence.”
Marketing budget by category
Main media marketing, which includes TV and online advertising, recorded its strongest budget growth in the past year (5.8%), with continued growth across online (10.5%), video (7.9%) and audio (1.7%).
Sales promotions budgets also grew over the period, up by 8.8% – the strongest pace in nearly two decades as companies support customers through the cost-of-living crisis. Event marketing spend also grew by 6.3%, as companies look to re-engage with audiences face-to-face, while direct marketing spending increased by 4.2%.
Kantar UK managing director for insights Dom Boyd said it was “heartening” to see marketing spend growing in this way.
“We know that brands which continue to invest in times of economic turbulence ultimately perform better in the long run, deliver stronger returns for shareholders and bounce back quicker after crises,” he said.
“But marketers should be wary of putting that extra cash towards short-term tactics, particularly promotional spending, at the expense of brand building… The emphasis should be on protecting and leveraging this pricing power, not chipping away at profitability.”
On a less positive note, published brands and out of home (OOH) ads both declined, by 1.9% and 12.4%, respectively, as did PR budgets (down by 1.9%) and market research spend (down by 3.2%).
Marketing budget plans 2023/24
Company’s expectations for the coming year were also strongly positive, with more than a third 36.6% of respondents predicting a greater total marketing spend for the 2023/24 financial period. Just 16.9% anticipate seeing marketing budget cuts.
Firms’ appetite to engage in face-to-face marketing activities remained strong, with 14.5% of companies expecting events marketing spend to rise in 2023/24, the greatest level of optimism among the seven categories where budget plans are monitored. An increase in main media spend wasn’t far behind, at 13.5%, suggesting that companies plan to use marketing tools to combat a potential period of economic turbulence.
Sales promotions budgets are also set to rise in 2023/24, a sign that firms plans to provide support to cash-strapped customers (6.3%), while direct marketing was the final monitored category where budget expectations were positive (1.4%).
Taking S&P Global’s forecast for the UK economy into account (GDP decline by 0.2%), the Bellwether Report predicts a small decline of 0.9% in overall adspend this year. A marginal improvement of 0.5% is expected in 2024, before growing to 1.6%, 2% and 2.2% in 2025, 2026 and 2027 respectively.
