IPA Bellwether: Marketing budget growth squeezed by main media reticence

The rate at which UK marketing budgets are growing has slowed down in 2024’s first quarter according to the latest IPA Bellwether, although the overall economic outlook for the industry remains rosy.

Despite this minor cooling point, marketing budgets have still seen their second-strongest upturn since Q2 2022, down from the near-decade peak figures experienced last quarter.

In a promising indication of the improving UK economy, the marketing industry has seen a consecutive run of growth stretching back almost three years to the second quarter of 2021.

Demonstrating perhaps a complete return to pre-pandemic normality, events is now the fastest-growing sector within the industry, growing by 23.1% year-on-year, the fastest rate on record. Direct marketing and sales promotions also continued to register strong growth, increasing by 7% and 4.9% respectively.

The fall in marketing budgets over the first quarter was confined to just two categories, although this crucially included main media (0.7%), indicating a reluctance towards large-scale ad campaigns. The decline was driven primarily by a drop in out-of-home spend, which fell by 10.8%, while published brands and audio were also down, by 5.7% and 4.5% respectively.

This was in contrast to largely positive final budget setting plans for the 2024-25 financial year, with over 40% of the survey’s panel having lifted the total amount available for marketing, compared to only 18% reporting cuts.

“Spring is in the air, bringing with it a greater sense of optimism in the UK economy and in UK companies’ marketing spend intentions for the year ahead,” said IPA director-general, Paul Bainsfair.

“Ahead of a suspected lightening-up on some economic pressures closer to home in the coming months, and despite wider geo-political uncertainties, UK companies are once again recognising the value of advertising by revising their spend up this quarter.”

He did have one note of caution, however, pointing out that the data showed companies upping their promotional spend while cutting back on main media spend – a trend that had been bucked over the past couple of quarters.

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“While sales promotions can stimulate short-term sales increases, the evidence also shows that their over-use can undermine a brand’s profit margins and pricing power over time by habituating consumers to buy mainly on price,” he warned.

“As always, a careful balance needs to be struck to ensure longer-term growth, for which greater investment in brand advertising particularly in main media, pays dividends.”

Across the coming financial year, budgetary forecasts predict continued strong growth for the events sector, with a strong net balance of 18.7%, followed by direct marketing (11.9%) and main media (10.1%). PR (6.3%) and sales promotions (6%) are also set to see further growth.

These positive forecasts reflects a strengthening British economy, with survey respondents displaying encouraging levels of optimism – just under one-fifth (19.5%) were more optimistic towards their industry’s outlook than they were in the previous quarter.

Despite being narrowly cancelled out by 24.9% of firms expressing stronger negativity (and yielding a net balance of -5.4%), these figures expressed the strongest positivity seen in two years.

With continued industry growth expected across the 2024-25 financial year, adspend is finally set to bounce back from 2025, with the report predicting the UK recession to be short-lived with growth expected to be confirmed by first quarter GDP data.

Overall, the IPA’s Bellwether predicts adspend to decline in real terms, but remain little-changed at -0.5% for 2024 (vs. -0.7% previously). This is expected to improve to 1.2% for 2025, and subsequently reach 1.9% for both 2026 and 2027.

IPA digital marketing group chair and EssenceMediacom UK and global digital partner, Amy Lawrence said it was: “heartening to see that the positive signs of recovery in the UK economy are reflected in positivity around marketing budgets, particularly in direct marketing and sales promotions.

“Whilst there is caution in main media advertising with a slight contraction, this lean towards promotions is echoed by the continued growth in online media, which is an indicator of a move towards more performance focus.

“As always advertisers should be cautious of moving away from brand spend and the long-term impacts that that can have.”

NewsResearch and Data

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