A Return to Long-Term Thinking? Reaction to the IPA Bellwether Report for Q3 2023
The Q3 2023 IPA Bellwether Report reveals a positive trend in UK marketing budgets, marking the tenth consecutive quarter of growth. Despite a challenging economic climate, companies have increased their main media marketing budgets at the fastest rate since Q1 2021.
This growth is driven by efforts to safeguard brands and seize opportunities presented by competitor hesitancy. However, the overall growth of total marketing spend has slightly decelerated, and the report predicts a real-term decline in adspend until 2024 due to an impending recession.
Looking back on Q3 and ahead to Q4, LBB collected the following reactions from UK business leaders.
Richard Aldiss, IPA Chair for England and Wales and MD, McCann Manchester
This quarter’s Bellwether Report brings focus to those brands that are proactively navigating the current economic climate with an increase in main media marketing investment, an eye on stealing market share and a focus on customer loyalty.
Advances in technology (AI), and sustainability goals are also unlocking opportunities in products and services, further fuelling the need and benefit of longer-term, strategic planning.
It remains a challenge for businesses and marketeers, to balance the needs of today whilst also looking beyond tomorrow to capitalise on the opportunities a future-facing strategy presents.
Josh Krichefski, IPA president and EMEA & UK CEO, GroupM
Given another turbulent year for the UK economy, it’s not surprising that ad spend is forecasted to fall in real terms until 2025 – and while it’s a prediction I hope brands can reverse, it's important that marketers understand their biggest opportunities first and foremost. Often, advertising is seen as an additional cost when it should really be seen as an investment into future success. Inflationary pressures won’t last forever and the brands that will be best positioned to capitalise when the economy eventually improves will be the ones that laid the foundations in the lead up – that means now.
Keeping one’s powder dry in the short-term may cut costs, but ultimately, it’s a matter of either investing now or spending money playing catch-up. It’s worth remembering that some brands will likely opt for the latter, so there’s more space to cut through the crowd. Advertising that connects with real human emotions will always be effective, regardless of economic circumstances.
Lillie Price, head of account management, Mr. President
At a glance, this feels like an encouraging headline. Marketing budgets are up. Hurrah!
But, when sitting down with my daily coconut latte to dig into the detail of the latest Bellwether report, it’s clear to see, the math ain’t mathing.
Sure, if I think back to this time last year, there's certainly more certainty. More stability with budgets. Fewer of those scary calls when you get told the budget for next year has been slashed again. But times are hard: for marketeers, for agencies and for the consumers we serve. A whole year of financial challenge has taken its toll on confidence.
That’s why at Mr. President, we are so proud of the creatively bold work we’ve been pushing out this year. Our work for The Woodsman whisky punched well above its weight: a relatively conservative media spend but brilliantly joyful work, and we were able to deliver a great return on investment for the client’s trust in creativity.
So, how should UK marketeers proceed in these difficult days? Trust your agency, and be bolder and more joyful with the work you put out into the world. Creatively it’s the better thing to do, but beyond that, it just makes good business sense.
Matt Charlton, CEO, Brothers & Sisters
It still isn’t very clear what’s going on. Clients are all rightly squeezing because of the effect of interest rates on consumer spending power, but what that really means remains unknown. What happened after the last banking crisis was that to recover, we had to keep productivity the same on half the workforce, and we’ve never gone back to pre-2008 levels. So there isn’t much left to squeeze there, and people’s mental health is increasingly a worry. Where everyone can help is more efficient culture, both in client and agency land. The wastefulness of our culture is a real problem.
As someone who’s been around the block, my advice would be that wisdom and experience have never been more valuable, so get those 50-somethings back in the business. Endless creative experimentation is expensive, so getting to good very fast will always help.
Clare Hutchinson, CSO, VCCP London
Resilience is everything. Whilst Q3 shows encouraging signs that brands are eschewing short-term, quick fix tactics, only those that commit to holding their nerve for long-term brand building will thrive. End of year pressures, global uncertainty and worrying forecasts for 2024 might make some falter... But for those brands that hold fast, the benefits of commitment and consistency will be manifold.
As cited by the IPA, earning ESOV (excess share of voice) - by investing in a greater share of media spend in the category than your brand’s market share – is the best way to increase market share as we head towards recovery in 2025. High ESOV campaigns are more likely to report long-term market share; they are also set to enjoy profit growth, customer acquisition and retention, and strengthened pricing. BUT, it’s also important to make sure you’re spending your money well, on proven equity-building creative. Consistency and creativity go hand-in-hand with brilliant branding. So, whilst Rishi [Sunak] is telling the nation “Be a Brit and show some grit,” holding fast in turbulent times (with great creative) is one of the smartest things a brand could do.
James Kirkham, founder, ICONIC
I thought there were two stand-out points deep within the detail of the report. Firstly, PR spending rose at the strongest pace in five years. I think we're finally seeing the end of the era whereby people assume PR is an afterthought - the writing of a press release being the culmination of the process only once everything else is in place. Now, with campaigns such as ‘Barbie’ setting an entirely new precedent of what PR even is, smart industry people at brand and agency level realise they need to adopt a 'PR is everywhere' approach. It is everywhere and everything, so taking a campaign and atomising it enables you to PR at every part, blurring the lines of where it even starts and ends, and that's a huge positive.
Contrastingly, a surprising detail was a reduction in spend around audio (presumably radio). This feels like CMOs are missing the opportunity afforded to them with podcasting, an insanely popular growth medium, predicated on long form discourse and discussion, and where audiences are readily engaging their ‘lean back and absorb’ need state, which is so rare in our hectic modern media. Audio should witness in the coming years insanely high growth as marketeers realise the value of inserting your brand natively into the appropriate conversation - it is just surprising how so many are late to this realisation.
Anastasia Leng, CEO and Founder, CreativeX
Digital advertising budgets have been demonstrably resilient amidst overall budget slowdown. For many brands, the panacea against inflationary-based price hikes is advertising, which can soften the blow of premium pricing and help maintain consumer demand.
But CFOs remain hawk-eyed, pushing for efficient budget allocation and measurable outcomes. As more research comes out that shows the rampant volume of unsuitable digital ads, and the billions being invested in ads that are not optimized for their digital environment, CMOs are being tasked with re-developing their systems and processes to execute great creative at scale. Adapting each ad to its digital environment by maximizing its Creative Quality Score (a metric used to measure content effectiveness by tracking adherence to platform best practices) is the last mile of executing an effective campaign. and it’s been repeatedly used to reduce media costs while driving up consumer engagement. That’s a win for everyone in the C-suite.
Hugh Fletcher, global head of consultancy and innovation, 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.
Tamara Littleton, founder and CEO, The Social Element
The IPA Bellwether Report serves as a reminder that adaptability is a cornerstone of success in the world of marketing, and nowhere more so than in social.
For me, this report emphasises: the shift from short-term sales promotions to long-term brand-building strategies, the potential offered by automation/AI/sustainability practices, and signals of a potential shallow recession in 2024.
Remembering that social media marketing is not merely about immediate sales, our advice is to focus on creating a space that resonates with your audience, tells your brand story (backed by strong social playbooks), and builds long-lasting relationships and superfans, wherever they are on social.
Like our recent work with Nissan on an experiential and augmented reality campaign, expect your social agency to continuously explore and utilise the latest technologies, to enhance your campaign and stand out in a crowded market.
In a world where consumer willingness to make discretionary purchases may be affected, strategic engagement with your target audience on social media will be the game-changer. For our clients, we will continue to focus on creating experiences that foster trust and loyalty, ultimately leading to increased sales.
Chris Mellish, CEO, TMW Unlimited
As seems to be the pattern with every Bellwether report of late, this brings a mixed set of news, and a balance of hope versus concern.
Last time round, the spike in brands moving their spend towards sales activation activities raised alarm bells around the short-termism. So, it’s pleasing to see that trend abate and longer-term thinking prevail.
The economic outlook for next year will, of course, be a cause for concern. Again, this will be a battle for the brave. As Paul Bainsfair points out, we will need brands to continue to see “that marketing spend is indeed an investment, not a cost.”
If maintaining spend at current levels isn’t an option for some brands, then they will need to spend smart. Huge inroads can be made if they properly tackle the 'messy middle' of the customer journey and deal with the complexity of the increasingly fragmented, multi-touchpoint journey that leads to consumers’ final purchase decisions.
If brands can get that bit right, and carefully balance their spend between brand building and brand activation, then long-term, continued success will be theirs.
Adam Morrison, founder, 2050 London
The Q3 report makes for gloomy reading going into 2024, but there are businesses investing in brand, indicated by a 7.4% investment for main media advertising in this quarter. Balancing long and short term needs is as critical as ever on tightening budgets. And so, agencies who can get those brands talked about with entertaining ideas that really aim to generate excess share of voice have opportunities to change things and do inspiring work. It’s no surprise, therefore, that there’s been an uplift in spend in earned activity and PR. Ideas will need to travel more than ever.
Patrick Reid, group CEO, 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.
Chris Freeland, executive chairman, RAPP
The latest report saw an upturn in marketing spend in Q3, principally driven by promotions, with this predicted to flatline in Q4. And, it projects that we are poised for recession (again!) as we move into 2024.
Yes, it’s widely accepted that established brands and strong businesses spend their way out of recession, however, whether spend is up or down a percentage point - most importantly it is about where and how the money is spent. That means using budgets in a more focused, targeted and measurable way, and crucially, where it can have the most impact. The powerful combination of AI and available data will supercharge this imperative as it becomes more and more possible to tailor and personalise in the moment, such that the content and messaging can be as relevant and targeted as possible.
Longer term, it is more important than ever that brands continue to reinforce their relevance with their consumers, and restate how they deliver meaningful value, recognising that ‘value’ means different things to different people. Yes, price is important, but it’s not as important as you might think – when we asked people in our latest research what was most important to them when choosing a brand or service for the first time, just under 70% of people ranked another value lever (such as control, community or convenience) ahead of price (price was ranked number one by just 31% of people).
Richard Exon, founder, Joint
Every marketer on earth is managing their brand in an unbelievably unpredictable news environment, and this looks set to continue in 2024.
The IPA Bellwether Report points to three Cs being key to marketing success next year.
‘Control, consistency and competitiveness’.
Control: As the 24-hour news cycle throws up continuous shocks that impact sharply on consumer confidence and a sense of hope for the future. well-planned and funded communications and campaigns are where confident brands can exert some sort of control of the narrative.
Consistency: As countries, economies and governments lurch from one crisis to the next, brands that invest and show up consistently in the right channels with the right messages will garner more trust with consumers, even as their trust in institutions diminishes.
Competitiveness: Ever more savvy consumers know a fair price when they see one, be that for every day essentials or occasional indulgences. Investment in advertising to the message out there is a necessary step for any brand to remain competitive. And, when done well, it can protect against aggressive discounting from the competition.
Peter Reid, global chief executive, MSQ
Up against a challenging national and global backdrop, it’s not surprising that the latest Bellwether Report will make uncomfortable reading for many. But I am a little more optimistic about the next few years. With inflation more under control, I suspect things will start to pick up more broadly – albeit I suspect growth will be slow and we will be a long way from boom times!
But even now, there are already opportunities for those agencies and groups shaped in the right way. In particular, both in the UK and beyond, we’re seeing opportunities for independent groups, who are taking larger shares and more substantial business from the holding companies by offering more innovative and agile multi-disciplinary services and solutions.
This is particularly the case for those who have been prepared to innovate and (judiciously) embrace areas such as AI, providing businesses with both the creative thinking and technological solutions required to build brands and drive efficiencies.
From a holding company perspective, I was surprised to see such buoyancy in Publicis’ and Omnicom’s latest results, but do wonder whether a lot of that is down to them taking share from competitor holding companies, rather than genuine evolution. Results from their counterparts, especially WPP, will make interesting reading as to whether the likes of Publicis are taking share from the market or just their peers!
Jon Williams, CEO and founder, The Liberty Guild
I’ve supported Manchester City for 40 years. Way back before the petro-dollars, if you’d asked me how they would do this Saturday, I’d say, ‘they’ll win’, because I loved them. And, I believed things would be good. Call it denial or whatever. I love our industry just the same. So, I get why we project a rosy future. But it doesn’t feel like that on the ground, according to a whole raft of freelance talent and clients who we work with. Clients want sales, the talent wants work… both are under pressure. The industry reaction to the preference for sales promotion is understandable. But there is a whole raft of mid-tier brands that simply can’t afford to ‘drive fame’ or ‘impact culture’ - for them the battle is for survival against up-and-coming new-to-world competitors. I totally get why you’d look to SP. The battle is at point of purchase. And it’s now. Next year is a long way off.
Julie Lock, marketing director, UK&I, HubSpot
As unpredictable as the UK economy remains, marketers are fiercely defending their brand territory, having seemingly broken through the slump, and are 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.
Ben Worden, head of planning, Wunderman Thompson UK
It's great to see that brands that want to be well-placed going into 2024 are continuing to invest. Conditions are certainly challenging: inflation remains stubborn at 6.3%, retail sales data suggest that consumers are still feeling cautious, and business confidence remains subdued. But, our own analysis continues to show that in times of uncertainty, investment in brand drives return on investment. Consumer and business confidence is hard to predict, but recent research from our clients HSBC shows that the majority of consumers want to be more positive as they look to 2024, which is good news for brands in every sector.
Ant Hopper, founder, The Ninety-Niners
Obviously, it’s positive to see a recent increase in main media spend and reduction in sales promotions, suggesting more long-term thinking and brand building activity. However, we shouldn’t get too carried away, as the economic outlook for next year remains tough, with renewed instability in the Middle East adding to uncertainty in the markets.
The data shows that companies are responding in different ways, with 21.1% increasing total marketing spend and 15.8% reducing it, and downturns still provide opportunities for marketers to gain an advantage. If recession is looming, then the evidence suggests brands need to hold strong and continue to invest in marketing, especially if others around them are reducing budgets.
Increased engagement with innovative new tools (e.g. AI) suggests brands are experimenting with new ways to reach consumers, but also perhaps the industry’s tendency to go after shiny new things, rather than what the 99% actually care about. As the cost-of-living crisis continues to impact some more than others, it’s important adland breaks free from its bubble and understands how consumers are really feeling right now.
James Coulson, managing partner, Consultancy, 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).
Richard Kelly, chief solutions officer, Mindshare UK
This report suggests that advertisers and agencies have adapted their playbooks to navigate a persistent economic downturn, in contrast to the more typical recessions followed by recovery cycles we've witnessed in the past. With the economic outlook remaining challenging for the foreseeable future, it’s encouraging to see brands prioritising long-term growth over shorter-term cost savings. As we approach the run-up to Christmas, it becomes more crucial than ever for brands to craft messages that are empathetic and resonate with the public to drive positive growth during what could be a challenging winter for many.
Nicole Lonsdale, chief client officer, Kinetic Worldwide
Official out of home revenue figures and forecasts paint a different picture to this latest report. The outlook for the sector is robust, with revenues up year-on-year and quarter-on-quarter. The sector has worked hard to return to 2019 spending levels, and our primary focus is now about reclaiming percentage share of budgets. To achieve this, we need to intensify efforts to explain OOH’s role as a strong awareness and brand builder, as well as its newer benefits of driving consideration and purchase made possible through smart data and automation that offer brands real-time opportunities to influence consumer behaviour. And when you consider that 60% of online purchases are now made outside of the home, OOH is a powerful channel that advertisers should be including on more advertising campaigns.
Nick Mason, CEO, Turtl
Given the continued challenging global climate, it’s unsurprising to see business leaders approaching their financial futures with the same continued caution of Q2.
However this quarter’s report offers positive signs for marketers, and it’s encouraging to see that budgets have increased. These findings align with recent research we conducted among senior marketers, where over half said their annual content marketing budget had increased over the last 12 months, and is expected to increase further over the coming year.
With budget expansions in Q3 driven by efforts to protect brands and take market share from competitors, it’s clear that marketers will need to justify budgets - and prove return on investment from marketing activities.
A greater need to show ROI means a greater emphasis on measurement. What’s particularly encouraging to see is that marketers are taking advantage of digital media capabilities and investing in analytics and data to accurately measure performance. Given the continued growth of online advertising budgets, a deeper measurement of performance is something that marketers can increasingly target. After all, the ultimate goal of marketing is to capture reader attention and translate that into business outcomes, including pipeline and revenue - something that’s impossible to manage without measurement.
Engagement remains the marker of successful digital marketing, and analytics are key to helping marketers improve this and ultimately drive growth. For this reason, baking a deep level of performance data into marketing content will be the most fundamental ingredient of every successful marketers’ recipe.
Beyond analytics, the conversation needs to progress to how marketers can better engage audiences. In an overcrowded digital content marketplace, which is only becoming busier, audiences are becoming more discerning when selecting the content they consume. This means experimenting with personalisation, new formats, behavioural data and marketing psychology. The future lies in powerful, reader-led marketing content that surpasses needs and expectations. This way, you’re continuously building better brand and content experiences.
As we head into Q4, we are seeing a world where marketing teams are increasingly focused on revenue and business objectives. Teams must prioritise spend based on concrete marketing objectives, prove the value of marketing using data and analytics, and further optimise marketing budgets based on this information. This more iterative marketing style will dictate what ‘best-in-class’ looks like - with data-driven approaches likely to become the industry standard.
Beth Menear, Account Director, One Black Bear
It’s an unsettled forecast, Wether we like it or not.
The latest IPA Bellwether Report finds total UK marketing budgets are up for the tenth successive quarter, though uncertainty prevails.
Respondents to the latest Bellwether quarterly survey that cited budget growth, advised marketing activity was both a ‘defensive and offensive manoeuvre’ to solidify their position before the forecasted downturn. This approach to both protect and fight for a brand, continues to be deployed by those focussed on long-term growth over short-term saving.
As we remain poised to take a dip in a shallow recession, overall perceived financial prospects remain pretty beige at both company- and industry-wide level. Furthermore, uncertainties surrounding interest rates and inflation have led to a downwardly revised forecast for 2024, and predicted reduced ad spend until 2025.
But it’s interesting to see how companies are approaching this challenge, with a shift in spend trends over the last few months. Main media saw its strongest upward spend in 18 months, with PR, direct marketing, and new innovations such as AI video also recording growth. Notably, spending on events continued on an upward trajectory suggesting an unrelenting desire for face to face contact from customers and prospect clients.
In contrast, audio and OOH both saw an accelerated spend reduction, as did investment in market research. And, perhaps most interestingly, investment in sales promos also fell compared with the last quarter suggesting businesses are heeding the evidence that more long-term investments are the way to go.
It comes as no surprise that times remain challenging, but it’s encouraging to see how businesses are adapting, be that through adjusting objectives to focus more long-term, or redistributing funds into new channels that meet revised consumer needs. We’re a full ten years on from the launch of Binet and Field’s 'The Long and the Short of It', and these current times are testament to the fundamentals of what they concluded.
We continue to sit tight and face these challenges alongside our clients and partners.
