The Institute of Practitioners in Advertising (IPA) has just published the report and core charts outlining the results of the Q4 2022 IPA Bellwether Report, as the cost of living crisis continues to take its toll on the UK’s economy. The report showed that while the UK economy is widely expected to have entered a technical recession at the end of the year, there was another quarter of total marketing budget growth across the final three months of 2022.
Around one-fifth of survey respondents upwardly revised their total marketing spending in the fourth quarter (20.2%), while 18.0% registered budget cuts. Overall, the net balance recorded in positive territory for the seventh successive quarter (+2.2%) and marked the longest uninterrupted sequence of growth for four years. Overall, growth was little-changed from Q3 (net balance of +2.1%).
LBB spoke to experts across the industry about their main takeaways from the report and what we should expect to see in the future.
Dan Cullen-Shute, CEO, Creature
As lovely as it is to see the words 'Bellwether Report' and 'positive' in the same sentence, it's worth nodding at the fact that as good as things are starting to look in the worlds of media and events (post-covid excitement, possibly?), creative agencies are notable for their absence - and understandably so. When times are tight, running stuff is important, but making new stuff less so. That can't last, though: and the more media money spent, the sooner new work will be needed, and creative agencies will start to see their own version of trickle-down economics come to light. So while it's not necessarily time to loosen creative belts, it's exciting to see that the lights are being turned on; and in the meantime, it's on us to show that, more than just ad-production houses, we're genuine commercial, business partners, laying the strategic foundations for the good times that are definitely (eventually) coming...
Jeremy Hine, CEO, MullenLowe Group UK
Despite economic headwinds, the findings of this quarter’s IPA Bellwether offer us a number of reasons to be cheerful. Spending growth across multiple categories is a highly encouraging sign that digital advertising is continuing to become a crucial part of brands’ advertising strategy.
As wider marketing budgets contract, however, and brands increasingly focus on their critical operations, agencies will need to work hard to prove their value to their clients. The likely result of this will be a move towards short-term project-based work, where results will be directly measurable, as opposed to retainers which can often have more nebulous outcomes.
Particularly heartening is the positive long-term outlook for marketing budgets which is fuelled by predictions of a short, shallow recession, instead of something more damaging to wider economic prospects. I’ll be approaching 2023 with a hearty dose of realism, but it’s heartening to hear that a large number of my peers are optimistic about the future of our industry.
Jamie Elliott, CEO, The Gate London
It’s good, of course, to see spend increasing. And, while making predictions about the future is a mug’s game, one hopes that as the global outlook brightens with China opening up, natural gas prices falling and so on, we could see a stronger second half than feared with inflation falling more quickly than forecast in the UK. In that context, brands that have maintained spend will be well placed to capitalise on their investment.
Michelle Whelan, Co-CEO, VMLY&R UK
As the last few years have demonstrated, adversity breeds creativity, and when the purse strings are tightened in the way they are now, we see businesses forced to think of new ways to provide value. It is reassuring to see that businesses are investing in marketing, showing an appreciation for brand building during times of hardship.
The focus now should remain on creating long term connections with customers in order to stay relevant. However, to grow, brands also need to innovate; and innovate for good – as these are the brands that prevail. Fortune will be made and lost this year and next based on how much a business is willing to change; to look at new ways to unlock growth through new moments, new routes to market, new customers.
At VMLY&R we’ve seen a surge in investment in commerce, brand and customer experience and retail media in particular as people want to touch and feel more after two years of lockdown. It’ll be the brands that show up during these challenging times that will endure, not those that hide away.
Jon Williams, Founder and CEO, The Liberty Guild
As we all lash ourselves to the mast and hope we manage to weather the perfect storm of decreasing consumer spend and volatile global headwinds, let’s bear in mind that if marketing spend increases you can guarantee that client expectations will increase even further. Clients will be looking to agencies to deliver more for less. And only those who have fundamentally reassessed their business models will be able to answer the call without front-line creative talent taking the brunt of the inevitable resultant margin squeeze.
Pip Hulbert, CEO, Wunderman Thompson UK
After a pessimistic Q4 it’s great to see some positive news, ‘strongly positive’ even. However, while it’s great that brands are holding their nerve when it comes to their budget outlook, it’s not quite time for us to breathe a sigh of relief yet. If the last couple of years have taught us anything it’s that if it’s not one crisis, it’ll be another. Agencies (and their clients) need to remain ready for anything and plan for chaos to ‘prepare’ for whatever lies ahead.
Alex Best, Founder and CEO, Wonderhood Studios
UK ad agencies should respond with caution. It’s impossible to predict how marketing budgets will change over the course of the year especially if the business environment gets tougher. We’ll continue to focus on how we can best serve our clients, showing them how great creativity can overcome the major marketing challenges they face.
Karla Smith, CFO, Ogilvy UK
Inflation growth and cost-of-living concerns are still front of mind for the UK consumer but there are positive shoots. Only last week the ONS reported that the UK economy grew in November 2022 against predictions of decline. The Bellwether report continues that message of increased but still cautious optimism with more respondents reporting an increase in marketing budgets than a decrease. The smart clients will lean into the caution to grow their market share, working with their agencies as trusted advisors and an agile approach to channel selection.
Jennifer Black, CEO and Partner, Special Group London
The latest IPA Bellwether Report has revealed that total UK marketing budgets continue to grow, findings that are particularly welcome in light of the current economic climate. While this needs to be viewed with a level of caution, positive sentiment, even if measured, is just what the industry needs right now, following three years of turbulence and uncertainty. It helps lift morale, sets expectations for the year ahead and is a sign that confidence is returning to the industry.
Patrick Reid, Group CEO, Imagination
Last year we saw a return to live experiences like never before, with global sporting events like the winter World Cup and Women’s Euros providing huge opportunities for brands to connect with fans and drive spending.
So it’s no surprise to see that events have continued to be the top performing category in marketing budgets in Q4, and are expected to continue this trajectory in 2023 and beyond.
It is promising to see that even during times of financial uncertainty, brands turn to experiences as a key marketing activity, which reflects what we’re seeing across our own client portfolio.
Brands today understand the value of engaging with customers on a deeper, more authentic level as a means to drive brand growth. We look forward to seeing this category continue to grow, and the innovations that will inevitably follow.
Richard Exon, Founder, Joint
The latest Bellwether Report points unflinchingly at the dilemma marketers face in 2023.
The cost of living crisis is real and urgent, crushing consumer confidence. But like all things it will pass. Inflation will slow, interest rates will stabilise and those brands that hold their nerve and invest with conviction throughout the first half of the year will reap rewards.
Every brand has the opportunity to represent certainty in an uncertain world by being present and being relevant. Surprise and delight with inspiring, bold ideas that consumers simply can’t ignore.
Whilst others dither, smart businesses will grab market share and energise their existing user base, investing consistently to create emotional advantage over their competitors.
Emma Ellis, Managing Director, Interbrand London
The findings from the latest IPA Bellwether report prove to be really encouraging and offer great news for the industry. Despite the global economic uncertainty we’re faced with, it is good for businesses to invest in brand activity and it’s important that people understand the benefits of this investment.
From experience, we have seen that businesses that invest in building their brand equity and leveraging brand as an asset are in a stronger position to bounce back from economic downturn. In fact, during the financial crisis in 2008, Interbrand's Best Global Brands managed to recover to their pre-crisis levels up to two times faster.
The last recession has proven that the brands who continue investing through turbulent times will not only be the ones who accelerate out of it, but also the ones that provide customers with the confidence they need. And as a result, consumer loyalty is strengthened.
It’s positive to see investment in marketing spend continue to increase in Q4 with 20.2% of survey respondents upwardly revising their budgets through the last three months. This investment could be key for brands as it signals the safeguarding of business and weathering of storms to come.