Resilience Amid Turmoil: Reactions to the IPA Bellwether Report for Q2 2023
Today’s IPA Bellwether Report reflects resilience in the UK's marketing sector amidst economic turbulence. The quarterly survey of around 300 UK marketing professionals from the nation's top 1,000 companies showed that, despite a reduction in main media budgets, there's a shift towards online areas, video, and experiential advertising. Brands have increased sales promotion budgets to support customers during the cost-of-living crisis, while also maintaining a focus on long-term brand value. And of course, AI technology plays a key role in optimising marketing spend, while building customer loyalty and brand reputation remain vital.
Looking back on Q2 and ahead to Q3, LBB collected the following reactions from UK business leaders.
Amy Lawrence, Digital Director, MediaCom and Chair, IPA Digital Marketing Group
As we continue to face into economic headwinds, it is unsurprising that there has been a slight reduction in forecast main media budgets, with a net balance of -2.5%. As inflation continues to bite in all areas, there is clearly some cautiousness amongst advertisers. This cautiousness is reflected in the more granular breakdown of budgets, with ‘other online’ at the top (+8.3) – a trend we’ve seen throughout the turmoil of the last few years, as advertisers focus more on performance tactics. It's therefore pleasing to see that video is also increased (although to a lesser extent) – a testament to the need to invest in brand too. As we move into H2, it is clear that the need for flexibility is paramount.
Richard Aldiss, Managing Director, McCann Manchester and Chair, IPA England & Wales
Against a backdrop of escalating inflation and interest rate increases, it is heartening to see the stalwart attitude of many brands, responding with agility to their consumer intelligence. It is equally heartening to see marketing strategies addressing the very needs of the UK market at the moment.
The rise in budgets across sales promotion is testament to this, showing brands supporting their customers during the cost-of-living crisis. However, we know that those brands applying a long-term lens will reap the benefits.
Patrick Reid, Group CEO, Imagination
As illustrated by the sustained marketing budget growth in Q2, whilst we remain in a turbulent economic climate, UK businesses still recognise the need to invest in their brands.
However, the focus has shifted slightly. While there has been a drop in main media spend, events and experiences recorded their highest boost in a year, with a net 9.3% growth on current budgets. With an annual projected forecast of 14.5% growth for 23/24 budgets, it’s a reminder of marketers’ recognition of the power of experiences to reach current and new potential customers delivering effective and measurable ROI. This rings true with what we’re seeing from our clients.
Julie Lock, Marketing Director UK&I, HubSpot
The IPA figures paint a mixed bag and mask some worrying dynamics. Budgets are tough and brands are reacting to economic pressures, so it’s no surprise that sales promotions are high at the same time when other marketing budgets such as main media have dropped.
But in this unpredictable economic climate, marketers should identify where their brand can drive their biggest impact, looking for punchier ways that require less budget. Once those areas are identified, it’s about utilising the new technology that marketers have at their disposal, particularly with AI that can be used as a catalyst for creativity to help ensure steady growth. In fact, three quarters https://offers.hubspot.com/behind-the-scenes-a-marketing-sales-and-cx-pulse-check of sales, marketing and CX managers have used AI in the last year and more than 85% https://offers.hubspot.com/behind-the-scenes-a-marketing-sales-and-cx-pulse-check endorsed its effectiveness. Using AI tools for content personalisation, data analytics and content generation means doing more with less. This revolutionary tech will allow marketers more time to do what they do best.
Nicole Kivel, Managing Director Northern Europe, Criteo
Inflation rates falling further than expected in June certainly teases a brighter second half of the year. It also reflects well on the marketing positivity represented by some of the latest growth numbers. Driving sales and averting the temptation to batten down the hatches is vital because the opportunities are there. Our data showed hourly sales recently leapt 89% for UK advertisers launching their own ‘Prime Day’ inspired promotions.
At the same time, as the IPA suggests, focusing too much on short-term goals like sales or ROAS leads to the deterioration of your upper funnel – it’s a challenge we often see in retail media. If brighter days are indeed what we can expect later in 2023, then brands need to position themselves to make the most of it. This starts with a full funnel approach that, I hope, will be represented by increases across other categories in next quarter’s results.
Anthony Pey, Head of Marketing Effectiveness, Medialab
As we enter the second half of 2023, it’s encouraging to see the solid growth of marketing budgets despite persistent inflationary pressures, although proceeding cautiously is still proving important.
Many measurement and econometrics studies typically prove that across many sectors, marketing investment is typically the biggest driver of growth, outside of discounting/promotions, which alone can erode brand value over time. This growth in marketing budgets signifies that brands want to continue to invest during difficult times, capturing more of the market vs. those that don’t and ultimately come out stronger.
The expansion of video also reinforces that brands are increasingly moving towards emotive and story-telling messages to reinforce their brand position, differentiating themselves in the market to ultimately improve their long-term brand health.
Concerns about economic challenges will no doubt continue, but with inflation starting to slowly decline, and consumer confidence back on the rise, now is a crucial time to invest and maintain momentum. More importantly, using the right data signals and measurement technology to optimise campaign returns will ensure marketing spend allocation supports and aligns with overall long-term strategies.
Steve Phillips, CEO and Co-Founder, Zappi
During turbulent times, it’s natural for those in charge of marketing budgets to go into protectionist mode and prioritise short-term sales over long-term brand building to shore up revenue and sales pipelines. But a reliance on promotion-driven marketing shifts consumer loyalty from brands to costs and hinders long-term brand equity.
In the cost-of-living crisis, it’s critical that brands invest resources into really understanding what their customers want and expect from them. This is the key to reducing the failure rates of campaigns and ensuring that the budgets are going towards the marketing that will deliver genuine impact both in the short- and long-term.
While the decline in market research budgets has continued, it’s further softened compared to the harsh cuts we saw last year. This promising shift indicates that more businesses are embracing forward-thinking strategies and realising that marketing campaigns are nothing without a stable foundation of consumer insights. These findings from the IPA are promising for our industry as we look ahead, despite the uncertain economic outlook.
Camille Flores-Kilfoyle, Head of Marketing, EMEA, Reputation
The increase in sales promotions budgets this past quarter is a positive reaction by marketeers to help combat the current cost-of-living crisis. As consumers are feeling the pinch, businesses are hyper focused on ways to attract and retain their customers and keep them engaged, even when things are tight. At Reputation, we are constantly talking to our clients about how brand loyalty and the willingness to do what it takes to support consumers goes hand in hand. Businesses need to be aware of the importance of marketing in a difficult economic climate and adjust their strategies to focus on meeting customers where they are.
Brand reputation and customer loyalty are important factors to consider when making marketing decisions. Businesses that focus on building these are more likely to be successful and promotions are a great tool for this. However, it is more important than ever for marketeers not to overspend and to ensure any promotions are targeted to the right audiences for the maximum ROI. This in turn leads to a positive brand reputation and enhanced retention.
Anna Uprichard, Regional Lead, Commerce, EMEA (ex. DACH & CEE), Blackhawk Network
Recent research from BHN found that 59% of consumers are planning to change their shopping behaviour, with 41% planning on purchasing more products on promotion. Meeting customers' needs has always been essential but the fact that sales promotion budgets have been revised to their highest in the 23-year history of the IPA Bellwether Report, is a sign that marketers are listening and acting on what their customers want.
Sales promotions can take many forms but a strong strategy can really help to build loyalty and help with customer acquisition. It’s great to see a more positive outlook on the market but we can’t get complacent. Times are tough for business and creative ways to keep customers engaged can be the difference in surviving or not.
Anastasia Leng, CEO, CreativeX
Doomsday headlines and predictions appear to have made no dent on marketing budgets, which have grown for the sixth quarter running. Have we finally turned the corner and accepted marketing as a revenue-driver?
As budgets have grown, two other trends have lurked underneath the surface: an increasing shift to digital spending, continually accelerating thanks to the rise of both social and retail media, and with it an increase in wasted digital media spend. An analysis published in June this year revealed that over $700m in digital spend (55% of spend analysed) was put behind creatives that were not digitally suitable. If this data is extrapolated to all of 2023’s projected digital ad spend, advertisers stand to waste $233.4 billion.
The predicted rise of generative AI is sure to bring with it an onslaught of content creation. Marketers are hastening audits of their creative workflows and the adoption of technology to review and benchmark their ads against the Creative Quality Score (a metric that represents an image or video’s digital suitability) to maximise investment behind ads that are set up to succeed on digital. By reducing wasted digital spend, marketers can quantifiably demonstrate their ability to drive effectiveness efficiently, and further bolster their relationships with their CFOs.
Matt White, VP EMEA, Quantcast
While the economy is unsettled, unemployment remains low and consumers are still working and spending. This is partly due to the robustness of people’s funds, with a record £4.6bn being withdrawn from UK savings accounts in May as people use the money they had set aside to keep spending.
In difficult times, advertisers have two options: they can either spend or cut back and retain budgets. Those who retain tend to plan a big splash when economic issues subside. The issue with holding back is that you lose brand visibility which can negatively affect customer loyalty. The IPA’s figures show the majority of brands have continued investing to ensure they remain front of mind for when consumer spending increases once again, rather than scrambling to push out creative when difficulties subside.
The second half of the year will be better. Inflation aside, much of the worst is now behind us and we are beginning to settle into a new normality. For advertising, the Rugby World Cup and inevitable Christmas peak will be strong drivers for growth, which will see marketing spend increase even further as the creative juices flow at the most competitive time of year for brands.
Phil Duffield, VP UK, The Trade Desk
It’s encouraging to see ad spend increase - albeit cautiously - despite continual macroeconomic challenges. However, spend could be going much further if it wasn’t concentrated in the hands of a few powerful tech giants.
Marketers want to be putting their pounds towards engaging their audiences on the channels where they spend the most time and can measure the return on their investment. That’s why the industry has launched upgraded identity solutions, like European Unified ID (EUID) which maintain the value exchange of the open internet (i.e online locations outside of search and gated social platforms) for the benefit of all.
As spend flows from the closed ecosystem of the walled gardens to the open internet and regulators knuckle down in the quarters to come, dominant players will have no choice but to create the equitable market we’re all striving for.
Andrew Stephenson, Director of Marketing EMEA & India, Treasure Data
Another quarter of increased spending coupled with declining inflation may bring a sigh of relief for marketers. But with budget growth softening amidst a cost-of-living crisis that is far from over, brands would be naive to assume their audiences are relaxing en masse.
The consumer landscape is more complex than ever, with vast swathes of factors dictating buying habits at any given moment. As the responsibility on marketers’ shoulders grows, they must not be blinkered by outdated ‘tribes’ of consumer behaviour and instead recognise the multi-faceted and fluid nature of their audience.
If brands are to have a real-time understanding of their consumers, it is crucial they have a robust data management strategy in place to put each data point to work. Only then will they be able to ensure every penny of spend is put towards reaching their audience at the right time, with the right message, across the right channel.
Bhavin Balvantrai, Chief Market Analyst, Omnicom Media Group UK
It’s positive to see brands showing resilience in the face of persistent inflation, interest rate increases and continuing economic pressures. There is a tangible shift into sales promotions as brands redirect budgets to help consumers during the cost-of-living crisis and bank some short-term performance gains. But brands should be wary of committing too strongly to sales promotions. When brands allow short-term thinking to dominate, they do so at the potential expense of brand equity, which ultimately drives long-term success and profitability for the business.
Investment in main media is down, and stagflation could translate to a softer market in 2024, but brands can work to extract value from their ad spend and there is plenty of scope for maximising investment effectiveness through innovation. Better use of data, be that customer, media owner or beyond, will drive campaign performance and undoubtedly AI will play an increasingly important role in this, as will incorporating sustainability into operations and adopting ESG as a marketing KPI.
James Smith, Managing Director, The Kite Factory
We are seeing a continued rise in sales promotions which provides crucial support for customers when times are hard. This also has the potential to open up new audiences as people shop around for the best value. But a rush to the bottom on pricing isn’t a long-term strategy and will impact brand value over time, the challenge will come when they need to come off the discounting drug. There is a real window of opportunity for brands that invest in holistic creativity – not just in terms of content, but in the creativity and craft of strategy, planning and buying. When both brands and consumers are watching their budgets, it is creativity across all parts of their marketing mix that will pay dividends.
Necessity is the mother of invention, and brands that can get creative, look for innovative ways to open markets through good use of data and also factor in new ways of addressing the sustainable agenda will survive and thrive
