Brands ‘gearing up for growth’ as marketing budgets hit eight year high – Marketing Week

BudgetsThe proportion of companies increasing their marketing budgets has reached an eight-year high, with relaxed Covid-19 rules meaning marketers are more confident in their investments.

A net balance of 14.1% of companies revised their marketing budgets upwards in the first quarter of 2022, according to the latest IPA Bellwether report. This figure is the highest since almost eight years ago, in the second quarter of 2014.

Marketing budgets have now seen growth for four successive quarters. However, the latest figure represents a significant increase from the previous quarter, when a net balance of 6.1% revised their marketing spend upwards.

Almost a quarter (24.1%) of surveyed companies upped their marketing spend in the first quarter of 2022, compared to just 10.0% which revised their budgets downwards.

The increase in marketing spend reflects the UK’s emergence from the Covid-19 pandemic, and signifies more confidence among companies that they will be able to proceed without the disruption of lockdowns or restrictions.

However, the IPA warns the industry faces “strengthening headwinds” to its recovery, including inflation and the war in Ukraine.

Despite these significant challenges, businesses are “strongly positive” about their budgets for the year ahead. A net balance of 33.1% of companies surveyed expected growth in their available marketing budgets for 2022/23.

Category breakdown

Of the categories tracked by the Bellwether, events saw the biggest growth in marketing investment over the quarter. A net balance of 18.7% of panellists reported increased spend in the channel, up from -3.9% in Q4 2021. The further relaxation of Covid measures in the UK “gave businesses the confidence to plan larger-scale gatherings with clients and set up exhibitions”, the report explains.

Main media advertising also saw “solid” budget expansion, with a net balance of 9.4% of companies reporting upped spend in this category compared with 3.1% in the previous quarter. Online advertising drove growth in this category with a balance of 18.6%, alongside video, which grew to 9.0%, and published brands, which grew to 1.3%.

Outside main media, sales promotions, direct marketing and PR all saw their budgets grow. A net balance of 8% of companies increased sales promotions budgets (from 0% in Q4), while direct marketing budgets expanded for a balance of 6.0% of companies, up from 3.8%. PR saw only marginal budget growth, at a balance of 0.6%.

Market research was one of categories that “slightly weighed down” the upturn. Over the last two quarters of 2021 market research budgets had been in growth, as a balance of 0.7% of companies increased their market research budgets in Q3 2021, and 7% in Q4 2021. However, in the first quarter of 2022 market research saw a net decline of -3.5%.

Market research budgets enjoy strongest boost in nine years as marketing spend slows

Before the last six months of 2021, market research budgets had been suffering from long-term decline. The proportion of businesses planning to increase spend in market research had only been greater than the proportion planning to decrease it four times in the previous seven years, most recently in the second quarter of 2015, when a net balance of just 0.6% said they would increase investment.

In 2020, Marketing Week discovered market research had been on a resolutely downward trend ever since, with that decline accelerating over the course of Covid-19. The net balance of marketers saying they planned to cut spend plummeted to a nadir of 42.2% in the second quarter of 2020.

Mixed outlook ahead

The optimism brought by the lifting of Covid-19 restrictions is tempered by caution regarding the geopolitical situation, as well as inflationary pressures.

The author of the IPA Bellwether, S&P Global, has downgraded its GDP growth forecasts for 2022 and 2023 from 4.0% and 1.8% to 2.8% and 1.2%, respectively.

This slowed growth is expected to negatively impact advertising spend. The IPA has revised down its figures to 3.5% in 2022 and 1.8% in 2023, from 5.2% and 2.5% respectively.

The IPA is expecting current events to have little impact beyond the next couple of years. Forecasts for GDP and ad spend beyond 2023 are “broadly unchanged” from the last Bellwether report.

UK companies are keen to capitalise on this moment and ramp up their marketing spend

Paul Bainsfair, IPA

When it comes to the businesses surveyed, sentiments differ between company-own and industry-wide outlooks.

Survey respondents were more pessimistic than they were three months ago about the financial prospects of the industry as a whole, with a net balance of -3.6% of companies reporting less optimism. This was broadly unchanged from the fourth quarter of 2021 (net balance of -3.8%) and therefore the second-greatest degree of pessimism for over a year.

In contrast, when it came to their own businesses, a net balance of 6.6% of companies were optimistic in their outlook. That said, this was down from 7.6% in the previous quarter.

Joe Hayes, senior economist at S&P Global and author of the Bellwether Report, says that while companies are “gearing up for growth”, the uncertainty brought by issues like supply chain problems and the Ukraine war “may lead to companies re-assessing their decisions until all of these risks reduce”.

However, IPA director general Paul Bainsfair says: “UK companies are keen to capitalise on this moment and ramp up their marketing spend”.

He advises companies to continue investing in their marketing spend to ride out this uncertainty.

“Brands do best when they maintain their investment in longer term brand-building media, complemented by a smaller ratio of sales activation media. This is the survival code for surviving a downturn,” he says.

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