Marketing budgets continue to rise but waning confidence slows growth

Marketing budgets are set to rise for the tenth consecutive quarter but to the weakest degree, driven by mounting worries about the global economy as marketers demand greater accountability, according to the latest IPA Bellwether Report.

Ad spend increases were claimed by 4.4 per cent of companies surveyed in the third quarter, a sharp drop on the 12.2 per cent jump posted in the second quarter.

It’s reflective of a bumpy financial period for businesses, with many failing to hit top line growth and instead cut costs to hit the bottom line. Consequently, companies' hopes for better financial prospects plummeted to a nine-quarter low of 6.9 per cent, compared to the previous quarter’s 13 per cent. This wavering confidence spread to marketers,, with a net balance of 22.4 per cent compared to 25.3 per cent in the second quarter, marking a two-and-a-half-year low.

As noted in the previous survey, confidence in the financial and economic outlook was already falling. Since then, UK growth has eased, according to the report’s author and senior economist at Markit Paul Smith, while marketers factor in the impact of the wider global economy.

Growth was stunted in most of the report’s categories, though budgets were expanded for Internet marketing, events and main media.

Internet was the top-performing category in the period, up to 7.8 per cent from 6.8 per cent. A further breakdown of the medium saw a marginal uplift for search (0.6 per cent), which was noticeably lower than the 6.5 per cent posted in the previous quarter. Events also clocked a marginal gain with 2.8 per cent, while main media was at 0.5 per cent.

Commenting on the continued growth of digital, Anthony Rhind, strategy chief at ad tech firm Adform, and ex-digital head at Carat, stressed the need for digital media firms to demonstrate the ROI they provide in order to continue winning ad budgets.

He added: “The Bellwether report highlights continued digital growth, against a backdrop of business uncertainty related to both the UK & global marketplaces. We should anticipate that the environment of uncertainty will prompt ever greater emphasis on the analysis of business outcomes directly attributed to media investment.

“Digital has always proved a safe area to prioritise media allocation when hard decisions are being taken. But we must not be complacent, digital doesn’t exist in a vacuum & our industry must strive to develop better attribution solutions that more effectively account for all media. Such a broad perspective if also supported by connected digital data & forensic analysis of the impact of each digital consumer connection should ensure a healthier integrated marketing sector."

PR (5.8 per cent) and market research (4.7 per cent) experienced the biggest drops in the period, followed by sales promotion (3.4 per cent), direct marketing (2.7 per cent) and ‘other’ (1.1 per cent).

Paul Bainsfair, IPA director general, said: “As predicted by Bellwether, upward revisions to marketing budgets and confidence are easing. However the important point is they are still positive. More specifically, there are upwards revisions to Internet, events and main media advertising budgets in Q3. We are seeing marketers demanding greater accountability, physical presence and share of mind in their planned marketing spend.”

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