IPA Bellwether Report Marketing Ad Spend

IPA Bellwether: marketers as downbeat about prospects as they were at start of pandemic


By Hannah Bowler, Senior Reporter

October 19, 2022 | 7 min read

Report shows that, industry-wide, financial confidence is at lowest level since Q2 2020.

The IPA releases its Q3 Bellwether report

The IPA has released its Q3 Bellwether report

British companies are as pessimistic now about their financial prospects as they were in Q2 2020, according to the latest Institute of Practitioners in Advertising (IPA) Bellwether report.

After surveying 200 companies, the IPA found half are downbeat about the financial outlook, while just 6.3% were upbeat, resulting in a net balance of -44.3%. It is the most pessimistic assessment of industry-wide financial prospects since Q2 2020.

The UK is thought to have entered recession in Q3. After Liz Truss was appointed Prime Minister, the pound fell to an all-time low of $1.035 and, this week, the country got its second chancellor in five weeks. Unsurprisingly then, marketers have exercised caution over budgets in the past quarter.

According to the IPA survey, 22% of British companies raised their total marketing budgets in the third quarter – marginally higher than the 20% who cut their budget. The IPA referred to this as a “weak positive net balance” of +2.1%, down from +10.8% in its last quarterly report.

Soaring business costs and high inflation impacting consumer purchasing power are cited as principal reasons for cutting budgets. Joe Hayes, a senior economist at S&P Global Market Intelligence, says: “Budget cuts are being seen across the majority of the monitored segments of marketing spend as companies move into retrenchment mode due to soaring costs and slowing demand.”

Despite a bleak picture, the IPA says it anticipates the recession being “short and shallow” and credits the government’s cost of living relief measures for helping to sustain ad spend till the year-end.

The government assistance resulted in the IPA revising its 2022 forecast to 3.7%, up from 1.6% in its second-quarter report.

Media spend breakdown

The report also reveals that advertisers have been cutting back on big-ticket advertising such as TV and radio, which fell for the first time since Q1 2021. While only a slight decrease from 0.0% in Q2 to -3.1%, the IPA says it was “indicative of a cautious reduction.”

There have also been slumps in publishing (-11.2%), out-of-home (-7.2%) and audio (-2%). Video and online advertisers saw a bump with +8.7% and +0.8% respectively.

PR budgets were cut during the third quarter of 2022, now at -4.8%, ending the longest growth sequence for over five years.

Events was the only segment to see record growth in the third-quarter of 2022, with most companies either increasing or maintaining budgets. Since only 21% recorded cuts, it resulted in a positive net 4.5%. Despite this progress, events are falling behind previous forecasts that predicted that by 2022/2023 it would have a net balance of +22.1%.

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Marketers respond

The message from the industry is to continue to spend and invest in your brand during this period to ensure survival after the recession wains. Phil Duffield, vice-president for the UK at The Trade Desk, says: “Marketers across all sectors need to implement tailored advertising strategies to keep their brand light burning. Each interaction counts, so using insight to ensure you have the right message and are amplifying it in the right channel is critical.”

Duffield makes reference to the likes of Netflix and Disney, which have adapted to the cost of living crisis by moving to ad-funded models. “While fears of a recession might be growing, consumers are just as willing – if not more willing – to engage with advertisements,” he says.

Many of the marketers we speak to urge brands to adapt strategies to be more sensitive toward consumers’ financial situation. Jeremy Hine, chief executive officer at MullenLowe Group UK, says brands have to be in touch with current economic challenges. ”The marketing spend for big-ticket campaigns is dwindling, so brands need to reflect the psyche of the nation through authentic and true-to-life communications,” he says.

The last quarter of the year could be tricky for brands to get right, with a likely recessionary Christmas. The global head of client services at Redmill Solutions, Marianne Yallop, urges advertisers to be “careful” about how they execute their Christmas campaigns.

While acknowledging that many big brands would have created ads earlier in the year, Yallop says they should be ”especially sensitive to consumer spending sentiment and cautious not to be seen as blowing hard cash.”

Very was first out of the gate with a Christmas campaign this year, which landed on October 13. The creative was a fairly traditional Xmas spot. Yallop adds: “Budgets need to be kept under control, with gimmicky but costly campaigns running the risk of alienating consumers.”

Michael Nevins, chief marketing officer at Equativ, suggests marketers get used to a faster rate of change in consumer behavior. “Strategies and spending plans must be aligned with what consumers want right now and which channels are driving the greatest ROI,” he says.

Meanwhile, Justine O’Neill, senior director at Analytic Partners, advises advertisers to ”scenario plan at every stage by using data that can quantify the impacts of reducing, maintaining or even increasing marketing budgets.”

She admits that nobody can really predict the impact of the cost of living crisis on purchasing power, ”so it is vital that companies stand firm and look at the data.”

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