After the turmoil and almost paralysing uncertainty of the politics around Brexit this year, the IPA Bellwether report for Q1 2019 comes as something of a surprise. Despite the mayhem that engulfed Westminster and dominated most news cycles in the run-up to when Britain was scheduled to leave the EU on 29 March, UK advertisers actually invested more in advertising in the first three months of the year than during the same period last year. And Q1 2019 is the three-month period immediately following Q4 2018’s quarter of zero growth. Indeed, marketing spend was flat for 2018 overall.
Here are the main points again of today’s IPA’s quarterly report for Q1 2019:
The net balance of advertisers reporting increased marketing budgets grew to +8.7% compared with +0.0% in Q4 2018
The best-performing category was online advertising, which saw its net balance increase from +2.1% to +17.2%. Search/SEO spend stands at +14.2% net (up from -3.9% in Q4 2018), while mobile is at +3.6% (vs -2.4%)
Main media marketing has returned to growth (+5.2% vs -6.2%)
Events marketing has also registered expenditure growth (+3.6% from +2.4%)
Meanwhile, market research, sales promotions, and direct marketing have all shrunk
There’s no doubt that some will herald this news as evidence that the economy isn’t falling off a cliff after all, that here are reasons to be cheerful, green shoots, all the usual optimistic clichés. I, for one, think advertisers should look beyond the headlines and take a longer view. This is particularly true when you consider that the Bellwether report also reveals that the longer-term outlook has actually taken a downward turn – both for ad spend overall, and for expected business performance.
In taking a long-term view, I believe there are three important factors that brands should consider as they plan for the future.
There are opportunities in a downturn
Repeated evidence from the IPA and elsewhere, has shown that right around the world brands that spend through troubled times – and particularly through a recession – are the brands that prosper and grow more quickly once calmer economic conditions return. It could be that, despite the uncertainty and confusion over the UK’s political and economic future, brands have upweighted media investment with this in mind. WARC’s best practice guide “What we know about advertising in a recession” summarizes this well.
Going dark in marketing terms has a long-term impact on narrowing options and availability for distribution and increasing price responsiveness. It typically costs brands more to catch up with peers who sustain investment, once demand returns to the market, than if they’d kept the lights on.
Resist the short-term pressures
The big winners in the Q1 2019 figures are search and SEO. With search the most effective, short-term, performance advertising mechanism available, the most recent IPA Bellwether appears to show brands reacting to uncertainty by investing more in short-term activation with proven ROI.
This makes sense – short-term – but not long-term. Binet and Field’s analysis of effective campaigns since 2000 has shown that marketing effectiveness has been in steady decline since its peak in 2012. They attribute this decline to over-investment in short-term, brand activation and under-investment in long-term, brand building. Binet and Field’s golden ratio of 60/40 – 60% in brand building, 40% in brand activation; recently revised to be 62/38 – is being ignored by many brands.
In Q1 2019, the rush to search and social appears to be reinforcing short-term spend at the expense of long-term investment. This is likely to weaken brands and reduce their ability to fight off me-too products, copycat brands, private label, and ersatz sub-brands from retailers. The message from the market mix modellers and econometricians in our Analytics practice is clear: short-term spenders beware!
Be agile, plan smarter
One problem with looking quarter to quarter and not, say, year by year, is that one quarter is almost certainly not a trend and may be just a blip. Indeed, the latest IPA Bellwether suggests that spend will be down in the UK for the full year, along with GDP overall; 2019/20 forecasts are the most subdued since 2009. Our advice to advertisers is to think in terms of the medium-term future; to be flexible and nimble with your investment; to be sure to embrace good business planning principles; and, to invest in brands through bad times as well as good. Q1 may be rosier than expected, but good discipline will be required to ride this out.
What this ultimately means for advertisers is that they need to be faster and better at business planning and forecasting. Brands need to factor in a broader set of metrics – including consumer confidence, employment, and changes to the taxation regime. These could very significantly, depending on how (or if) Brexit is resolved.
Lastly, it’s also well established that the media and marketing industry is very much more Remain than Leave – in some cases by as much as eight or nine to one. Perhaps it’s just that the IPA’s Q1 figures reflect a suspicion on the part of marketers that they didn’t know what to plan for. Hoping against hope that Britain wouldn’t leave after all, maybe they acted as if it wasn’t going to happen.
Christian Polman is the chief strategy officer for Ebiquity