Q4 outlook isn’t perfect for marketers, but there’s cause for optimism about 2024

Client budget allocations will determine where agencies should focus their growth efforts, which sectors to target, and what skills and capabilities are in demand. These decisions will direct agencies toward the talent and tech resources they need to ensure they can deliver on campaigns and projects (have you appointed an AI prompt director yet?).

Marketers will be scrutinizing all available insights and data on their own sectors, consumer behaviors, and trends to help make their decisions.

A mixed outlook

The quarterly IPA Bellwether Report covering Q3 and the AA/WARC Expenditure Report are two recent indicators of the health of the industry. The Bellwether delivered a mixed bag. Total marketing budgets were revised upward in Q3, extending the current sequence of upward spending revisions to ten successive quarters, but it was the weakest quarter of total marketing budget growth since the final quarter of 2022.

There was good news for ‘main media advertising’, as the channels in the category enjoyed upward revisions in ad spend while promotional media spend took a dive. This suggests that some businesses are seeing potential advantages in strengthening their brands to be front-of-mind and positioning to steal share over the longer term.

What are agencies saying?

Propeller’s clients’ opinions are varied too.

Rob Meldrum, head of creative futures at EssenceMediacomX said that “the rise in main media marketing budgets to the highest in a year and a half” is “a great sign of positive change”.

“But,” Meldrum continues, “this doesn’t mean brands should take their foot off the peddle. Growing fragmentation, new and emerging channels, and continual pressure to meet consumers where they are means that marketers must continue to push their capabilities. This means we need to embrace innovation and new ways of thinking to break through.”

Daisy Proctor, managing director at BBD Perfect Storm, thinks this means that, going into 2024, “content is king. And it reigns supreme, even in times of economic decline. But creating content is redundant without cause or reason steering it in the right direction. Marketers need to start balancing long-term brand building with short-term investment, moving from a product-centric focus to a more consumer-centric approach. TV and OOH have always been the go-to channels for building trust, but with the rise of digital media, social and influencers, there are now more impactful (and cost-effective) opportunities to seamlessly connect with consumers on a brand level, in a way that feels organic.”

What does this mean for strategy? Celine Saturnino, chief operating officer at Total Media, commented: “We’re advising clients to consider more long-term engagement strategies as this will not only help with brand awareness but also deliver a sustainable return on ad spend in the face of the suspected recession. In a turbulent time, brands need to have their fingers on the pulse and react accordingly. Deeper analysis of behavioral trends through a psychological lens can help to predict changes in consumer behavior. This, combined with the use of AI tools to understand sentiment and crunch large sets of analytical data, will create support in delivering more impactful campaigns."

Brands are still looking for partners

Consumers are undoubtedly feeling a cost-of-living squeeze. And inflation (including media inflation) is driving up costs for clients and agencies. Still, there are areas where ad spend is rising.

For example, digital display spend data from Winmo’s Adbeat shows a significant uplift in spend in the entertainment sector over the past quarter. Disney+, Channel 4, and Paramount Plus have made moves. Retail chains like Sports Direct, Holland & Barrett and The Perfume Shop have also stepped-up investment.

Big pitches are still coming through; recent examples include UK theme park Thorpe Park awarding a creative brief, cosmetics firm Elizabeth Arden naming a global consumer PR partner, and Princess Cruises choosing a new media agency.

Eyes on the prize in 2024

The coming year has a lot to be excited about. Tentpole events from the Paris Olympic Games and Euro 2024 to a US presidential election (and a possible UK general election) are opportunities for media owners, brands, and agencies.

To invert the old saying, ‘when the US sneezes, the rest of the world catches a cold’. US business, as measured by the performance of leading companies, is looking relatively strong and that should have a halo effect for regional operations of multinationals.

According to Magna’s US ad Forecast, total advertising spend in the second quarter of 2023 was up +4% year-on-year, following two quarters of stagnation. This was largely driven by pure-play digital (social, display, video, etc).

One thing to guard against is the trend for client consolidation of their agency rosters as they look to simplify operations and ensure consistency and seamless integration across campaigns.

Agencies need to stay front of mind by maintaining frequency of contact and providing real insights and solutions across this all-important final quarter of 2023. By proving your value in the next couple of months you’ll lay the foundations for a strong relationship in 2024.