Bellwether: UK marketing budgets grow but market research spend still stifled

Around one-fifth of survey respondents upwardly revised their total marketing spending in the fourth quarter ( 20.2%), while 18.0% registered budget cuts, according to the quarterly spend report published by the Institute of Practitioners in Advertising, meaning a net balance of +2.2% of UK companies are revising their marketing budgets up.

While the continued overall growth is positive during economic uncertainty, marketers in the survey continued to shrink their market research budgets in the fourth quarter of 2022, with a net balance of -8.8% reducing spend – the sharpest reduction since the second quarter of 2021.

Looking ahead, a net balance of +2.0% of businesses reported that they expect budgets allocated to market research to grow during 2023 and 2024 – while positive, it is the category with the lowest prediction of growth analysed in the survey.

Almost two-fifths of surveyed companies ( 39.5%) expect total marketing budgets to be higher in the coming year, while 15.3% forecast spending cuts (a net balance of +24.2%). The optimism extended to all marketing categories, with the strongest expectation of budget growth for events.

The findings offers insight into how UK businesses are planning to navigate an economic recession, noted report author Joe Hayes, senior economist at S&P Global Market Intelligence.

Hayes said: “Another quarterly expansion in total marketing budgets at a time when business costs have hit multi-decade highs and consumer confidence has plunged suggests many businesses understand the importance of investing in resources that will help them get through the downturn as best as possible.”

The IPA Bellwether report is based on a survey of around 300 UK-based companies that provide regular quarterly information about their marketing activities. Participating companies include a broad variety of advertisers in terms of market sector and geographical location. Respondents are primarily marketing directors or similar, with questionnaires dispatched to companies in the final three weeks of each calendar quarter. 

Paul Bainsfair, IPA director general, said: “Given the immediate outlook for the UK economy has deteriorated since the previous Bellwether Report, this quarter’s results are most welcome. While understandably cautious, they are nonetheless in positive territory.

“We can see that the companies that can are holding their nerve and continuing to invest in marketing through the downturn, with supporting anecdotal evidence from the report also revealing that a lot of companies who are concerned about losing market share to competitors have either maintained or increased their spend accordingly.” 

Industry response: Brands should be wary of cutting research spend, data insights must be relied on now more than ever

Dom Boyd, senior director at Kantar Insights UK, said: “It’s good to see the overall nudge up in budgets but teams should be wary of cutting their market research spend. The cost of living crisis is still recasting consumers’ behaviours and attitudes, and without the data and insight to understand those trends, marketers will be planning campaigns in the dark and their investment is likely to be far less effective. 

“It’s tempting during the current economic cycle to switch the focus onto short-termist tactics to drive quick wins, rather than sustained brand building and engagement with consumers, but that’s the wrong way to go. We know that strong brands do better in the long run and typically bounce back quicker after crises too.”   

Ben Leet, chief executive at Delineate, said: “As consumers become increasingly discerning amid tightening incomes, marketers must rely on data-driven insights to make quick and informed business decisions now more than ever. 

“This robust outlook for UK marketers should be taken with a pinch of salt. Financial prospects remain bleak at both the industry and company levels, though they are improving. Marketers need to utilise their consumer data to enhance their ability to react and make smart decisions. Brands that can effectively track their audiences’ wants and needs will be better positioned to maintain a competitive advantage and avoid long-term reputational damage.”