Market research budgets revised down in Q3, finds Bellwether

The Bellwether found that while on balance market research budgets had fallen in the third quarter of 2023, this was a relative improvement on the previous quarter, which had a 2.9% negative balance.

The 2023 third quarter results showed 9.5% of panellists signalled growth in market research budgets compared with 10.9% of firms that registered a decline, and the marginal decline was broadly in line with expectations for 2023/24.

For UK marketing budgets, the Bellwether revised upwards in the third quarter of 2023, the tenth successive quarter that has seen an upwards spending revision.

While 21.1% of Bellwether firms increased their total marketing spending in the three months to October, 15.8% registered a downgraded budget, resulting in a net balance of +5.3%, which was the weakest quarter of total marketing budget growth since the final quarter of 2022 and down from +6.4% in Q2 2023.

The main media advertising category was the strongest-performing segment of the Bellwether survey in Q3 with a net balance of +7.4% of companies increasing spending at the strongest rate in a year-and-a-half.

Other online advertising methods rose to a net balance of +9.1%, versus +8.3% in the previous quarter, and Video (+0.9%, from +3.2%) and published brands (+0.8%, from -5%) also performed well.

Audio dropped -10.8% in the third quarter from -8% the previous quarter and out-of-home (-12.1%, from -7.1%) saw contractions accelerate.

Events saw a net balance of +5.9% of companies increasing spending, and other areas of budget growth included direct marketing (net balance of +4.3%, from +7.3%) and public relations (+4%, from -1.9%).

When assessing the financial prospects for their own business, Bellwether firms were optimistic, with a net balance of +5.2% of companies reporting stronger sentiment than three months ago and 25.4% of respondents were more upbeat on their financial outlook.

However, 20.2% signalled weaker confidence and the majority of companies ( 54.3%) reported no change in their assessment of financial prospects.

In contrast, the industry-wide outlook remained negative during the third quarter, with the proportion of panellists that were downbeat towards the outlook for their sector ( 24.9%) more than double those who were positive ( 12.1%).

The Bellwether said that the growth outlook for the next financial year is lacklustre, with expectations of a shallow recession in the UK next year and a subsequent expectation that advertising spend will contract 0.6% and 0.4% in 2023 and 2024 respectively.

Reaction

Paul Bainsfair, director general, IPA
Against a backdrop of economic stagnation and ongoing elevated levels of inflation in the UK, coupled with increasing global geo-political volatility, the trading environment for companies is unquestionably tough. But instead of seeing a re-run of last quarter’s slightly concerning results where companies revised up their short-term sales promotional activity to record amounts while reducing their main media spend, this time we are buoyed to see a more considered, reverse state of affairs.

This quarter, those companies that can are heeding the evidence that in general, investing more in main media will help to steady them through the uncertain times and help to ensure the longer-term health and profitability of their brands. Crucially, they – alongside the many investment analysts we have also recently surveyed – are recognising that marketing spend is indeed an investment not a cost.

Joe Hayes, principal economist, S&P Global Market Intelligence, and author of the Bellwether Report
As storm clouds gather over the UK economy, it’s encouraging to see total marketing budgets hold firm in expansion territory. We saw last quarter that firms had become concerned by persistence of the cost-of-living crisis, which drove a record rise in sales promotions spending.

In the latest quarter, however, firms have gone back to brand-building, with anecdotal evidence suggesting that this move has been made both defensively and offensively. With demand conditions coming under pressure, companies will have to position themselves strongly to stand out from their competitors.

Steve Phillips, chief executive and co-founder, Zappi
Understandably, difficult economic circumstances in the UK continue to dictate marketing strategies, but it’s critical that we don’t lose sight of the big picture. While brands are rightly concerned about budgets and return on investment, short-term, defensive tactics aren’t a replacement for long-term brand building as teams shape their 2024 plans.

Despite market research spending continuing to decline, there are still reasons for optimism. Brands are finding that reduced spend does not mean reduced access to insights. In fact, more teams are turning to agile platforms that enable them to do more with less and drive more insights – not just data – into their businesses. Now is the time when brands need more, not less, insight into what their consumers want and many are meeting the challenge head-on.

Rachel Macey, head of TGI agency partnerships, Kantar Media
None of these figures have seen any meaningful decline in recent months or years and some have seen rises, so it’s interesting to see that spend has been pulled back. Of course, we also know the value of being forensic in identifying target audiences for campaigns and it could be that marketers are pinpointing specific consumer groups in other areas.

The cost-of-living crisis is dramatically reshaping people’s behaviour, habits and attitudes, and brands have to understand what this means for them. It can be surprising in some cases just how big the differences can be – we know, for example, that people renewing their mortgages in the next few months have been particularly hard hit by recent interest rate pressures, changing their spending priorities.