Marketing budgets up but research budgets drop, finds IPA

The report, which is run by the Institute of Practitioners in Advertising (IPA) and based on a questionnaire survey of around 300 UK-based companies, found that a net balance of +10.8% of UK companies revised their marketing budgets upwards in the second quarter.

Approximately a quarter ( 24.2%) of surveyed companies raised their total marketing expenditure during Q2 2022, while 13.4% carried out budget cuts.

The positive balance, however, showed a slight slowdown in growth when compared with the opening quarter of 2022 (+14.1%).

Market research spending was also heavily hit, with a net -6.5% of companies investing in the discipline, indicating an overall cut in budgets across the industry.

Events was the biggest driver of marketing growth in the most recent financial quarter, with a net balance of +22.2%, up from +18.7% in the previous quarter.

The only other Bellwether category to record growth in Q2 was public relations, which hit a net balance of +3.7%, from +0.6% in the first quarter.

Main media – which includes big-ticket advertising campaigns relating to TV – saw marketing budgets stagnate at 0%, ending a year-long sequence of growth and down dramatically from +9.4% in Q1.

While other online (+4.4%, from +18.6%) and video advertising (+0.8%, from +9.0%) growth continued, they both saw steep slowdowns, and further drops were seen in audio (-16.4%, from -8.5%) and out of home (-15.9%, from -4.6%), while published brands moved from positive to negative territory (-2.6%, from +1.3%).

Direct marketing ended four consecutive quarters of growth, and sales promotions (-0.7% vs +8.0% previously), market research (-6.5% vs -3.5% previously) and other marketing activities not already accounted for (-8.3% vs -0.9% previously) all dragged on total expenditure.

The survey showed companies were becoming pessimistic about the impact of high inflation and the looming possibility of a recession, as a net balance of -26.7% were downbeat about the industry’s prospects going forward.

A net balance of -9.5% of companies were pessimistic about their own performance, the worst score for two years.

Underlying data showed that 30.7% of survey respondents were pessimistic towards their own business prospects, compared to 21.2% that were more optimistic.

Paul Bainsfair, director-general at the IPA, said: “It is interesting to see, amid the mounting economic headwinds, there were a number of businesses that signalled their intent to market aggressively to support their brand and gain market share from less-prepared competitors.

“This is usually a wise and canny move. All the IPA’s analysis on who does best in a downturn, shows that the companies that recover fastest are the ones that either maintain or increase their marketing spend during difficult economic times.

“Equally, cutting ad budgets – relative to competitors’ spend – in a recession undermines companies’ ability to grow future market share and profits.”

Joe Hayes, senior economist at S&P Global Market Intelligence and author of the Bellwether Report, said: “Amid a deteriorating economic outlook for UK businesses, sustained growth in total marketing activity is encouraging.

“However, the stagnation in main media marketing budgets is a disappointing result from the Q2 survey and suggests concerns around the outlook are weighing on decision making.

“Risks are clearly skewed to the downside as the intensifying cost of living crisis weighs on disposable incomes, while firms face difficult decisions regarding their spending at a time when their cost burdens continue to inflate.”

Industry reaction

Philippa Snare, senior vice-president Europe, Middle East and Africa, The Trade Desk

“It’s important that marketers recognise this apparent resilience in budgets for what it is – a red herring against the backdrop of the cost-of-living crisis.

“With budgets set to tighten for the rest of the year, it’s imperative that marketers look beyond short-termism and ensure that spend is invested smartly – and that means on the open internet over the walled gardens. Not only is this where investment can be best understood and optimised, it’s also where advertisers’ existing and prospective customers are spending the majority of their time.

“Despite the government advising revising marketing budgets, economies, brands and businesses that invest during downturns are the ones that bounce back quicker ahead of those who don’t.”

Richard Exon, founder, Joint

“It’s telling that the Bellwether Report has landed in the same month that we heard a truly dumb government suggestion, that UK companies should decrease all marketing and advertising investment in order to cut prices for consumers to help ease the cost-of-living crisis.

“While the current generation of Tory leaders seem happier breaking things than building them, businesses know that investing for the long and the short term need not be antithetical to offering value for money today.”

Ben Davis, editor, Econsultancy

“With online and video advertising budgets continuing to grow, combined with reduced consumer spending and the return to brick-and-mortar retail, ecommerce brands will be fighting it out to win clicks.

“At the same time, given the IPA report also highlights the continued branding push in digital, one would expect marketers to place even greater emphasis on the value of a strong organic search presence and engaging social content, particularly given online-to-offline shopper behaviour.”

David Kells, head of partnerships, Raconteur

“The downturn in forecast for several sectors seem to balance out the optimistic predictions in the last report. It’ll be interesting to see what the dramatic growth in forecasted spend in events does for the sector.

“It’s clear that some the old event formats were outdated and needed innovation. Is the business world ready to fly in out in their thousands to global expos, or will the impact of travel disruption and hybrid working mean things become smaller in scale, more localised and targeted?

“Some predictability in the future would be lovely, but seemingly unlikely.”