Net fall in market research budgets in Q4, says IPA Bellwether

The report found that the net fall in market research budgets was down from -1.5% in the preceding quarter, with the fourth quarter results showing 10.7% of respondents increased insights budgets while 15.7% made cuts.

The data adds to predictions made by Bellwether panellists earlier in 2023 that research budgets would face an overall reduction in the 2023/24 financial year.

A net balance of -1.0% of firms forecasted a reduction in budgets in 2024/25, according to preliminary budget setting data.

Despite cuts to market research budgets, total marketing budgets saw their strongest upward revisions since the second quarter of 2014, with a net balance of +14.7%.

The report found 26% of panellists saw total marketing budgets rise in the fourth quarter of 2023, more than double the proportion registering cuts ( 11.3%).

The resulting net balance of +14.7% was up sharply from +5.3% in the third quarter of last year and extended the current sequence of expansion in total marketing budgets to 11 quarters, the longest uninterrupted period of sustained growth since 2018.

Events was the best-performing sub-category of marketing in the final quarter with a net balance of +15.9%, its highest in a year-and-a-half (up from +5.9% in the third quarter of 2023 ).

It was also a positive quarter for direct marketing, which saw its greatest increase since the opening quarter of 2005 with budgets rising at a net balance of +12.6%, from +4.3% the previous quarter.

The latest Bellwether data showed a widening of the divergence between company-own and industry-wide financial prospects during the final quarter of 2023.

Industry-wide prospects had a net balance of -12.7%, which was unchanged from the previous quarter, compared with a +12.6% balance when discussing their own company’s prospects.

The IPA Bellwether is based on a quarterly questionnaire survey of around 300 UK-based companies.

Paul Bainsfair, IPA director general, said: “Despite the challenging economic climate, this quarter’s upbeat Bellwether findings show that companies are heeding the evidence that continuing to advertise through the tough times can help maintain brand loyalty and protect the long-term health of their brands.

“However, we also saw anecdotal feedback that some companies noted plans to price their goods and services more competitively in a bid to gain market share. While this is good news for the consumer, it is further proof that companies are experiencing a tough trading environment.”

Joe Hayes, principal economist at S&P Global Market Intelligence, added: “The resilience of UK marketing continues to be at odds with the worsening economic climate businesses are facing.

“Instead, companies are demonstrating the foresight to maintain a long-term view towards their brands, maintaining a healthy level of investment in the tools to stave off competition, retain clients and win new business.”

Reaction

Steve Phillips, chief executive and co-founder, Zappi:

Into 2024, marketers will need to keep a finger continuously on the pulse of what consumers want, ensuring that their marketing activity aligns with ever-changing consumer demands.

Market research continues to be a source of spend reduction on marketing budgets. While 10.7% of those surveyed report increases to their market research budgets, there is a -5% net spend leading into the new year.

While on the surface this could be perceived as a negative for the industry, this doesn’t mean that marketers are speaking to their consumers less than in previous years; the opposite could indeed be true. This reduction in spend could signal the continuation of more efficiency in research budgets which began during the pandemic, as brands adopt and expand research via agile platforms.

Sarah Sanderson, managing director of TGI, Kantar Media:

The IPA’s new report is a welcome sign of growing optimism as marketing budgets are revised up to their strongest level in nearly a decade. Brands are being bullish and backing their conviction through proactive, long-term investment – despite the challenging headwinds. 

However, it’s important that the sector remains vigilant. With elections coming up and the threat of expanding global conflict, volatility is still on the horizon which makes the role of sound market research even more crucial. 

It’s vital that businesses stick close to the changing moods, attitudes and motivations of their target audience. If you’re spending big as a marketer, good research that gives a 360 picture of your customer is an absolute necessity to ensure you can spot opportunities in a tight market and drive profitability.

Laura Lane, head of marketing UK and Ireland, HubSpot: 

For now, allocating budget to tools such as AI will ensure brands can personalise content and uncover data insights that prioritises removing any friction in the customer journey.

After all, enabling brands to have the loudest voice in what is an incredibly crowded – and competitive – business environment is not enough if the customer cannot see long-term value in the relationship.

Nicole Kivel, managing director, northern Europe, Criteo:

With online advertising up 13% in Q4, attention will now be fixed on Google’s rollout of its Privacy Sandbox. Marketers and their media agencies will want to explore new, sustainable ways to reach buyers and access to closed, authenticated environments like retailers’ sites will be a crucial component.

With shoppers focusing on new year’s resolutions over new year’s spending, marketers need to ensure 2024 starts with a full-funnel mindset, one that has customers at the heart and one that champions long-term strategies versus short-term wins.