NEWS16 January 2019

Research budgets decline as marketing growth flatlines

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UK – Market research budgets continued to be cut in Q4 as overall marketing budgets stagnate against a backdrop of economic uncertainty, according to the latest IPA Bellwether report.

Gloomy outlook_crop

According to the quarterly IPA survey, a net balance of -4.7% of marketing executives indicated they planned to spend less on market research in the fourth quarter of 2018 (decreasing from -3.7% in Q3 ). This continues the downward trajectory for research budgets, which have been declining since the third quarter of 2015.

Moreover, -7.9% of panellists expect budget cuts in market research in 2019/2020.

Overall marketing budgets have not fared much better, stalling in the fourth quarter and ending six years of budget growth as economic uncertainty surrounding Brexit continues. A net balance of +0.0% marketers said there had been no change to their budgets in Q4, and while 16% reported growth, this was offset by others who had seen their spending cut (-16%).

Marketers remained cautious in their outlook for 2019/2020, with 27% expecting an increase in spend and 26% anticipating cuts, resulting in a net balance of +0.8%.

Panellists were slightly pessimistic in their assessment of their own financial outlook, with a net balance of -0.9% (down from +5.7% in Q3 and +13.3% in Q2 2018 ) when asked if they felt more or less optimistic about the financial prospects for their company than three months ago.

Meanwhile, the outlook for the industry’s prospects as a whole remained firmly in negative territory, falling to -28.6% in Q4, down from -21.0% in the previous quarter.

Budgets for sales promotions saw the greatest upward revisions, with the net balance increasing to +3.8% in Q4 from +0.6% in Q3. While digital advertising remained dominant, growth was moderated, with the net balance for the internet category dropping to +2.1%, from +13.6% in Q3. Main media advertising, including TV and newspapers, fell to -6.5% from +4.8%, its first downward revision for two quarters.

Joe Hayes, economist at IHS Markit and author of the report: “The slowdown in marketing budget growth seen in recent quarters culminated in Q4, as the six-year bull-run came to an end. Company-wide indecisiveness restricted the allocation of resources to marketers, as the wait-and-see approach to how the Brexit process will transpire appears to be the current strategy in place for many UK businesses.

“The neutral stance on marketing budgets came in tandem with a first pessimistic outlook by businesses towards their own companies’ financial prospects for the first time since 2012, suggesting that top-level belt-tightening and plans to protect margins has seen marketing executives be given less discretion. Indeed, provisional data for budgets for the coming 2019/20 financial year indicate that downbeat stance seems likely to persist.”

Paul Bainsfair, director general at the IPA, said: “In uncertain political and economic times, the understandable reaction for some advertisers is to lose confidence in brand building advertising and to think short term even to the point of heavily discounting their products and services ... Too much short-term sales promotion activity destroys brand value in the long term. Marketers need to weather this turbulent period and think ahead.”

The Bellwether report is researched and published by IHS Markit on behalf of the Institute of Practitioners in Advertising. The report is based on data drawn from a panel of around 300 UK marketing professionals.