Marketing budgets on the rise to ‘grow business’

UK companies revised their marketing budgets up markedly in Q1 2019, according to the latest IPA Bellwether Report.

This is in stark contrast to recent trends where growth momentum had been easing and culminated with a stagnation at the end of last year.

The net balance of marketing executives reporting upwardly revised budgets increased to 8.7 per cent in Q1, up from a 0 per cent reading for the final quarter of 2018 and the highest since Q3 2017. Around 21.6 per cent of panel members observed spending growth, compared to 12.8 per cent registering budget cuts.

However, marketing executives erred on the side of caution with their forecasts for marketing spend for the 2019/20 financial year. A modest net balance of 3.4 per cent anticipate budgets to grow during this period, which was notably weaker than past forecasts made before a new financial year and the lowest since 2009.

Although approximately 26 per cent of panellists foresee growth, the remaining 74  per cent expect cuts or no change. Compared to this time last year, a net balance of 18 per cent of firms anticipated budget growth for the 2018/19 period.

Paul Bainsfair, IPA director general, said: “This sharp increase following Q4 2018’s flatlining signals that UK marketing budgets have received a much-needed kiss of life in an economy gripped by Brexit uncertainty. The smart marketers realise that to grow their businesses, they must invest in them, particularly in mass reach, long-term media.

While the forecast for the year ahead remains uncertain given the seemingly endless Brexit negotiations, those that want real competitive advantage should follow the proven rule that if you increase your share of voice above your share of market, you should expect to experience growth.”

Digital growth
The best performing category of the Bellwether survey was internet, which saw its net balance jump from 2.1 per cent to 17.2 per cent. Firms showed a strong appetite to enhance their digital footprints, with Search/SEO spending (14.2 per cent from -3.9 per cent), as well as targeted advertising on mobile (3.6 per cent from -2.4 per cent) all receiving boosts.

A renewed drive for big-ticket advertising campaigns was also apparent during the opening quarter of 2019, with main media marketing returning to growth (5.2 per cent from -6.2 per cent). Events was the third and final Bellwether category to register expenditure growth (3.4 per cent from 2.6 per cent).

However, market research, sales promotions and direct marketing budgets were all revised lower during Q1.

Joe Hayes, economist at IHS Markit and author of the Bellwether Report, said: “A return to growth in marketing budgets during the opening quarter of 2019 may come as a surprise given the uncertainty that shrouds the UK political and economic climate has only built further since the previous Bellwether Report.

However, some companies began to show a determination to step up brand-building and protection in these challenging times, taking a pro-active, yet defensive approach in the face of business belt-tightening and weakening consumer confidence. That said, cautious undertones were still apparent in budget plans for the 2019/20 financial year, with panellists providing only modest growth expectations in available marketing spend. In fact, the outlook was the most subdued since 2009.”

Patrick Reid, Group CEO of Imagination, added: “Through periods of economic uncertainty, experience continues to grow as brands look to create more meaningful connections with customers. We believe in the power of experience to transform behaviour, they provide a platform to truly change how people feel, think and act. At Imagination, we’re continuing to invest in technology and strategic partnerships, to create the experiences of the future.”

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