The Media in Figures: Marketing budgets, Q3 2017 IPA Bellwether Report

GENERAL economic uncertainty has resulted in what is being described as a ‘paralysis’ in marketing budget spend, according to the latest (July-September 2017) survey of UK marketing expenditure: the Bellwether Report, published by the Institute of Practitioners in Advertising (IPA).

Says the IPA: “While the net balance* of UK companies have revised their marketing budgets up this year (+9.9 per cent), almost 70 per cent have kept them at the same level as three months ago, in response to wider geo-political and economic instability.”

The Q3 survey reveals that around 21 per cent of the survey panel recorded an upward revision to marketing budgets during the latest survey period while 11 per cent of companies recorded a cut to their marketing budgets.

The resulting net balance of +9.9 per cent was notably down on Q2’s +13.1 per cent and the lowest reading since the first quarter of 2016.

Adds the IPA: “More significantly, however, a greater number of companies left their budgets unchanged in Q3 at 69 per cent, versus 57 per cent in Q2.

“Marketers cited the hard-to-quantify impacts of the Brexit negotiations and the UK’s future departure from the EU as the primary sources of uncertainty. This was coupled with reports of reduced sales and investment and a desire to keep costs lean.”

More findings:

The perceived advantages of cost and return of digital marketing were noted as key in driving budget growth for internet advertising – and thereby total marketing – during the third quarter of 2017.

Latest data showed that a net balance of +17.0 per cent of companies increased their internet budgets, lower than the previous quarter’s decade high of +22.7 per cent, but nonetheless indicative of healthy expansion. Reflective of a longer-term shift, there were reports that internet marketing budgets had been increased at the cost of reduced spending on traditional print media advertising.

Within internet, marketing budgets related to search/SEO rose to a greater degree as signalled by the respective net balance improving to a seven-and-a-half year high of +16.3 per cent (Q2: +15.6 per cent).

Mobile advertising also rose to a stronger degree in Q3 (net balance: +5.8 per cent, from Q2’s +3.0 per cent).

Other Bellwether categories to enjoy positive net balances during the third quarter included events (+9.4 per cent versus +2.1 per cent for Q2) PR (+7.2 per cent from +2.1 per cent in Q2) and ‘other’ (+2.3 per cent from Q2’s -2.6 per cent).

Perhaps reflective of ongoing uncertainty and generally slower sales growth in the third quarter, main media advertising was unchanged (net balance: 0.0 per cent, down markedly from +9.8 per cent in Q2 2017).

Given the strong performance of internet, which forms part of the wider main media advertising category, the latest survey data subsequently implied a subdued performance for advertising related to ‘big-ticket’ areas such as cinema, TV and radio.

Stagnation of marketing budgets was also seen in the sales promotion and direct marketing categories during the third quarter (net balances of 0.0 per cent were registered). That said, in both cases, no change in marketing budgets was a relative improvement following notable reductions seen in the preceding quarter (Q2 net balances were -10.7 per cent and -4.7 per cent respectively).

Posting a net balance of -2.4 per cent (Q2: -6.2 per cent) market research was the only Bellwether category to register a net reduction in spending during Q3.

Adds the report… 

When asked to consider their optimism regarding financial prospects for their industry compared to three months ago, nearly 24 per cent of UK marketers were less confident, compared to around 15 per cent that had become more optimistic.

Although the resulting net balance of -8.2 per cent was an improvement on the -12.6 per cent seen during Q2, latest data marked the seventh successive quarter that a negative net balance has been registered.

Companies were a little bit more optimistic about their own financial prospects in Q3 2017. Just over 29 per cent of the survey panel have grown more confident, compared to 18 per cent that are less optimistic, with the respective net balance of +11.1 per cent up slightly on the 18-quarter low of +9.8 per cent in Q2. However, optimism remains historically subdued and well below the post financial-crisis average.

Continues the survey findings: “Reflective of the uncertainty associated with Brexit, and the adverse effect this is having on business investment, the Bellwether Report predicts only a muted increase in adspend for 2017 (0.6 per cent).

“This subdued view is supported by current business survey data which is showing the economy growing at just 0.3 per cent in the third quarter as sectors exposed to changes in large scale investment such as construction struggled in September.

“With the economy expected to slow further in 2018 (GDP growth is forecast at just 1.6 per cent, undermined by a weak increase in consumer spending), Bellwether currently anticipates a stagnation of adpsend in 2018.

“As investment, consumption and wider growth improve in 2019/2020, adspend is forecast to rise at similarly quicker rates, with predicted increases in adspend of 1.8 per cent and 2.3 per cent respectively in 2019 and 2020.”

Source: Q3 2017 IPA Bellwether Report, October 18 2017.