Marketing budgets stop rising after six years of growth

Parliament: MPs may reject Theresa May's plan
Parliament: MPs may reject Theresa May's plan

More marketers are pessimistic than optimistic about their company's financial prospects for the first time since 2012.

Marketing budgets have been hit by the uncertainty around Brexit with just 72 days until the scheduled date of the UK’s departure, the latest IPA Bellwether Report shows.

In the fourth quarter of 2018, a net balance of 0% of marketers surveyed said their budgets had increased – the first time this figure has not been in the positive for six years. While 16.4% reported a budget increase, the same proportion reported a decrease. In the previous quarter, a net balance of 2.5% revised their budgets upwards.

Last night, MPs rejected Theresa May’s Brexit deal by a majority of over 200, but without a way forward that could clearly win the support of parliament – meaning a "no deal" exit from the European Union remains a possibility.

The chill of Brexit uncertainty can also be seen in marketers’ assessment of the financial prospects for their own companies. A net balance of -0.9% said they felt positive rather than negative about their prospects in the final quarter of last year, down from 5.7% in the previous three months; this is the first time the balance has fallen below zero since the third quarter of 2012.

Marketers were also asked for their view of the prospects of their industry – a measure that typically paints a much gloomier picture and has been negative on balance since the fourth quarter of 2015. This figure also fell significantly, from -21% in the third quarter of 2018 to -28.6% in the following three months, representing the lowest figure for seven years.

Marketing budget showed a net decrease across most areas of spending in the final quarter of last year, including search/SEO, which stood at -3.9%, down from 5.8% the previous quarter and the first time this figure has been negative since the second quarter of 2009.

Mobile advertising budgets were at a net -2.4%, down from 1.9%, while main media advertising (including TV and press) was at -6.5%, down from 4.8% the three months before.

However, there were small increases in the net balance for events, up from -1.1% to 2.6%, and sales promotions, up from 0.6% to 3.8%.

Paul Bainsfair, director-general at the IPA, said: "In uncertain political and economic times such as these, 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.

"We’ve seen this on- and offline in the run-up to Christmas – and now see the impact in black and white in this latest Bellwether Report. We know from the research we have done into what builds and what destroys brands – and it is proven – that too much short-term sales promotion activity destroys brand value in the long term.

"Marketers need to weather this turbulent period and think ahead. Now is the time to be bold, to keep up their share of voice and, if they can, increase it to grow their share of market."

Looking to the next financial year, 27% of marketers said they expected expenditure to increase – marginally higher than the 26% who expected it to decline.

The report, meanwhile, cut its projection for 2018’s adspend growth to 0.5% from a previous estimate of 1.1%. But "under the assumption of an alleviation of uncertainty as a new relationship with the European Union becomes clearer", the report said this should bounce back in 2019 and has revised this year’s projection from 0.7% to 1.3%.

Dino Myers-Lamptey, UK managing director at MullenLowe Mediahub, said: "The last recession was like no other. Businesses tucked their brands away in their advertising beds and woke up to a new global and digitally disrupted world, for which their relationship with the now more informed and more demanding customer had completely changed.

"What we will see this time round is some of the same old mistakes and some fresh ones. Top of that list will be the predictable mistake of brands attempting to maintain a ‘best of both’ approach by cutting cost and protecting adspend through ‘in-housing’ and diverting budget to lower cost-per-thousand media."

While the latest negatives figures were "inevitable", the report only reflects certain segments of the economy, according to Jonathan Trimble, chief executive of And Rising. He argued: "Bellwether reflects the incumbent state of [traditional] business, which inevitably is tethered to wider political and economic indicators. If you shift the lens to those scale-up companies inventing the future or catching waves relevant to a public formerly known as consumers, you see a very different picture."

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