Brand Strategies Shift Amid Economic Recovery Signs

Budget

Source: Shutterstock

Main media advertising budgets have decreased for the first time in three quarters, while overall marketing budgets have increased due to a better UK economy.

According to the most recent IPA Bellwether report, the net balance in main media budgets, which covers video, audio, published brands, and out-of-home (OOH), fell by -0.7%, a decline from the previous quarter's 1.9%.

Only 4.5% of companies saw an increase in their main media marketing budgets, while 15.1% reported a decrease.

Interestingly, 24.4% of businesses increased their overall marketing budgets. This shows that the focus is shifting from traditional media to sales promotions, events, and direct marketing.

Sales promotions budgets increased for the second quarter in a row, rising by 4.9% compared to 1.4% in January. Marketers are optimistic about continued growth in this area for the upcoming year, with a net balance of 6% predicting an increase.

Following the previous report in January, recent positive business survey data suggests that the UK recession will be brief, with growth likely to be supported by first quarter GDP figures.

Principal economist at S&P Global Market Intelligence, Joe Hayes, highlights signs of economic recovery emerging in the UK. This has led to a significant increase in marketing budget growth. The latest inflation data, showing a decrease to 3.2% in March, further supports the optimistic economic forecast.

Hayes explains that due to cost-of-living pressures and elevated borrowing expenses, both households and businesses have been cutting back on spending. This has intensified competition in the market for attracting and keeping customers.

It is very encouraging to see that firms are continuing to see positive results in their marketing efforts during this period.

The data shows that there is a decrease in pessimism regarding the financial prospects of the industry as a whole. About 19.5% of survey respondents are more optimistic about their industry's outlook compared to the previous quarter. This optimism was slightly outweighed by 24.9% of firms expressing increased negativity, resulting in a net balance of -5.4% (an improvement from -12.7%). This is the highest level observed in the past two years.

Still, macroeconomic challenges were identified as a key threat to the outlook in the coming 12 months.

Bellwether April 24

Businesses are making changes to their marketing budgets and evaluating their own financial prospects, according to the IPA Bellwether report.

OOH experienced the largest decrease in the main media sector, dropping by -10.8% compared to -8.1% in January. Additionally, 13.5% of businesses reduced their budgets for published brands, resulting in a decrease from -5.7% to -1.4%. However, there was a slight increase in online advertising by 7.1% and video by 0.8% to partially offset this decline.

IPA director general, Paul Bainsfair, advised companies to be careful when increasing their promotional budget while decreasing their main media spend. According to Bainsfair, although sales promotions can boost sales in the short term, relying too heavily on them can ultimately hurt a brand's profitability and pricing power.

Investment in events is increasing.

The latest Bellwether report shows the biggest increase in events budgets since data collection began 11 years ago. This quarter, 31.9% of businesses reported an increase, while only 8.8% saw a decrease. This resulted in a net balance of 23.1%, up from 15.9% in January. This marks the ninth consecutive quarter of growth in events marketing, making it the top-performing category in the first quarter of 2024.

Events are projected to be the primary focus of marketing budget expansion in 2024/25. A significant 18.7% of businesses are looking forward to increasing their expenditure on events compared to the previous year.

IPA Bellwether April 24

Revisions to current budgets by category were analyzed, with data sourced from IPA Bellwether.

In the first quarter, there was a significant increase in businesses allocating more funds towards direct marketing. Approximately 18.5% of survey participants indicated a boost in their direct marketing budgets.

Market research budgets have increased for the first time since the end of 2021, showing a significant improvement from the previous quarter's sharp decrease. The net balance is now at +1.4%, a positive shift from the -5% recorded in the final quarter of 2023.

While 13.6% of businesses have seen an increase in market research spending, the modest growth experienced in the first quarter of 2024 is not expected to continue into the current 2024/25 financial year. In fact, a net balance of -4.4% of respondents are anticipating a decrease in market research budgets - marking the most pessimistic forecast since 2021/22.

Marketing budgets set to rise

Bellwether surveyed businesses to find out about any additional paid-for marketing activities not previously included. The results showed a continuing trend of decreasing budgets in the first quarter of 2024. However, there was a slight improvement with a net balance of -4.3%, which is better than the previous quarter's -6.4% and the highest figure in two years.

Bellwether also inquired about their budget plans for 2024/25. Businesses across the board shared their intentions to boost marketing budgets. 40.7% of respondents are looking to increase their total marketing budget, while only 18% are planning to cut back.

Similar to the previous quarter, events are generating the most positive outlook, with a net balance of 18.7% of respondents expecting to increase their spending compared to the previous year. Direct marketing is also following a similar trend, with a net balance of 11.9% planning to raise their budgets in the next 12 months.

Despite experiencing a contraction in the first quarter, budgets for main media advertising are projected to increase in 2024/25, with a net balance of 10.1% planning to boost their spending.

PR and sales promotions were the only two marketing categories showing positive growth for 2024/25, with PR at 6.3% and sales promotions at 6.0%.

Companies are still trying to save costs, so they may reduce spending in certain areas of marketing. Market research is expected to decrease by -4.4%, while the other category will contract by -3.4%.

Editor's P/S:

The article highlights the changing landscape of marketing budgets, with a shift towards digital media and a decline in traditional advertising. Despite economic headwinds, overall marketing budgets are increasing, indicating a focus on driving sales and customer engagement. The rise in events marketing, direct marketing, and sales promotions suggests a move towards more targeted and measurable campaigns. However, businesses must carefully balance these investments with traditional advertising, as over-reliance on short-term tactics can impact brand equity in the long run.

The positive economic outlook and optimistic industry sentiment are encouraging signs for the marketing industry. Companies are reassessing their marketing strategies and investing in channels that deliver the most value. The emphasis on events, direct marketing, and digital media reflects the evolving consumer behavior and the need for businesses to adapt to changing market dynamics. As the economy recovers and consumer confidence grows, it will be interesting to see how marketing budgets continue to evolve and shape the industry in the coming years.