IPA Bellwether: Industry analysis
Despite positive revisions to budgets, the UK’s uncertain economic and political climate meant industry financial prospects remained negative, according to the latest IPA Bellwether results. Here, senior figures from around the industry react to the results.
Paul Kennedy, data strategy director, Amaze One
For each new rumour, intention, deal or special concession that surfaces from the Government and their Brexit negotiations (as well as developments overseas such as the Presidential Elections and conditions in the Middle East), businesses will need to respond appropriately and with confidence.
Consumers too will be watching and potentially deferring or advancing purchase decisions. What will the transition plan and timings be? Will it be hard, soft or somewhere in the middle? Will the consequences hit all business sectors equally or will some be particularly impacted?
Businesses that have a better understanding of the performance of their marketing activities as well as the linkage between early demand (e.g. based on website behaviours) and resulting sales are likely to be those who are making more confident marketing investment decisions.
On the other hand, organisations who struggle to see what impact each marketing intervention is having on company performance are more likely to be holding back and possibly losing market share and revenue opportunities.
Many organisations now have a plethora of marketing platforms each with their own reporting suites, dashboards, KPIs and other MI. They struggle to bring all of this together into one cohesive picture. Add to this a mix of retained agencies, each responsible for a different part of the sales funnel and you have what can seem like a very difficult conditions to make sense of.
In the coming months, we are likely to see those with more mature and unified reporting capabilities (for example through a ‘holistic CRM Dashboard’) pull ahead and others stagnating or falling behind as a result of poor budgeting decisions.
Those organisations canny enough to have the right centralised data and MI to back up such decisions with fact based evidence will continue to increase their marketing and advertising spend and others treading water.
There’s no doubt about it we are entering into an economic climate which is more complicated than we have ever seen – consumer businesses need to armour themselves with better MI than they have ever had.
The UK has been a stand out growth market over the past 4 years. Zenith forecasting estimated this would continue into 2016, but we were already predicting a slow down before the result of the referendum hit.
This is illustrated by 2015 ad spend growth of +9.2% dropping (pre Brexit) to a predicted +5.4% in 2016. The latest Bellwether report predicts a year end figure of +1.9% which remains encouraging considering the wider macro factors.
Whilst we do not expect Brexit to have an immediate effect on budgets, which is evident from the continued growth predicted by Bellwether, the impact of Brexit may well accelerate this slow down as advertisers continue to step into the unknown next year, and beyond.
This is likely to become more evident over the next few months, as uncertainty causes companies to scale back investment, and consumers to postpone big spending decisions – particularly with the lack of sporting events to place spend behind compared to the sport heavy 2016 we had with the Olympics and the Euros.
However, it’s clear to see that marketing remains a strong growth engine for businesses and brands, and Zenith predicts continued growth, albeit more modest, of circa 3-4% over the next 2 years.
It’s great to see resilience in the market, though understandable that there will be uncertainty over the coming months, as we move into 2017 and are faced with even more predictions about what a post-Brexit UK and EU will look like.
Given market uncertainties, it is crucial that we in media continue to deliver evidence and assurances to advertisers that we will continue to push for greater engagement, measurement, transparency – and, most importantly, return on investment.
Data will play a leading role in delivering this, especially within the out-of-home industry as we deploy new technologies and tools to become even more accessible and accountable for marketers.
The report shows that internet spend is rising, which chimes with the strong showing for internet ad spend forecast by AA/Warc previously – and which predicted how digital spend will drive overall growth for out-of-home this year, ahead of other media including TV.
Given that the digital transformation of the media landscape is evolving at a rapid pace, the industry must continually strive to understand consumer behaviours and needs – and invest in the right ways.
Not do ‘digital for digital’s sake’, but look seriously at where we can provide the most relevance for consumers. Our audiences matter and if we get that right, new opportunities for growth will come in spite of what lies ahead.
The last Bellwether results straddled the day of the referendum so it is encouraging to see that budgets have again been revised upwards, in spite of some obvious economic uncertainty in the immediate aftermath.
It comes as no surprise, however, that we’ve seen marketers turn back toward more measurable spend in online activity, which appears to be supplemented by an improvement in another highly measurable channel: direct marketing.
With this, data science will continue to play a key role and in particular, more accurate cross-channel attribution modelling will be essential to providing the holistic view necessary to support marketing activity. Clients want to know what will pay back in the short-term.
Smarter brands making use of more sophisticated approaches to marketing will be able to enjoy the fruits of this approach to their whole budget, rather than making blanket assumptions about channels.
That said, one area of concern is the reduction in mobile spend. With consumer behaviour and Google rankings inextricably linked to mobile platforms, this is no time for complacency toward investment in the medium. A responsive website alone isn’t adequate. Brands that continue to develop here will steal an easy march on those that don’t.
Of course, only time will tell what will happen. However, for most of our clients it’s been “business as usual” and more, with recent successes coming from our particular brand of collaboration, which is grounded in creativity and data science driving each other.
Plus of course while our Australian acquisition wasn’t driven by Brexit, it’s looking ever more like a smart move.
These figures are clearly encouraging and we are delighted to see a return to a more normal service after Q2 which for us, and I understand many others, was a bit of an unexpected slowdown.
Brands in this climate cannot afford to take their foot off the pedal for fear of competitor brands steaming past them. To that end, there seems to be an almost post-recessionary feeling to proceedings at the moment, with significant activity taking place but not much strategic planning or long term thinking going on.
This more cautious approach is perhaps best exemplified in the growth of Direct. Whilst I continue to have issues about the IPA definition of Direct, the fact being that direct delivers the ability to engage more personally with the customer and prospect and to deliver a truly personalised experience.
We are seeing real consumer fatigue around digital communications and a real willingness to be contacted in different ways. I have been talking about a resurgence in DM for a few months now so perhaps this is the first indication of brands waking up to the really sophisticated opportunities that the channel presents today.
Brexit has brought about even more uncertain times and brands need to make sure they are moving funding into channels that are easy to measure (transparent) and efficient in order to keep a tight reign over the impact of investment.
Brands need to think differently and sometimes work with less traditional media channels in times of economic downturn in order to see the returns they are increasingly challenged to deliver.
Whilst we continue to see media consumption behaviour changing at pace, we also see increased fragmentation of traditional channels. However, there is one guarantee for brands – if someone is going to purchase a product, they will have to go through a store whether physical or online. Therefore, this is the last guaranteed and most influential touchpoint to reach shoppers with marketing communications.
With the forecast for 2017 budgets to tighten, marketing spend is set to be under more scrutiny to ensure most value for every pound spent.
For FMCGs specifically, the reach of in-store marketing is phenomenal. With the top four grocers seeing upwards of 50 million visits by customers every single week, it genuinely stands alongside TV as an awareness ‘channel’. And with pricing in this category lower than in the traditional media channels (with CPMs being sub £5 on average), even the most challenged marketing budgets can make it work.
Brands must focus more on effectively reaching the right audience through channels that allow smart targeting. Many of these are digital and include mobile messaging, programmatic advertising directing shoppers to store, mobile coupons etc. They allow brands to deliver communications to relevant people ensuring maximum engagement and conversion.
When IPA Bellwether’s Q2 2016 report was released, we predicted that marketing budgets would remain consistent despite the confusing political and financial atmosphere. What we’re seeing in the programmatic space since then is reflective of our forecast of the IPA’s most recent report: brands are continuing to increase their budgets in the ‘internet’ category.
Digital marketers aren’t panicking; they’re simply pushing towards the channels that deliver ROI. Certainly, in times of uncertain economic climates, marketers face greater scrutiny with how they allocate their budget. Owing to programmatic technologies, marketing budgets on a performance and brand level are now held more accountable.
Indeed, performance marketing is built on the premise of delivering tangible results. Conversion. And now, at a brand-level, marketers are able to qualify their investment as a result of further efficiencies and clarity into their marketing spend. They understand they can accurately measure success with unprecedented precision, especially in comparison to other advertising formats with softer KPIs.
The upward revisions for online marketing by +9.5% is comforting but not surprising. Given the continuous innovation in the programmatic space in a relatively short amount of time, the industry is becoming smarter, more efficient and more willing to collaborate towards a win-win solution benefiting advertisers, publishers and customers.
It’s an industry-wide investment that’s proving sustainable marketing spend, because, as we saw back in July and still see today: UK business won’t stop. Customers will still buy. It’s up to the industry players to help make this process as efficient and effective as possible.