IPA Bellwether: Industry analysis

The report highlights a lot of the challenges we have seen clients face this year. Currency fluctuations and the rising costs of product manufacturing across multiple markets have created profit challenges across a range of sectors. These challenges quickly make their way to advertising budgets and the need to create greater efficiencies across all areas of the business.

We have however seen continued growth of digital investment, like the rest of the market, and some of this is driven by the more short term budgeting position and the need to deliver greater ROI more quickly.

The trends are not unilateral, however, and we have equally seen some advertisers increase their investments in broadcast channels at the expense of digital advertising. This is particularly true of retailers focused on in-store but it also includes brands driving to hard online or mobile acquisition goals.

Although the financial outlook is fairly stagnant, I hope that we will see continued confidence from consumers that will in turn bolster marketers to be brave with budgets and with their use of media, while ensuring that efforts to spread media across channels are not abandoned in favour of the short-term return of digital advertising.

Although the IPA Bellwether report suggests the landscape in general is flat, with a freeze in most marketing budgets, we can hope that the strength of digital will serve to keep marketing budgets strong as the industry gets back on its feet after a long period of uncertainty.

The increase in digital spend and mobile advertising reflects the growing understanding of online as a failsafe way to reach a brand’s audience. Over the coming years, and as marketers begin to once again feel stable in relation to the volatile climate, we can expect to see the positive impact of digital marketing success reverberate throughout the marketing industry.

Although budgets are stretched at the moment, brands who continue to invest in marketing will be those that prosper. Through the improved data, audience knowledge and technical expertise now available, it is possible for marketers to make more of their budgets and deliver excellent ROI, encouraging further investment down the line.

As such, I hope that the currently muted adspend growth predictions are something we can expect to see raised in future Bellwether reports.

While we wholeheartedly support the concept of Paul Bainsfair’s point about brand-building and sales activation, they are not divided by online and offline. This is important distinction as without doubt brand and performance will need to work together like never before in the age of digital. Due to things like the rise of voice search, we are on the cusp of a significant shift to the way in which consumers interact with brands, and brand will be of utmost importance. Given such technological advances, it is pleasing to see brands investing more in search.

Additional areas of significant development in 2017 are GDPR and digital transformation; it wouldn’t surprise me if brands are increasing internet budgets with this in mind. However, they must invest wisely here. GDPR isn’t a box ticking exercise – it’s an opportunity for brands to reset how they connect with their customers.

In digital transformation, the big consultancies will be vying for brands’ attention to define and implement infrastructure and operating models but relevant experience at the coal face of marketing will be essential to success. Companies that can offer both seamlessly are few and far between. Minimum viable product and iteration is a great mantra when the pace of change in things like Artificial Intelligence, Virtual Reality, Augmented Reality and the Internet of Things is exponential. Big ticket transformation mustn’t be expensively obsolete by completion.

Political and economic uncertainty in the months ahead is reflected by the muted budget predictions in this report. However, it is not all doom and gloom, with promising expansion in internet spending and slight growth predicted for 2017.

We know recent years have proven difficult for ‘traditional media’, which is having to compete with internet spend, but there is undoubtedly still a place for both. Main media adspend remained the same in Q3 and ‘big-ticket’ areas such as cinema, TV and radio should look to adopt key principles of internet advertising in order to become more resilient.

In testing economic times, the ability to demonstrate return on investment is paramount. Investing in data is crucial, allowing marketers to understand the size and preferences of their audience and how best to reach them.

Out-of-Home advertising is a great example of a ‘traditional’ media that has embraced developments and proven resilient to internet pressures. Digital is unlocking incredible opportunities for our clients and has been embraced by consumers. But it will be through advances in data, measurement and accountability, and also automation, that the medium will continue to demonstrate effectiveness. This will underpin Out-of-Home continued growth.

It’s not surprising that digital channels are continuing to show growth in uncertain economic conditions because they deliver measurable accountability for marketing investment both for brand and performance activity.

The ability to use data in order to target and reach discreet audiences with relevant and timely content delivers results and has the added flexibility to adapt to short term market conditions.

Specifically, the growth of mobile and search are not a surprise. As consumers increasingly access content across multiple screens they spend more time on mobile devices while advertising spend doesn’t reflect this split of time so any added growth of mobile is just part of a catching up process.

Meanwhile, search continues to be a critical part of the marketing mix and ongoing innovations such as voice search together with the growth of e-commerce will continue to drive spend growth.

As consumer spend falls it is more important now than ever to maintain a strong brand presence, to ensure your brand is top of mind for increasingly cautious consumers. Doing so relies on intelligent and considered spend – something that doesn’t necessarily even involve an increase in budgets, which as the report shows, are staying stagnant.

It does, however, involve a change of mindset – instead of throwing money at digital, just because everyone else is doing it, marketers need to carefully assess the channels in which they will gain the highest traction and brand recall, in order to ensure growth.

In the past, periods of economic uncertainty have had a heavy impact on marketing budgets. Despite anxieties around Brexit, currency fluctuations and inflation, it’s encouraging to see that marketing continues to be a key driver of business growth with 89% marketing budgets being held or grown and only 11% being cut.

To an extent, this could be seen as recognition in British business that communicating to your customers about the value of the products and services you provide is not a discretionary spend.

Un-chartered waters create caution and marketers are expressing this in the latest IPA Bellwether Report. The lack of change in marketing budgets across main media channels demonstrates stability, but within this perhaps the perception of the immediacy of ROI from internet advertising is still appearing the safest harbour for marketing investment, with a higher (+17%) net balance change.

However, the well-publicised current concerns around viewability and tech tax may be taking their toll as confidence has dropped by 6% from Q2. For brands to continue growing in the long term, they should invest in mass mediums which provide good opportunity for brand building.

Despite this quarter’s results, we expect out of home to attract greater revenue in 2018 as brands will ultimately want to continue improving on trade.

In its seventh successive quarter with a negative net balance, the IPA Bellwether signals a continuation of stagnant marketing budgets. The report also paints a complex picture where the future is mainly informed by how macro trends affect individual sectors, with retail being the most affected and others (like tourism) finding advantages in this new normal.

With net income decreasing because of inflation and rising cost of living, consumers are looking to get the best use out of each pound spent. It is unsurprising that marketers are continuing to mimic this behaviour and sustaining investment into short-term, measurable options like internet marketing to capture existing demand in the most efficient way.

However, amidst uncertainty, having the forecast unchanged for a second quarter begs the question as to whether this new normal is here to stay (at least for the foreseeable future): in contrast to last quarter’s, we have moved into single digits (from -12.6% in Q2 to -8.2%).

This, coupled with the recent OECD report forecasting 1% growth for the UK even in the “least favourable scenario” (i.e. leaving the EU without a deal in 2019), begs the question as to whether now is the time to buck the trend and begin to invest in long-term, demand generation marketing to create a competitive advantage into the future.