IPA Bellwether: Industry reaction

It’s business as usual for our clients at the moment whilst everyone is waiting to understand the impact of Brexit. Many of our clients have signed off budgets for 2016 and we’re now in planning mode for 2017 and clients are progressing as normal until the point that we’re clearer on economic trends.

We’ve seen a bounce in the stock market and whilst the pound has taken a hit we are starting to see positive movement on that front so it’s all still unclear.

Media planning as we know is something that moves constantly from the point of initial planning through many iterations to the point of final execution. Any real downward revisions will be made nearer the time prior to the point of having to commit to media owners. If the pound remains weak then obviously there will be businesses that have to divert some of the discretionary marketing budget back to material costs.

In periods of uncertainty clients typical go with channels they know to work best for them. I think we will just see more focus on short term deals next year as clients seek to maximise value potential from the market with a closer eye on ROI from channels that deliver against the relevant metrics.

Jonathan Barnard, head of forecasting, Zenith

The Bellwether results were surprisingly positive for Q2, indicating a substantial net increase in ad budgets when signs of economic slowdown were already starting to gather. This is likely to be the most positive quarter for some time.

The EU referendum result has thrown the market into a state of great uncertainty: we do not know when negotiations between the government and the EU will even begin, let alone what their positions will be. This uncertainty is going to cause companies to think carefully before initiating new projects, and consumers are going to be more wary of taking on big spending commitments.

Economic growth is likely to slow, and when that happens advertisers are going to start thinking about cutting back any planned spending increases.

Whatever happens to the UK ad market in the short term – whether the uncertainty fostered by the Brexit vote leads to a slowdown in growth, or a decline in spend as the Bellwether report predicts – what matters in the long term is the agreement the government finally reaches with the EU.

A swift negotiation leading to relative freedom of movement for goods, services and people will do the least damage; protracted uncertainty leading to barriers to trade and movement will do the most. Our median estimate is that Brexit will reduce the ad market by £1bn in today’s prices by 2030. Whether the actual damage turns out to be greater or less than that is now up to the government.

To some extent, the latest Bellwether is difficult to unpick as much of the data was gathered before the referendum. However, the downgrade in the forecast is unsurprising – we’re still slap bang in the middle of post-referendum volatility and there was already some evidence of economic growth slowing, albeit without quite the variability and impact of the last couple of weeks.

At this particular point, the outcomes remain to be seen. Indeed, we’re noting that while some clients are more nervous, others remain bullish. Which reflects our view that we see both opportunities and risks.

Many brands will need to consider, if and when Article 50 is triggered, how they prepare for life during and after Brexit. There is much still to be determined.

Typically we see uncertainty playing into moves to digital channels and more sophisticated use of data science to ensure ever-better measurability and accountability. We’re happily well placed for this.

However, there are some interesting questions to ask about investment in brand marketing too. For example, the impact of currency fluctuations on the cost of imports presents an opportunity for UK manufacturers to push brand British.

It’s reasonably well documented that companies that continue to invest in promoting their brand and products do better during less positive economic circumstances, maintaining presence and grabbing the best share of voice and wallet.

So while many companies may have the jitters right now, the key will be balancing a strategy of continued, prudent investment with a tight rein on the purse strings to avoid unnecessary waste. Brands will fare best when partnered by resilient, agile agencies offering innovation and flair in their thinking coupled with the ability to cover whichever bases they need efficiently and effectively.

Adam Baker, managing director, Sociomantic

The UK as a whole is shrouded in uncertainty following its decision to leave the European Union. As such, the report has predicted a fall in adspend, downgrading its forecasts for 2017. However, today, emphasis is placed on the ability to use data to drive performance, so I don’t see why economic uncertainty need affect marketing budgets.

With change comes opportunity, which is particularly relevant to brands and how they reach and engage with their audience. I don’t believe, generally, marketing budgets will be cut as a result of the uncertainty. And the report reveals the same with online marketing and main media advertising as sectors seeing upward revisions in marketing budgets. Specifically, online advertising recorded a net balance of +10.9%, up from +9.8% the previous year.

More likely, marketers will be looking at ways to leverage the data at their disposal, both first and third party, to deliver personalised messages to highly granular, segmented audiences, aimed at returning maximum effectiveness, conversation and ROI.

Key to this is how brands find their customers online – existing and new – which creates opportunities for sophisticated programmatic partners to help marketers find the right users, at the right time, regardless of device.

UK business won’t stop. Customers will still buy. It is the industry’s role, both brand and supplier, to make this process as efficient and effective as possible.

With the country in a state of flux post Brexit, it comes as no surprise that the Bellwether report has downgraded its adspend forecasts for 2016 and 2017. However, rather the slamming on the breaks in the face of uncertainty, marketers should act with caution, not fear. We believe that Brexit is good for British business. We do not believe that member states will cut off their nose to spite their face, and will continue to do business with the UK as an independent.

In uncertain times marketers must be more diligent than ever. Take this time to consider whether you are thinking of the consumer first and targeting them in the right way for them. We must remember that the consumer is at the centre of this and brands will need to work harder to ensure that they remain confident in our products and services.

Direct Marketing has shown a further small decline, but only on basis of MarkIt’s slightly outmoded interpretation of direct marketing. Surely, nobody would dispute that data is at the centre of every major brands marketing strategy these days delivering greater read through rates and higher ROIs. Data and the opportunities that it enables is proven to establish more meaningful relationships with consumers than its digital alternatives. Marketers should be using data to blend the old with the new and using multiple channels to build a coherent narrative with the consumer.

Exiting the EU will free UK businesses to create global relationships without being held to account by Brussels. This is a fantastic opportunity and marketers should be leading the way.

Jack Wilcock, marketing manager UK and Ireland, Gameloft

The IPA Bellwether report naturally gains its relevance through longevity, and you can understand their reluctance to change the metrics to meet every new marketing strategy or media innovation. But by steadfastly lumping together of all digital marketing activity under ‘internet’, the insights from the report are becoming increasingly irrelevant.

Interesting though it may be to compare retrospective marketing spend like-for-like across 16 years, it is the future outlook that marketers care about; a future that’s currently not reflected in this report. Who could have dreamed back then that 74% of the British population would be accessing the internet from a mobile device, much less that millions regularly while away their commute on a connected game?

The ‘internet’ was satisfactory when digital marketing was more simplistic, but it’s a much more complex field now. Smart agencies and marketers are now increasingly investing in other digital and mobile avenues such as in-app advertising which have proven success over their competitors in delivering engagement and ROI.

It is time for the IPA to concede to its critics and paint a real picture of advertising as it is in 2016. In the potentially troubled waters ahead, understanding the full breadth of strategies available to them has never been more important to the success of the industry overall.

It’s clear from this report that brands will be carefully considering how to come out of the impending downturn as a winner. Previously, we’ve seen brands that maintain a presence during times like these enjoying significant benefits once the economy recovers, especially over competitors that cut back.

For brands, continued investment in the digital activities that matter is a very good way to meet this end, as it’s the most accountable and cost-effective way to maintain a brand presence in uncertain times. Our challenge as agencies will be in assuring brand clients that continued investment in advertising, and digital in particular, is more important than ever as consumers continue to feel the economic strain too.

As agencies we must guide brands through this while taking budgetary concerns into consideration. The more value we can add at times like these, the more trust we can build with our clients as we help their brands withstand the strain of Brexit.

The agencies who are uniquely positioned to help brands maximise any opportunities are those with a deep data capability. Agencies that ensure brands gain real increase on return on ad spend by making data about their consumers accessible and much more useful are the ones brands should turn to.

This focus on the data that drives consumers that then informs the strategy and execution will be key for brands to weather the storm. One might call this a single minded focus on audience first, politics later.

In the current economic climate, it’s easy to focus on the negatives; however, the latest report gives a clear sign to brands and agencies of the way forward. As clients look to adopt a leaner approach and invest in media that is more measurable and targeted, data-focused agencies have a good chance of weathering economic uncertainty.

Brexit inevitably means uncertainty but there are two things we can be absolutely certain of. One is that people are still be far more likely to trust, like and buy from brands who are relevant to them and two, that data is the single most important tool for marketers to ensure their marketing is relevant.

The results of the survey may suggest that direct marketing will stay flat or fall a tiny amount but data is no longer limited to direct marketing but in fact affects the planning, targeting, personalised execution and measurement of most marketing today.

I would suggest that the smart use of data and technology will now be an even higher priority for marketers who need to be more certain about reaching the right customers and more certain they’re spending their budgets wisely, in this time of increased uncertainty.

Although growth is set to slow, the positive figures seen earlier in the year show that our industry is generally in good shape. Having said that, if we look to the last 12 months – think mediapalooza and ANA – there’s work to be done to ensure that the current economic climate doesn’t have an undue impact on our relationships with clients.

There’s a risk that brands will look at this as an opportunity to reassess their marketing strategy, so agencies should be getting ahead of the game and doing that for them – if they’re not doing so already. Given that the tools and technologies exists to target the right media and accurately measure performance, agencies must start taking advantage of them to avoid losing out.

Adopting a performance-led approach to media planning is undoubtedly the future, and is more important than ever at this juncture to assure marketers that their agency is spending their money wisely.

Other than identifying some natural uncertainty before the Brexit decision, it is difficult to rely too much on this data. It feels like this is going to be an evolving picture, unlike the traumatic events surrounding the 2008 Lehman Brothers collapse, as we negotiate Brexit and our future relationship with the EU.

So far, we have experienced little change to plans although this will become clearer as we move further into the second half of the year. Overall I would expect some flight towards more measurable and performance media such as online, mobile and DRTV at the expense of, perhaps, secondary display media.

In the climate of uncertainty in the UK there will be opportunities for braver, challenger brands to invest in campaigns, whilst the competition retrenches. Meanwhile, our mainland Europe campaigns for multi-national clients appear to continue unphased as you would expect. However, it is early days.