CEO, Patrick Reid, shares his thoughts on the Q3 IPA Bellwether Report

Patrick Reid, CEO, comments on the Q3 IPA Bellwether Report.

"As uncertainty gathers over the economic landscape, this is having an impact on company decision-making and marketing spending. Despite this, the report suggests a continued ‘after-glow’ of interest in live events since the lifting of Covid restrictions, as people still reconnect with their social lives.

This quarter sees the slowest increase in total marketing budget growth since Q1. However, there is a reported growth of +4.5% within the events budgets, proving for the third consecutive quarter that there is a continued desire for face-to-face contact and meaningful interactions.

Across our client portfolio, we’re seeing the continued demand from brands wishing to connect with their audiences in an emotional and authentic way through experiences across multiple touchpoints.”

From the IPA Bellwether Report:

Another period of total marketing budget growth was recorded in the third quarter of 2022, reveals the latest IPA Bellwether Report, continuing the positive trend that began over a year ago. However, the expansion slowed for a second successive quarter as the cost-of-living crisis, soaring energy bills, weakening demand and economic uncertainty stalled business decision-making and led some companies to retrench.

According to the latest survey findings, 22.2% of companies increased their total marketing budgets in the third quarter. However, only a marginally smaller proportion of companies registered total marketing budget cuts during the third quarter (20.1%), resulting in a weak positive net balance of +2.1%. This was down from +10.8% in the previous period and its lowest seen across the current six-quarter expansion sequence.

Rising cost pressures was a principal challenge faced by UK firms in the third quarter. With energy bills and general prices for goods and services rising sharply, profit margins have ultimately been squeezed. At the same time, high inflation has caused consumers' purchasing power to deteriorate, weighing on demand. This has led some companies to retrench, with marketing budgets being reduced as a result.

Paul Bainsfair, IPA Director General:

"We know from analysis of additional S&P500 data and new data from the FTSE 100 benchmarks that strong brands are a critical strategic asset that deliver value and that their budgets are an investment not a cost. Furthermore, we see from this data that strongly branded companies recover quickly after a crisis and retain their performance. We appreciate, however, that while increasing or maintaining investment in marketing during these tough economic times is generally the ideal thing for companies to do, it is not necessarily the easiest thing to do – as these latest Bellwether results imply. But there are ways around this.

Instead of slashing budgets that can lose brands their customers’ awareness and subsequent market share, our experts would advise that after optimising their pricing and promotions strategy, which would usually include supporting with brand advertising, companies tweak their brands’ marketing budgets subject to their geography, portfolio, channels and media – all of which will have variations that can also be optimised accordingly. Equally, we’d advocate a longer-term approach that steers away from heavy sales activations which can erode brand loyalty and lose companies profit."