Q2 2018 Bellwether Report shows further growth

The rise in internet budgets in the 2Q 2018 Bellwether Report marks nine years of consecutive upward revisions to this category, boosting overall growth to marketing budgets according to the report.

Marketers displayed a noticeable drive towards digital-based advertising in Q2 2018, with the net balance of firms, +22.7%, reporting upward revisions to their internet marketing budgets. This level, which matches Q2 2017’s nine-and-a-half year peak, is up significantly from Q1’s net balance reading of +8.7% and marks the thirty-fifth consecutive quarter (since Q3 2009) that marketers have made upward revisions to their internet budgets. Within the broad internet category, panellists also increased spending plans for search/SEO marketing, as signalled by the net balance rising from +5.6% in Q1 to +11.0% this quarter.

The Report also reveals how these strong upward revisions to internet budgets have positively impacted the overall figures for UK companies’ marketing budgets. While 23% of panellists indicated higher spending plans for overall marketing activity during Q2 2018, just below 17% pointed to lower budgets. This subsequently yielded a net balance of +6.5%, up from +5.0% seen in the previous quarter, although this is the second lowest since Q1 2016.

Marketing spend revisions by category

Further findings reveal that main media advertising, which includes big-ticket campaigns related to TV, radio and cinema, showed more bullish spending plans by marketing executives, following downward budget revisions in Q1. The net balance was positive overall (+4.9%). Modest upward revisions were noted for both events (4.3%) and sales promotion (+4.0%) marketing budgets during the second quarter.

Elsewhere, budgets available for direct marketing, which includes email and telemarketing, were revised lower in the second quarter amid recent GDPR changes. The latest -3.2% net balance extended the period of direct marketing budgets cuts to three years. Other categories monitored by the Bellwether survey to endure downward budget revisions during the second quarter were market research (-7.2%), PR (- 6.5%) and ‘other’ (-10.3%).

UK marketers’ financial prospects

Regarding UK marketers’ financial confidence, the report shows that company financial prospects remain upbeat, but wider industry prospects are to deteriorate further.

Businesses maintained a positive outlook towards their own finances during the second quarter of 2018, with a net balance of +13.3% of firms that were optimistic, fractionally higher than in the first quarter (+13.1%) and the greatest level of optimism since Q1 2017. Confidence towards wider industry financial prospects was lacking however, amid a recent softening in UK economic growth and the ongoing impasse in Brexit negotiations, with a net balance of - 9.0%, albeit up from -13.6% in the last quarter.

UK adspend growth forecasts

Following a slight upward revision to the official Q1 GDP quarterly growth figure, expectations are for a bounce back in Q2. As such, the Bellwether Report predicts a greater degree of optimism towards adspend growth for 2018 and 2019 than it previously forecast. Growth for the year as a whole is expected to come in at around 1.1% (revised from 0.8%), while 2019 growth was also upwardly revised to 0.7% (from 0.4%).

Commenting on the latest survey:

Says Paul Bainsfair, IPA Director General: “You only have to look at the recent hype surrounding Love Island and the World Cup – whether that’s crowding around the big screen, huddling around the box, adding to #GarethSouthgateWould or passing on the ‘It’s coming home’ memes - to realise that consumers are deeply ensconced in screen-based activity. As the evidence shows, television is the most effective medium for advertisers to build their brands and adding digital media to the mix enhances the effectiveness of traditional media. It therefore makes infinite sense that advertisers are investing their money here. Despite this overall positive growth, however, with continued Brexit uncertainty, the underlying story still remains one of caution, with the latest Bellwether data pointing to the second-slowest marketing budget growth since Q1 2016.”

Says Joe Hayes, Economist at IHS Markit and author of the Bellwether Report: “Despite the pickup in marketing budget growth, the latest pace remains weak and only slightly greater than Q1’s two-year low. That said, at a time when industry-wide financial prospects are deteriorating, the continued increase in advertising spend offers a positive development. However, latest growth is partly defensive in nature. Margins are being tested by increasing competition and firms are raising budgets largely to sustain market share and profits. Since the forecast for the 2018/19 financial year made last quarter which indicated the lowest growth in total marketing budgets for five years, the impasse in Brexit negotiations, combined with panellists reports of rising costs, provide clear downside risks to spending available to marketing executives.” 

Says Andy Reid, Managing Director of McCann Bristol and IPA England & Wales Chairman: “The latest Q2 IPA Bellwether Reports highlights that marketers are ploughing even more of their marketing spend into digital channels in an effort to remain fleet of foot whilst protecting market share and profits in the face of increasing competition. Budget holders are rightly concentrating on short-term, flexible ways of segmenting their budget to overcome issues such as Brexit and other market uncertainties. However savvy marketers will also be keeping an eye on longer-term, multi-channel marketing strategies that will really make an impact on a brand’s health.”

Says James Goddard Chief Executive JJ Marketing: “To understand the change in PR budgets, we need to understand the role that PR plays in 2018. It’s a role that should see PR as part of a wider marketing mix instead of a standalone discipline that commands its own individual budgets. That’s not to diminish its importance and as a full funnel marketing agency, we recognise the power of PR. But that power needs to be harnessed through collaboration, strategy and creativity – elements that form the overarching basis of a full funnel approach. Alongside PR can run a variety of other disciplines and specialities. And with measurability and cost-effectiveness two of its biggest bonuses, the internet is inevitably attracting investment right now.”

Says Patrick Reid, CEO EMEA Imagination: “It's great to see the trend of continually increased investment in brand experience events maintained for 19 consecutive quarters. The most effective brand experiences are those which are integrated with other marketing channels that have also shown solid growth in the Bellwether Report, including social and digital. We have seen this through our own Connected Experiences Index which ranked 30 experiences that were amplified through social and digital engagement, by analysing their social media effectiveness. So it is no surprise to us that brands are continuing to invest more budget in brand experiences than ever before.”

Says Stephen Roycroft, IPA Northern Ireland Chairman and Managing Director, RLA Ireland: “Even cautious steady growth in accountable marketing investment is encouraging when other business confidences are experiencing pressure. It is proof again that marketing spend with qualified professionals such as IPA member agencies provides measurable return on investment, whether protecting or growing market share; that’s just good business.”

The full report Bellwether Report has content detailing threats and opportunities facing marketers and their companies over the coming 12 months.   The report also includes charts comparing business confidence amongst survey panellists to wider economic output, which depicts how views on financial prospects are a function of the current business environment. A downloadable PDF for Q2 2018 can be purchased for £99+VAT for IPA members (£140+VAT for non-members).  Annual subscription is also available by contacting economics@ihsmarkit.com