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UK marketing budgets continued to grow in the last three months of 2022 despite growing pessimism as marketers faced a recession in 2023, the latest IPA bell said. This was revealed in the weather report.
Only 2.2% of companies increased their total marketing spend in Q4 2022. About a fifth (20.2%) of his 300 marketers surveyed reported upward revisions to their marketing budgets, while 18% made cuts.
This marked the seventh consecutive quarter of budget increases. The balance of companies increasing marketing spending remained the same as the previous quarter, when the net balance of 2.1% reported an increase in total marketing budgets.
Despite the bleak macroeconomic outlook for the year ahead, respondents indicated their intentions to maintain their marketing spending increases throughout the year. Nearly four-tenths (39.5%) of the companies surveyed expect an increase in marketing budgets in the 2023/24 fiscal year, while only 15.3% expect spending cuts.
This translates into a strong positive net balance of 24.2%, which is expected to increase marketing budgets this year, suggesting companies are protecting their spending despite economic concerns.
In the last three months of 2022, 4.4% of businesses increased their primary media spending, unlike the previous quarter. Net income was -3.1% in the third quarter, with spending cuts in this category, including spending on TV, radio, on-the-go and online.
Video spend grew 13.7% net, while online ad spend grew the remaining 6.3%. Audio budgets remained unchanged, with a net balance of -3.9% on less spending on public brands and a -8.8% balance on out-of-home spending.
Respondents have a strong net income (13.4%) and expect to spend more on main media in the next fiscal year.
Events was the only non-main media category to grow during the fourth quarter as demand for in-person experiences continued post-pandemic. The net balance for the quarter was 5.7%.
However, promotions, market research, PR, direct marketing, and other marketing activities were all cut. Companies’ net balances of -8.8% slashed market research budgets compared to -4.1% in the previous quarter, while promotions were cut the remaining -4.0%.
Given the deterioration in macroeconomic conditions since the last IPA Bellweather report, IPA Executive Director Paul Bainsfair said the good balance between marketing spending and outlook was “very welcome”. said.
“We find ourselves a company that is able to remain unnerved and invest in marketing during this downturn. A lot of companies, worried about being taken away, have made it clear that they are either trying to retain market share or they are trying to keep it, and they have increased their spending accordingly,” he said. say.
“This shows that marketing is being used both defensively and offensively.”
The findings are in line with the media agency’s forecast last month, which told Marketing Week it doesn’t expect major advertiser budget cuts this year.
“Next year everyone knows [2023] It’s going to be difficult and people are planning it and trying to crack down on and protect their marketing budgets,” said Chris Gilfoy, head of strategy at the7stars.
negative financial sentiment
However, the report shows that companies as a whole are pessimistic about the industry’s financial future.
More than four in ten respondents (41.8%) believe their financial prospects in a particular industry are worse than they were three months ago, and only 8.7% believe their prospects have improved. bottom. This means that net balances at -33.2% are more negative about the outlook for certain industries than they were three months ago.
This figure is slightly better than the third quarter, when net balances were -44.3%, which was thought to be a weaker outlook for the industry as a whole. However, the latest report figures still represent the second most pessimistic assessment of industry-specific financial health since the second quarter of 2020, which marked the start of the pandemic.
The percentage of respondents who were more pessimistic about their company’s outlook was also down from three months ago, with net income falling from -27.6% to -17.2%. However, more than twice as many respondents were pessimistic (32.8%) than optimistic (15.6%).
In line with the bleak outlook for next year, report author S&P expects gross domestic product (GDP) to contract by 0.8% in 2023.
However, we expect the recession to be “short and shallow”, with GDP returning to 0.6% growth in 2024. Along with this, he expects advertising spending to increase by 1.2% in 2024.
Over the next year, it forecasts higher GDP growth than in previous reports, with advertising spending projected to continue growing by 1.8% and 2.0% in 2025 and 2026, respectively.
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