Marketing budgets across the UK have seen an extraordinary surge, marking the highest increase in a decade.
Surges are closely tied to the nation’s improving economic conditions and a notable decrease in inflation. Companies are capitalizing on the favorable economic environment to boost their marketing investments, aiming to position themselves for future growth.
The latest IPA Bellwether report details this huge expansion in marketing budgets across all main categories.
A positive trend discovered in this report shows the optimism within the business community, with a net balance of 15.9% of companies reporting increased budgets in the second quarter, a significant rise from the 9.4% reported in the first quarter.
Economic upturn fuels marketing budget expansion
The strong performance of the UK economy, combined with falling inflation and the anticipation of interest rate reductions by the Bank of England, is creating a market of increased confidence among businesses.
Factors including these are creating fertile grounds for companies to invest more heavily in their brands, with an eye on securing long-term growth.
As inflation decreases, the purchasing power of consumers stabilizes, leading to a more predictable and optimistic economic outlook. Stability encourages businesses to allocate more resources to marketing, anticipating a stronger return on investment.
Companies are seizing the opportunity to strengthen their market positions and increase brand loyalty during this period of economic resilience.
Main media marketing budgets bounce back strongly
After experiencing a -0.7% decline, main media budgets have returned to growth, increasing by 3.5%, which is driven by 14.8% of panelists who have revised their main media spending upwards, surpassing the 11.3% who reported downgrades.
Despite this growth, it falls short of the anticipated net balance of 10.1% spending growth for the 2024/25 financial period, indicating that while optimism is high, some caution remains.
Main media includes a range of categories, such as video, audio, published brands, and out-of-home (OOH) advertising. A resurgence in main media spending displays the strategic importance of these channels in reaching broad and diverse audiences effectively.
Events marketing continues its unstoppable climb
Events marketing is a large area of growth, with budgets increasing by 17.2% in the second quarter.
Although this is a slight dip from the 23.1% growth seen in the first quarter, the trend of continuous investment in events marketing since early 2022 remains strong. Consistent increases show the value companies place on direct engagement and experiential marketing, which are key for building strong customer relationships and brand experiences.
The appeal of events marketing lies in its ability to provide immersive and interactive experiences that foster deeper connections with target audiences. As companies continue to prioritize this channel, they are likely to see sustained benefits in customer engagement and loyalty.
Market research investment sees sustained uptick
Market research budgets have seen a sustained increase for the second consecutive quarter, reaching 3.2% in Q2, up from 1.4% in Q1, marking the second highest increase since 2021 and highlighting the growing emphasis on data-driven decision-making.
Businesses are increasingly investing in market research to gain deeper insights into consumer behavior, market trends, and competitive dynamics.
Investment in market research shows growth towards more informed and evidence-based marketing strategies.
When accessing detailed market insights, companies can better tailor their offerings and campaigns to meet evolving consumer needs and preferences.
Sales promotions budgets surge amid price-cutting strategies
Sales promotions budgets have grown for the third consecutive quarter, rising to 6.9% from 4.4%, an increase surpassing the Bellwether panelists’ projections for the 2024/25 period, which anticipated a 6% growth.
The rise in promotional activities is driven by brands’ strategies to cut prices and stimulate sales in the short term.
Kantar’s Dom Boyd cautions against over-reliance on price cuts, emphasizing the need for long-term profitability and growth. While sales promotions can provide an immediate boost in sales, maintaining pricing power and brand value is key for sustainable success.
Brands are advised to balance promotional activities with strategies that reinforce their market position and profitability.
Direct marketing budgets on an uninterrupted growth streak
Direct marketing budgets have continued their growth trajectory for the sixth consecutive quarter, increasing from 7% to 8.9%.
A notable 19.3% of businesses have raised their direct marketing spend, nearly doubling the 10.4% that reported a decrease. Such sustained growth reflects the effectiveness of direct marketing in reaching targeted audiences with personalized messages.
Direct marketing, including channels such as email, direct mail, and telemarketing, offers a high level of precision in targeting specific customer segments. Precision, combined with measurable results, makes it an attractive option for businesses looking to optimize their marketing efforts and achieve tangible outcomes.
PR budgets experience strongest rise since last year
Public relations budgets have seen a notable increase, achieving the strongest growth since the third quarter of 2023. PR budgets have surged to 2.6% in Q2, a significant rise from 0.6% in Q1.
Boosts in PR spending indicates that companies are prioritizing their public image and stakeholder relations in an increasingly competitive and media-driven environment. Investing in PR helps businesses navigate complex market dynamics, manage crises, and engage more effectively with their audiences.
Main media subcategories show mixed results
Within the main media categories, ‘other online’ and ‘video’ have shown considerable growth.
‘Other online’ marketing saw a net balance increase of 15.3%, marking the strongest upward revision in this segment since Q1 2022. Video marketing also experienced growth, with a net balance of 7.8%.
Rises in online and video marketing spending show the change towards digital platforms, where consumer engagement is high and the ability to track and measure performance is robust.
Online marketing offers scalability and precision targeting, while video content continues to be a powerful medium for storytelling and audience engagement.
Some main media categories struggle to maintain growth
In contrast, other main media categories have either stagnated or contracted. Out-of-home (OOH) advertising recorded a 0.0% net balance, indicating no change in spending levels. Audio advertising saw a decrease, with a net balance of -5.5%, slightly worse than the -4.5% decline in the previous quarter. Published brands faced a decline as well, with a net balance of -6.3%, down from -5.7%.
These declines suggest that while digital media is on the rise, traditional media channels are facing challenges in maintaining their relevance and effectiveness. Factors such as changing consumer habits and the shift towards digital consumption are contributing to the stagnation and contraction in these traditional media categories.
Paid marketing efforts see a downturn
The ‘other’ category, which includes paid-for marketing activities, experienced a significant downturn, decreasing from -3.4% in Q1 to -7.6% in Q2, indicating a cautious approach towards spending on miscellaneous paid marketing activities.
Despite this, the majority of panelists (84.8%) kept their marketing budgets unchanged, reflecting a cautious optimism about overall marketing expenditures.
Reductions in paid-for marketing may suggest a shift towards more cost-effective or high-impact marketing strategies as companies navigate economic uncertainties.
Company financial confidence reaches new heights
Companies are showing the greatest degree of confidence in their financial prospects in nearly three years. The proportion of companies expressing optimism about their own financial outlook remains steady at 29%, while negative sentiment has decreased from 19.5% to 15.4%, resulting in a net balance increase to 13.6%.
Heightened confidence is likely fueled by favorable economic conditions, including lower inflation and expectations of interest rate reductions.
As companies feel more secure about their financial health, they are more willing to invest in growth initiatives, including marketing and brand development.
Industry financial outlook remains cautiously optimistic
Despite the positive outlook for individual companies, the industry-wide financial outlook remains cautious.
About 20.1% of the Bellwether panel forecast a downbeat outlook, while 16% remain optimistic, resulting in a net balance of -4.1%, which, although negative, is the least pessimistic since Q1 2022.
Cautious sentiments reflect broader economic uncertainties and challenges that the industry faces, including fluctuating market conditions and potential external shocks. While individual companies may be optimistic about their own prospects, the collective industry sentiment remains tempered by these overarching concerns.
Businesses now adopt cautious optimism with steady ad spend predictions
UK economy shows signs of recovery amid persistent challenges
The UK economy has shown signs of improvement in 2024, following a mild recession at the end of the previous year.
Key indicators such as reduced inflation and stable economic performance have contributed to a more favorable business environment, yet, several recovery challenges persist, including high borrowing costs, reduced government financial support, and elevated food and energy prices.
These challenges continue to affect household finances and consumer spending power, impacting overall economic recovery. Businesses must work through these complexities while planning their strategies for growth and investment.
Key takeaways
Businesses are expected to adopt a cautious approach, with ad spend anticipated to flatline in 2024 compared to 2023, marking an improvement from the first quarter forecast, which anticipated a 0.5% contraction in ad spend.
Flatline projections indicate that while businesses are not overly pessimistic, they are maintaining a conservative stance on marketing expenditures amid ongoing economic uncertainties.
Cautious optimism mirrors the balancing act between leveraging growth opportunities and managing risks in an uncertain economic landscape. Companies are likely to prioritize strategic investments that offer the most significant potential returns while maintaining flexibility to adapt to changing market conditions.
