Marketing budget growth is directed towards promotion | WARC | The Feed

Marketing budget growth is directed towards promotion

Sales promotions budgets are growing at the strongest pace in nearly two decades as companies dedicate more resources to supporting their customers through the cost-of-living crisis, according to the latest IPA Bellwether Report. 

Headline figures

• In Q1 2023, the net balance of firms registering upward revisions to their marketing budgets stood at +8.2%, almost 4x higher than the +2.2% recorded in Q4 2022. 
• While 21.1% of firms saw an expansion, 12.9% of firms registered budget cuts and around two-thirds (66.0%) recorded no change in spending.

Category data 

• Main media marketing had a net balance of +5.8%: strongest performing constituents were other online (+10.5%, from +6.3%) and video (+7.9%, from +13.7%), while audio also saw an upturn (+1.7%, from 0.0%). Published brands (-1.9%, from -3.9%) and out of home (-12.4%, from -8.8%) were, however, drags on main media in Q1.
• Sales promotions budgets returned to expansion in Q1 (net balance of +8.8%, from -4.0%), and events also edged up (net balance of +6.3%, from +5.7%) as marketing executives looked to re-engage with new and prospective clients face to face. Direct marketing spending also rose at the start of the year (net balance of +4.2%, from -0.6%).
• A net balance of -0.6% of firms cut their PR budgets (from -1.9%), while a modest reduction was seen in market research spending (net balance of -3.2%, from -8.8%).

Future expectations

• More than a third (36.6%) of respondents foresee greater total marketing spend in real terms in the year ahead, compared with 16.9% anticipating cuts. This yielded a strongly positive net balance of +19.8%.
• Sales promotions budgets are set to rise in 2023/24 (net balance of +6.3%); market research is the only segment where budgets are set to be reduced (net balance of 0.7%).
• When assessing their own company’s financial prospects, a net balance of +7.0% of respondents were optimistic (vs a net balance of -17.2% previously).
• At an industry-wide level, a net balance of -7.1% signalled the weakest degree of negativity in a year and compared with a reading of -33.2% previously.

Key quote

“Consumers will welcome sales promotions, as inflation keeps prices high. However, neglecting brand investment for short-term gains is a risky business. Let’s hope pricing for the moment does not overpower building for tomorrow” – Alex Uprichard, Managing Director, IMA-HOME and IPA City Head for Leeds, Yorkshire and Humberside.

Sourced from IPA Bellwether