Sales promotions hit record high: Bellwether

Total UK marketing budgets grew solidly in Q2, with a decline in main media spending offset by companies ramping up investment in sales promotions to record levels, according to the latest IPA Bellwether Report. 

Why it matters

Marketing investment weakened slightly from Q1 as persistent inflationary pressures, ongoing interest rate hikes and an uncertain economic outlook led some companies to retrench. The drop in main media and rise in sales-promotions spending suggests a reactive change by businesses in response to the economic climate. 

But while it’s clear that many businesses are looking to support consumers through the cost-of-living crisis, long-term use of sales promotions will adversely affect brand equity and brand loyalty.

Category findings

• Just over a fifth of survey respondents observed growth in total marketing spend during the second quarter, more than the 14.4% who registered budget cuts, yielding a positive net balance of +6.4% (down from +8.2% in Q1).
• The top performing segment was sales promotions, where the net balance of firms recording budget expansion rose to +13.4% (up from +8.8% in Q1).
• Events also registered growth (net balance of +9.8% from +6.3%) reflecting the continued appetite for face-to-face meetings and engagements in person. 
• The final area to record spending growth was direct marketing, where the expansion was the sharpest since the third quarter of 2006 (net balance of +7.3% from +4.2%).
• Marketing budgets in main media fell for the first time since Q3 2022. Within the category, ‘other online’ (+8.3, from +10.5%) and video (+3.2%, from +7.9%) remained in growth territory, although this was offset by audio (-8.0%, from +1.7%), out of home (-7.1%, from -12.4%) and published brands (-5.0%, from -1.9%).

Industry sentiment is getting worse 

• A net balance of -12.6% registering optimism about the next 12 months for the industry was higher than Q1’s -7.1%.
• Similarly, sentiment towards own-company financial prospects is declining, from a net balance of +7.0% in Q1 to +2.6% in Q2.