UK marketing budgets have been cut to their lowest levels in 20 years of the IPA Bellwether Report due to pandemic.
Businesses are being forced to reconsider what they’re offering to customers at the moment, as the context they are operating in has changed completely. Amid the outbreak of Covid-19, a severe decline in revenues has forced businesses to make a sharp reduction to their marketing spend. Marketers everywhere have had a pause on their usual activities, to adapt to the new normal.
According to new data, the economic damage caused by the pandemic, has led to a reduction in all types of marketing. Q2 2020 figures released on 15th of July, examined companies’ marketing spend intentions and financial confidence. The IPA Bellwether Report found out that UK ad budgets have contracted at the quickest pace since data collection began over 20 years ago.
The report draws data from a panel of around 300 UK marketing professionals from the UK’s top 1000 firms each quarter. The IPA found that companies have faced challenging circumstances, with the burden of staff costs and a lack of customers amid enforced closures.
The net balance of firms that cut marketing budgets fell to -50.7% between March and June. Almost 64% of panel members registered a decrease in Q2 budgets and 13% posted an increase. These figures were said to supersede the Bellwether Report’s previous nadir of -41.7% evidenced in Q4 2008, following the global financial crisis.
Funding for events marketing saw the sharpest reduction in Q2, as coronavirus restrictions prohibited gatherings.The report found a net balance of -76.6% of respondents registered a decline in events budgets, with more than 80% reporting a decrease and 3.6% reporting a rise.
Main media advertising, including TV, reported a net balance of -51.1% of marketing executives seeing a decline in available spend. The report states: “Underlying data within this main media category suggested the worst performing sub-category was out of home advertising (-61.2%). This was followed by audio (-50.0%), published brands (-49.2%), video (-39.3%) and other online (-35.1%).”
Direct marketing and public relations were said to be the marketing types that saw the joint-softest budget cuts in the second quarter, although the downturns were still severe overall. Market research (-42.2%), sales promotions (-51.2%) and other marketing expenditure (-59.2%) also experienced historic reductions for their categories.
In the second quarter, two-thirds of Bellwether respondents remained pessimistic towards finances against 11.5% who expected an improvement, taking the net balance to -55.1%
IHS Markit expects a -11.9% decline in GDP for the year as a whole. Given the current economic climate, the report also predicts an -11.3% reduction in adspend during 2020. This figure was said to depend on sectors in the UK economy remaining open for the rest of the year.
The report stated: “Looking forward, IHS Markit anticipates a robust recovery in macroeconomic conditions during 2021 as businesses move closer to operating at full capacity. This would translate into a predicted +4.9% expansion in GDP and implied adspend growth of +6.0%. Beyond that, it expects the economy to achieve above-average growth during a further recovery phase, before stabilising near long-run rates in 2024 and 2025.”
According to Mark Inskip, CEO UK & Ireland, Kantar (Media Division), marketing brands need to now measure each step of their campaign to stay up to date with what customers need and feel. In Kantar’s recent DIMENSION study, 43% of UK costumers said they prefer to see ads that reflect their needs, which proves the importance of communication between brands and the audience.
Paul Bainsfair, IPA director general, said that the range of Government aid – from VAT cuts to the Eat Out scheme – can help with the problems arising, as understandably companies in the most disrupted sectors have had only few options to preserve cash and operations to survive until trading conditions are more benign. Paul Bainsfair states:
“While the future trajectory of the economy is unpredictable, however, that of brands starved of marketing investment is much clearer. Our evidence from previous recessions and periods of buoyancy consistently shows that cutting marketing investment weakens brands in the near-term and limits growth and profitability in the long-term.”