Bellwether reaction: Short changed in the long term?

The advertising and marketing industry has once again shown its resilience, with the latest IPA Bellwether report showing the sector is fighting off plunging consumer confidence and multi-decade high inflation to navigate through economic turbulence.

As ever, the report draws its own conclusions, especially about the major growth in promotional marketing, but what about the wider industry? Decision Marketing thumbs through its contacts book to gauge opinion.

Imagination director Patrick Reid insists the report provides a number of positives. He explained: “Firstly, the evidence that UK businesses realise marketing activities must be supported – even when in challenging economic conditions – for the long-term health of their brands. Secondly, particularly for the experience industry, the thrill of in-person experiences continues to be felt.

“Events saw a net growth as marketers increasingly look to include brand experiences in their marketing mix – to bring their products and services to life with hybrid experiences fully engaging existing and new customers.”

Meanwhile, Analytic Partners associate vice-president Kevin O’Farrell reckons the report shows just how strong the industry is and helps maintain a sense of optimism for the rest of 2023. And while the crisis remains, the expansion of sales promotion budgets tells us that brands are doing exactly as they should – supporting their customers during tough times.

O’Farrell added: “Main media marketing recorded its strongest spend increase in a year, which reflects the increased opportunities we’ve seen in digital media, and retail media in particular. In the past year Channel 4’s recent successful retail media trial, which saw a 29% boost in sales for the brands that took part, is a testament to this. Continued investment within this category could hold impressive potential for brands.”

Looking ahead, he believes that, while there is initial optimism about rising marketing budgets, the report raises concerns about the prospect of an economic downturn later on in the year.

O’Farrell continued: “With this in mind, many brands are investing in scenario planning – preparing for two, three or more potential future scenarios and creating data-led simulations to optimise marketing budgets. As trepidation for the future continues, scenario planning could be a company’s strongest asset.”

For Yahoo head of EMEA Josh Partridge, the Bellwether has further cemented the need to keep pace with evolving consumer trends and implement dynamic ad campaigns across multiple platforms.

He reckons that is should be no surprise that sales promotions are the top performer as marketers drive content to high-intent consumers looking to ease inflation.

However, Partridge cautions: “Marketers need to be wary of tunnel-vision during tough economic times though and not lose sight of the power of great creative to drive consumer preference. Combining great creative with digital formats and technology that can provide direct call to action and adapt channels by performance in real-time means advertisers don’t need to compromise on brand creative.

“The increased spend across main media marketing, including digital and TV, is testament to how programmatic is democratising the big screen and giving opportunities for new brands delving into the connected TV environment. Interestingly, live event-based marketing is growing significantly as consumers look for more engaging in-person experiences, so I’d bet that digital out of home will grow as new screens come online in areas like point of sale and other interactive opportunities to engage live audiences.”

In fact, Kinetic Worldwide chief operations officer John Davidson questions whether the report’s findings that OOH is is being cut chimes with the reality of what happening “on the ground”, insisting the sector saw double-digit growth year on year and this momentum has continued into 2023.

Davidson continued: “What’s really exciting about OOH at the moment is not just that we are experiencing growth, but the way advertisers are using the medium. This week we are running the largest 3D Out of Home campaign that has ever taken place in terms of scale for Maybelline and a fantastic data-driven campaign for Tesco which adapts content around time of day during Ramadan and Eid.

“These are just two examples, but they reflect how brands are embracing the creative and technical possibilities and of OOH and why we continue to see the sector grow, despite a complex economic outlook.”

Croud director of digital transformation Sophie Wooller maintains that the marked rise in sales promotion budgets shows that brands are prioritising the customer.

She added: “Against a backdrop of higher than expected inflation, the trend of sales promotion expenditure rising (at the strongest pace in nearly two decades) is likely to continue. Now, more than ever, is the time to truly offer something useful to consumers – not just to maintain brand recognition and loyalty but also to practically support them through the cost-of-living crisis.”

However, not everyone is convinced, with Matt Andrew, UK MD and partner of global data science consultancy Ekimetrics, claiming the increase in promotions and short-term sales could be cause for concern.

He added: “With the resurgence of media mix modelling (MMM) methodologies, it’s essential brands continue to focus on incrementality, using econometrics as an integration point for other methods, such as attribution and test and control. In particular, MMM that is fit for purpose today needs to be more granular and forward-looking than its origins, ensuring the effects of promotions is well understood to avoid waste and optimise decision making – of budget, margin and even planetary resources.”

It is a point which chimes with Wavemaker UK chief strategy and planning officer Elliott Millard. He explained: “The worry for me is that brands forget what they’re for. Brands are essentially designed to defend price premium, and everything we’ve seen in our own research suggests that people are more inclined to choose brands they know and trust in a cost-of-living crisis. This isn’t the old argument about brand and performance (although that is true); it’s about marketing being a way to defend price sensitivity.

“In the current climate, a brand that invests in its own proposition and can avoid discounting is likely to be more successful than a brand that chases volume over value. Obviously, there is nuance here – brands need to think about their own cost base, their demand pool and their supply chain. However, we need to remember the power of marketing not only to shift bottom line numbers but also to defend price increases.”