Justifying your market spend in a cost of living crisis is something many marketers are dealing with even though the latest IPA Bellwether Report shows budgets continued to grow at a solid pace in the second quarter of 2022.
While 24.2% of marketers have revised their market spend upwards, 13.4% said they had cut spend – giving a net growth of 10.8% (an average of the percentage of companies reporting a rise to current budgets minus those reporting a decrease) for the last quarter.
One of the key drivers for the rise in total marketing spend growth were events. With the pandemic restrictions being slowly removed, people have been able to hold large scale gatherings once again. The new “living with COVID” normal has given companies the confidence to plan face-to-face events, with many firms reportedly set to use this platform to relaunch their brands.
The only other Bellwether category to record growth in Q2 was public relations, which saw its expansion strengthen from the start of the year (net balance of +3.7%, from +0.6%).
Declining economic growth responsible for fears over market spend
Since the last report, IPA Bellwether author S&P Global Market Intelligence has downgraded its assessment for the UK’s economic growth prospects from 2023 through to 2025.
It has also cut ad spend growth for 2022 to reflect the growing economic changes that have built up in the first half of the year and elevated inflation throughout 2022 is likely to result in a hit on consumer confidence and disposable income.
High costs for businesses will weigh on the economy and higher interest rates are likely to act as a deterrent to investment. The risk of a recession has intensified, and as such, S&P has cut its ad spend forecast for this year to 1.6% (from 3.5% previously).
Paul Bainsfair, IPA Director General, said the findings reflected marketers’ understandable concerns about the challenging economic climate ahead, but that a number of businesses were signalling their “intent to market aggressively to support their brand and gain market share from less-prepared competitors”.
“This is usually a wise and canny move. All the IPA’s analysis on who does best in a downturn shows that the companies that recover fastest are the ones that either maintain or increase their marketing spend during difficult economic times.
“Equally, cutting ad budgets – relative to competitors’ spend – in a recession undermines companies’ ability to grow future market share and profits,” he added.
Cutting market spend does more harm than good
Paradoxically, extensive evidence shows that cutting marketing spend does more harm than good but the moves to a cookieless future and the pending recession may mean marketers consider “doing more with less”.
Justine O’Neill, Senior Director, Analytic Partners, speaking to Performance Marketing Weekly, said: “There will be tough conversations in the boardroom as CMOs fight to hang on to their marketing budgets.
“Fail they may but try they must. We applaud those businesses that have signalled their intent to market aggressively to support their brand because this will help them gain market share from less prepared competitors.”
And, according to Pierce Cook Anderson, Managing Director, Northern Europe, Equativ: “Buyers need to adapt their strategies and create greater cost efficiencies to drive ROI by targeting quality over quantity.
“This means investing in the open web and relying on trusted partners that will ensure efficient media buying – notably by offering curated marketplaces and contextual targeting, which will become even more relevant in a cookieless future.”
For Matt Nash, UK Managing Director at Scibid, the current cost of living crisis and projected downward turn means advertisers are going to need to ensure their campaigns are delivering ROI.
He added: “Indeed, the death of the cookie is challenging brands to reimagine their digital advertising and powerful artificial intelligence (AI) is one way to boost campaign performance.
“Contextual signals based on anonymous interest cohorts are quickly becoming the best data point to maximise traditional metrics like CPA, CPV and newer metrics like attention. These signals are privacy-compliant as they do not track users between websites or capitalise on personal data.
“Additionally, they eliminate the issue of consumers being shown the same ad repeatedly when the likelihood to convert is not present. AI can be used here to build bespoke data sets which constantly evolve and have the ability to reallocate budgets in real time. Together, the two achieve campaign efficiency at scale, garnering user attention when brands need it the most.”
Ad fraud complicates market spend budgets
Fears over a recession and downturn in market spend budgets are compounded by the steady presence of ad fraud.
Digital advertising spend lost to fraud could reach as high as $68bn globally in 2022, with the US most affected, according to the latest study from Juniper Research. Nearly 18% of all internet traffic in the marketing industry can be attributed to nonhuman bots, which are actively engaged in ad fraud.
The UK-based market analyst’s latest report claimed the amount of money lost to ad fraud would rise by more than 15% year-on-year, up from $59bn in 2021.
The report urged digital advertisers to form strategic partnerships with ad fraud detection and prevention vendors capable of spotting fake traffic that provides no return on ad spend.
Juniper claimed the most effective tools use machine learning to establish baseline metrics for legitimate traffic and then flag when they spot patterns that diverge from the norm.
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