Marketing budgets fall under pressure as cutbacks bite

A steady stream of bad news is prompting brands to cut back across Europe, the Middle East and Africa, although sentiment across the Asia Pacific region remains far more positive.

This has seen brands reappraise their spending commitments, with offline investment bearing the brunt of the retrenchment as half of the respondents plan cuts. Digital investment continues to grow, with 42% pledging to slightly or significantly up their spending.

The survey of 43 multinationals, with a collective spending power of over $44bn, found that 29% intend to decrease spending in 2023, with a similar proportion expecting to increase investment over the next 12 months. This disguises a broad souring of sentiment, however, with three-quarters in agreement that budgets will come under scrutiny like never before in the year ahead.

Stephan Loerke, WFA chief executive officer, said: “It is encouraging to see that a number of clients are planning on standing firm and taking heed of the well-taught lessons of previous recessions, which show time and again that those who continue to invest or increase their ad spend emerge stronger from periods of economic uncertainty.”

The immediate danger is a shift to short-termism, with brands prioritizing resources in areas where they are likely to make immediate gains, and 28% focusing on performance marketing.

Nick Waters, Ebiquity’s group chief executive, added: “Sustaining investment is one thing, but there is a risk to long-term brand health by over-investing at the bottom of the purchase funnel. It is a natural instinct to want to see immediate results from media investment, but the longer-term trade-off needs to be weighed carefully. It becomes more expensive to re-build brand credentials once they have slipped.”

Greater flexibility is the final watchword of the WFA report, with brands employing biddable/auction-based platforms in ever greater volumes to minimize upfront commitments.