A measly 0.8%—that’s how much UK ad spending grew in the first quarter of 2018 according to the results of a study conducted by financial services company IHS Markit. As it turns out, the challenging and unpredictable market conditions created by Brexit has led almost 18% of marketers to cut back on their advertising spending. Unfortunately, this trend, based on the report, is expected to continue well into next year. The good news, however, is that digital marketing has remained strong as budgets rose 8.7% following the success of 2017 campaigns.
Consumers not spending enough
One of the reasons behind the budget cuts was the decline in consumer spending. Overall household spending in the UK dropped 2.1% compared to last year amid fears that Brexit will leave Britons worse off—and these fears are well-placed. Given the weakening of the British Pound, the future, without a doubt, seems rather bleak for consumers and their spending power. To make matters worse, the rising cost of importation has also prompted some brands to bump up their prices to cover the difference, ultimately passing the additional financial burden onto their customers.
Marketing budgets all over the place
According to the IHS Markit study, not everyone decided to pull back in the face of the challenges brought about by Brexit. In fact, 22.9% of the respondents have actually increased their marketing budgets. 17.9%, however, cut theirs, resulting in a net rise of only 5%—which is the lowest recorded since 2016. This has inevitably led to a significant drop in mainstream media advertising, a phenomenon that has affected even the likes of advertising giant WPP, which has just lost a couple of its biggest accounts.
Digital marketing more cost-effective option?
It doesn’t take a lot of money to get started with digital marketing, and this is probably one of the primary reasons why a lot of companies are shifting their focus in this direction. Couple this with the fact that it’s completely targeted and scalable—versus traditional advertising that uses a more scattergun approach—and it quickly becomes apparent that it is indeed the perfect tool to sell in a largely unpredictable market. It gives marketers the power to reach and engage the exact audience they want to connect with, easily measure each campaign’s results, make the necessary adjustments and quickly roll out a new one. In addition, it also allows them to quickly scale their marketing efforts up or down depending on how willing consumers are to spend at any given time.
Brexit outcome may not change digital marketing landscape
At the end of the day, even if Brexit’s outcome ends up making traditional advertising a viable option again, it would probably not affect the success digital marketing is currently enjoying in any meaningful way. After all, companies have already been relying more and more on it even before Brexit happened. If anything, the whole thing only served to speed up its adoption.