The results of the 11th PM Forum and Meridian West International Marketing Benchmark arrive at a turning point for the UK economy, requiring creative thinking from cost-constrained marketers, writes Alastair Beddow.

The professional services sector enjoyed a successful 2022 with many firms reporting record financials and struggling to hire and retain staff at sufficient pace to meet client demand. This growth came despite a series of geopolitical shocks, worsening economic indicators and domestic political instability.

It is likely that the consequences of these macro factors will be felt more acutely by the professional services sector this year. But what exactly do the next 12 months hold for professional services marketers? Our annual survey of CMOs, marketing heads and business development (BD) directors suggests the pressure will be on marketing and BD functions to deliver greater value to their firms this year, all while operating in a more cost-constrained environment.

Ten important headlines emerge from the Benchmark for the year ahead.

  1. Sentiment and outlook are down year-on-year

This year, marketers are much more pessimistic about the outlook for the economy. Just 6% anticipate market conditions in 2023 to improve on 2022. Nearly three-quarters (73%) of marketers anticipate conditions in 2023 to decline. This compares with just 18% who anticipated a declining market at the start of 2022.

Although CMOs believe the professional services sector will be more resilient than the economy as a whole – just 14% believe the outlook for the sector will worsen this year – more than two-thirds (69%) believe 2023 will be a year of no growth. Even when asked about prospects for their own firm, 56% believe the outlook will either deteriorate or remain static compared with 2022.

  1. Firms anticipate many constraints on their growth

The Benchmark suggests multiple factors will be a drag on growth this year for the professional services sector. Over half (57%) of respondents point to the poor economic outlook among the top three growth constraints for their firm, and more than four in ten (43%) cite fee pressures. With inflation still in double digits it will be difficult for firms to pass on the full effects of increased costs to clients at a time when clients themselves will be under pressure to cut their external spending.

The war for talent is another factor that continues to concern professional firms. As pay in the sector rises to keep pace with the cost of living, for now at least our Benchmark indicates that CMOs anticipate an active recruitment market to continue.

  1. Operational efficiency rises up the strategic agenda

As a result of the declining economic outlook, operational efficiency now tops the management agenda for professional firms. Nearly two-thirds (63%) place this in their top three management priorities for 2023.

This trend will manifest itself in various ways. For some firms, operational efficiency will mean reducing costs and freezing headcount. Other firms will look to more creative solutions such as adopting technology to service clients in new ways. Others will seek to refresh strategic direction to exit unprofitable markets or work types and tap into fresh opportunities.

  1. CX and thought leadership remain top BD priorities

Top of the priority list for marketing and BD functions for 2023 is making improvements to client experience. This is cited by 55% among their top three priorities. Given the growing impetus to retain clients and demonstrate value, improving client experience will be one way in which marketing and business development professionals can deliver greater impact this year, while also fostering greater client satisfaction and loyalty to protect market share.

  1. Marketing and BD spend as a proportion of revenue falls back

Since the onset of the pandemic in 2020, our Benchmark has reported year-on-year increases in the proportion of firm revenue that is spent on marketing and business development activity. However, in 2023 this figure is anticipated to fall back to 2.88% from a high of 3.35% last year. This suggests firms are seeking either to conserve cash or prioritise investment in other functional areas.

Just 30% of Benchmark respondents anticipate that the proportion of revenue spent on marketing will grow over the next budget cycle, while one in ten (10%) anticipate it will decline further.

  1. Firms anticipate an average 8.5% increase in their marketing budget

After a record average increase of 11.2% to marketing budgets reported in last year’s Benchmark, this year the increase falls back to 8.5%. Although this rise is still well above the 10-year trend, with inflation running at over 10% this means marketers will need to manage real terms cuts to their budget.

However, average figures can disguise a more complicated picture. One in ten respondents to the Benchmark say they will manage a decrease in their overall marketing budget this year, and four in ten expect no growth to their budget. Just one in four firms anticipate an above inflation (ie greater than 10%) to increase their budgets for the coming year.

  1. Increased spend is focused on BD technology, social media and thought leadership

This year’s Benchmark shows marketing spend is moving away from sponsorships and virtual events (31% and 23% are decreasing spend in these areas respectively), and towards business development technology, social media and thought leadership campaigns (57%, 52% and 51% are increasing spend in these areas). This is a continuation of a trend witnessed since the onset of the pandemic in which spend is focused on activities that build brand profile and drive sales opportunities.

  1. Most firms anticipate headcount to remain stable

Over half (57%) of firms are working on the assumption that the headcount of their marketing and business development function will remain unchanged this year. Just 38% will grow the headcount of their teams in 2023, compared to 48% who anticipated headcount growth this time 12 months ago.

When asked about spending on marketing and BD salaries, firms anticipate an average growth this year of 13.8%. This suggests that firms are planning for above-inflation pay rises to retain talent in their functions.

  1. Marketing and BD increasingly being asked to lead the ESG agenda

Our Benchmark this year shows that ESG (environmental, social and governance) is becoming a new sphere of impact for professional services marketers. Nearly half (48%) of marketing leaders say they have played a leading role in developing their firm’s strategy around ESG. Only one in four (24%) say they have had limited or no involvement.

For BD professionals and marketers, this involvement falls into two significant areas. First, developing new propositions and services to capitalise on client demand for ESG advice. Second, driving greater transparency and ESG reporting, including crafting a compelling brand narrative about the firm’s purpose.

  1. Marketing and BD leaders are actively addressing DE&I

This year’s Benchmark reveals that fostering DE&I (diversity, equity and inclusion) within their own function has become a top priority for marketers. While 45% of firms say they have a strategy in place to address ED&I goals within their marketing and BD function. A further 39% are currently working on this. This suggests that senior marketers are conscious of the need to demonstrate leadership on the DE&I agenda to ensure their function provides positive opportunities for all.

Alastair Beddow is Managing Director at Meridian West, and a co-author of Professional Services Leadership Handbook.