With fears of a recession, ongoing inflation and in some cases recovery from supply chain PTSD, advertisers aren’t so sure they’re going to get a very merry Christmas. As they ready for a tumultuous 2023, what options do they have, and what mistakes can they avoid?
In this economy?
The current reality is that we’ve had better times, and there may be gloomy economic skies ahead. But interestingly, consumer demand isn’t doing that bad. In fact, retail sales have been going surprisingly well in the US, even beating expectations in October. It doesn’t mean every category is trending the same (and we can’t underestimate that a lot of people are indeed struggling). But even if people are tightening their belts, they’re still able to breathe, and there is demand to be met.
It’s also worth remembering holidays remain prime time for people to spend on fancier purchases, whether for them or people they love – we just don’t always know what they’ll be willing to upgrade. Inflation means they might not be able to afford the largest purchases, but can still buy fancier versions of something typically more affordable to drop in their stocking. What this means is that unless your category is particularly exposed to a decline in sales, the answer isn’t necessarily to focus only on lower price point items in your offering. Ultimately this season is going to be competitive, and you should do everything you can to stay ahead of the competition with plenty of room to stay on the offensive.
Keep investing—if you can.
The first implication is making sure you stay visible. It’s tempting, in times like these, to think it’s a wonderful opportunity to cut advertising budgets. But we know from historical evidence that brands tend to lose out over time when they stop advertising, something reaffirmed by Ehrenberg Bass research back in 2018.
Interestingly, their research found one exception: big brands in high growth markets. But considering CFOs are mostly having cold sweats about the lack of growth, chances are this won’t be the most common situation marketers will find themselves in. Looking at the Covid-19 experiment when lots of brands thought reducing their spend was the right approach, we’re seeing, as predicted, that brands that maintained their investments during the crisis came out on top while those that stopped suffered.
The good news is that a little like the stock market, there’s a lot of merit about buying when there’s blood in the streets: media rates can be easier to negotiate down, while competitors cutting spending mean your share of voice takes a natural boost. Unlike the stock market, there isn’t a real risk of catching a falling knife. The decision to spend (and how much to spend) isn’t trivial and requires internal alignment with your finance leadership, not to mention a revenue pipeline that makes it possible. Cratering categories will be hard pressed to sustain their investments, and “costs savings” will no doubt be high on the C-Suite agenda.
The solace is that advertising remains a relative force: what matters isn’t necessarily the brute force with which you hit the market, it’s about trying to keep your head above other boats as the tide goes down.
As such, it’s important to protect as much of your investments as possible and not give into complacency. Make sure you don’t cut too much in proven channels that are known to lift your brand. Equally, as many brands clam back into what they’re most familiar with (and where they feel wastage is most limited), very few brands will make cuts in their performance media budgets. And this short-sightedness remains is a major opportunity for the taking: don’t underestimate the opportunity to stand out in less obvious channels. It also offers odds of owning a higher share of attention.
Protect what drives premiumness.
As revenues get tighter, the most common decision is to refocus investment in short term sales activations. To many, building a brand seems sumptuous and wasteful. But when times are tough, being seen as affordable is (still) about being seen as valuable, not necessarily cheaper.
With consumers being more careful about their spending, the temptation to focus on special offers and discounts is high. While price driven messaging certainly plays a role in times like these, remember that what drives up perceived value usually comes from the brand itself, and every time you discount a product you anchor its value lower. Trying too hard to drive growth through the lower funnel has a bad habit of pushing your perceived value down along with it.
It’s therefore important to keep betting on things that help you justify a higher pricing power: a great product and a strong brand. From a communications perspective, investing in creativity and brand building remains a winning strategy, known to reduce price sensitivity and able to deliver fatter margins in the long term. While the effects might not be as immediate, a commitment to fame and brand building is essential to not only weather months (if not years) of economic woes, it’s also a fantastic way to recover faster than competitors who focused on discounting their value during a crisis.
Understandably, it’s often hard for marketers to justify things that are tough to track in the long term. We are often judged on the next few months, if not weeks. But the reality is that protecting your worth today is both a long-term strategy and avoids making your competitors’ Christmas less merry.