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How to adapt your advertising strategy to tough times?
In April 2023 Thinkbox, one of the world’s leading advertising research experts asked Les Binet, Head of Effectiveness and co-author of “The Long & Short of It” to give his views on How businesses can adapt in tough times. The below is a summary of some of the key point of this article and how the Buymedia advertising platform can help practically implement some of the strategies outlined.
The past few years have been nothing short of tumultuous. From pandemics to energy crises, we've experienced an upheaval of economic instability and uncertainty. In these trying times, brands and marketers are looking for guidance on how to advertise effectively. Starting with the recognition that advertising is an investment, not just a cost.
Here are some key points to keep in mind:
- Revenues are likely to grow for most brands this year, particularly for FMCG brands and those in less discretionary categories. Be mindful of how your revenues may be affected and adjust your advertising strategy accordingly.
Buymedia's advertising platform can help businesses identify the most effective channels to reach your target audience and optimise your advertising spend to achieve your desired outcomes.
Protect your margins
- Protect your profit margins by shifting your budget from discounting and price promotions to brand advertising. This can reduce price sensitivity and support firmer pricing, ensuring that you maintain healthy profit margins.
- This is a great time for brands that can afford it to take advantage of cheap media. In real terms, advertising on fixed inventory media like TV will be fantastic value. Now is an opportunity to buy market share and voice cheaply.
Buymedia's platform allows businesses to access a range of media channels, including TV, at competitive rates. This can help brands maximise their reach and market share while keeping costs low.
- Brands that keep advertising through a recession find it easier and cheaper to borrow money. This makes capital investment more feasible, creating opportunities for growth and expansion.
- Don't rely solely on simple attribution modelling, which can yield inaccurate results. Supplement digital metrics with controlled experiments and econometric modelling to measure true ROI.
Buymedia's platform can help businesses analyse their advertising performance using data-driven insights and advanced analytics. This enables businesses to make informed decisions and optimise their advertising campaigns for better ROI.
By keeping these tips in mind and leveraging Buymedia's advertising platform, businesses can weather the challenges of tough economic times and come out on top. Remember, advertising is an investment that can yield significant long-term benefits.
What are your growth prospects?
As we look ahead to the economic landscape in 2023/24, it’s important for businesses to assess their growth prospects and adjust their marketing strategies accordingly. When growth is stagnant or declining, it becomes much harder to justify investment in advertising or other marketing initiatives.
The last two recessions in the UK, in 2009 and 2020, saw sharp contractions in GDP of 11% and 4.5% respectively. However, these were exceptional cases. Typically, the GDP contraction in a “normal” recession, like those in the 1970s-1990s, is usually much milder, ranging around 1-2%. It is likely that this is the type of recession we will see in the UK in 2023. The Bank of England is forecasting that GDP will probably grow slightly this year overall.
Inflation is another important factor to consider when predicting consumer spending. During the 2009 and 2020 recessions, inflation rates were low. However, the current inflation rate is the highest it has been in approximately 40 years. Therefore, it is more appropriate to examine the impact of recessions during periods of high inflation, such as those in the 1970s, 80s, and 90s.
Interestingly, despite the economic downturn during those higher inflation recessions, consumer spending actually grew in top-line nominal terms, as things cost a bit more. As a result, most firms can expect to see consumer spending and top-line revenue growing this year.
So, how can SMBs adjust their advertising strategy to best navigate these challenging economic times? By investing in advertising as a long-term investment to generate incremental profits in the future, SMBs can help protect their profit margins when costs are rising. This is where Buymedia's ad platform can help SMBs make the most of their advertising budget. The platform offers a range of cost-effective advertising options that can help SMBs reach their target audience and generate more leads and sales.
In addition, SMBs can leverage Buymedia's platform to optimise their advertising effectiveness through good media planning, combining both new and established media channels to reach the widest possible audience. The platform also offers controlled experiments and econometric modelling to measure true ROI, providing more accurate insights than simple attribution modelling.
Change-in-share-of-consumer-spending
During a recession, certain sectors of the economy tend to be affected differently. Sectors such as transport, restaurants, hotels, tourism, and recreation, which rely on discretionary spending, tend to suffer the most. According to data from the Office for National Statistics, during the 2008-2009 recession in the UK, consumer spending on restaurants and hotels decreased by 11.4%, while spending on recreation and culture decreased by 12.4%.
However, other sectors such as clothing, health, household equipment, and durables usually perform somewhat normally during a recession. While they may experience a slight decrease in sales, it is not as significant as in the discretionary spending sectors. In contrast, sectors such as food and drink, alcohol, utilities, and mortgages tend to do relatively well in a recession as they are necessities.
Demographics also play a role in how different sectors are affected. Younger and poorer families tend to suffer more during a recession due to rising energy bills, mortgage rates, and rents, which are bigger components of their household bills. On the other hand, older and more affluent households are less affected.
These shifts in consumer spending patterns may present an opportunity for brands to shift their focus on different audiences. Buymedia features such as audience targeting and segmentation can help brands identify and reach specific demographics through various media channels such as linear TV and online video.
Maintaining profit margins
The rising costs in commodities, prices, input prices, wages, and capital costs are causing inflation, which is squeezing profit margins.
Price promotions are not the answer
However, price promotions are not an effective solution. Econometrics has shown that price promotions are not actually incremental but rather subsidise sales, time-shift sales, and relocate some sales. Therefore, they reduce profits for most brand owners, and repeated price promotions increase price sensitivity, reduce pricing power, and erode margins.
Use brand advertising to support firmer pricing
A better strategy for supporting firmer pricing is to use brand advertising to make people less sensitive to price. This is because strengthening brand metrics reduces price sensitivity and increases the price elasticity, allowing for higher prices to be charged for the product. Video advertising is especially effective at reducing price sensitivity and increasing margins because of its emotional power. Thus, a smart move for anyone facing high inflation and rising costs would be to shift money from price promotions into brand advertising, particularly video advertising, which has shown a reduction in price sensitivity in nearly all the cases in the IPA databank.
Buymedia features that could help address this challenge for SMBs include:-
- Optimising media planning and buying to maximise the ROI of brand advertising campaigns.
- Using data and analytics, SMBs can identify their target audience and the media channels that are most effective at reaching them.
- They can also measure the impact of their campaigns on brand metrics, such as awareness, salience, and emotional bonding.
- By using Buymedia's platform, SMBs can save time and resources by automating the media buying process, accessing a range of media channels, and tracking campaign performance in real-time.
Understanding the true value of advertising
In the current business climate, rising costs are squeezing profit margins, and advertising costs are also increasing. However, it is important to understand the true value of advertising and how its costs are changing in real terms.
The cost of TV advertising has been falling
According to long-term data, the real cost per thousand of TV advertising has been steadily falling for the past 20 years, despite nominal costs rising. This is due to the increase in competition in the advertising marketplace. Other forms of advertising are likely to have a similar trend. This means that, particularly for fixed inventory media like TV, there will be a buying opportunity for firms with robust profit margins and in buoyant sectors, like FMCG. In fact, during the pandemic, Unilever took advantage of the high value for money of TV advertising and reaped the rewards.
For SMBs, Buymedia features like programmatic advertising could be helpful in addressing this challenge. By using programmatic advertising, SMBs can access advertising inventory across multiple channels, including TV, at a lower cost and with more targeted reach. This could help SMBs to take advantage of the falling real cost of TV advertising and compete more effectively with larger brands. Additionally, Buymedia's analytics tools could help SMBs to measure the effectiveness of their advertising campaigns and make data-driven decisions to optimise their advertising spend.
Managing Risk: Why Strong Brands and Research Matter
When it comes to investing, risk is always a factor to consider. If an investment is low-risk and you know it will pay off, it's a no-brainer. But when returns are uncertain, it's important to ask tough questions before investing. This holds true for any investment, whether it's a new factory or a new advertising campaign.
One way to reduce risk in advertising investment is to use advertising to directly affect the risk premium you pay in financial markets. According to a study by Brand Finance, companies with stronger brands pay a lower risk premium when borrowing in capital markets. This highlights the importance of brand advertising, not just for attracting consumers and maintaining price premiums and margins, but also for signalling to investors that your company is strong and low-risk.
Buymedia can help advertisers build strong brands through its targeted media buying and planning platform. With Buymedia, advertisers can access a wide range of media options and insights to reach their desired audiences effectively. By leveraging these tools and data, advertisers can build a strong brand that stands out in the market and attracts investors.
Research is Key : beware of over reliance on attribution
Another way to reduce risk in advertising investment is through good research. Understanding what is actually having an effect, rather than what looks like it is, is vital to making informed investment decisions. However, direct attribution, particularly digital attribution, can be dangerous. While it offers immediate feedback on the response to digital communications, it assumes that every sale can be attributed to that communication.
Buymedia's platform provides advertisers with in-depth reporting and analytics, enabling them to measure the effectiveness of their campaigns and make informed decisions. By supplementing attribution modelling with controlled experiments and market mix modelling, advertisers can gain a more accurate understanding of their ROI and determine their optimal level of investment.
While attribution modelling has a role to play, it can also direct money to the wrong places. It can overestimate short-term, directive effects for performance channels like paid search and direct marketing, while underestimating longer, indirect effects for brand-oriented channels like TV advertising. Buymedia can help advertisers allocate their budget effectively and optimise their media mix to achieve their desired outcomes.
Invest in Effectiveness
In today's challenging economic climate, businesses are under increasing pressure to do more with less. The good news is that effective media planning can help optimise your budget, ensuring that your advertising spend is distributed across the right channels, products, and markets to achieve maximum impact.
According to recent research by Meta, TV remains the most effective form of advertising. While digital media, including online video and paid search, are particularly effective for short-term performance marketing, the majority of the payback from advertising comes from the longer-term effects of brand advertising on sales and profit.
Buymedia offers a range of features to help SMBs optimise their advertising spend across multiple channels, including TV, online video, and social media. Our platform allows advertisers to plan, book, and track campaigns with ease, ensuring that every penny is spent where it will have the greatest impact.
In addition to channel optimisation, creative is also critical to achieving maximum ROI. Research by econometrics consultancy D2D has shown that breakthrough creative can increase ROI and profit by a factor of just under 12. Buymedia offers access to a network of top creative agencies, enabling SMBs to harness the power of creativity to increase brand awareness and drive sales.
By combining the logic of econometric modelling with the magic of breakthrough creative, SMBs can achieve big profits. With Buymedia, businesses can access the tools and expertise they need to make the most of their advertising budget and achieve maximum effectiveness.
Key Takeaways
We have explored a range of topics related to advertising and marketing in today's digital age and economic environment. We began by discussing the importance of understanding your target audience and the value of data-driven insights in informing your advertising strategies. We then delved into the key factors that contribute to the success of advertising campaigns.
We also discussed the challenges that small and medium-sized businesses (SMBs) face when it comes to advertising and how technology, such as programmatic advertising, can help address these challenges.
We also looked at the impact of emerging technologies on the future of advertising and the opportunities they present for businesses. Furthermore, we discussed the importance of measuring the effectiveness of advertising campaigns and how data analytics can provide valuable insights into the performance of your ads.
Finally, we considered the importance of investing in effectiveness, particularly in a time when costs are rising and margins are under pressure. We discussed the power of media planning, the effectiveness of different advertising channels and the importance of getting the creative right. We also highlighted how Buymedia, with its range of features such as its data-driven insights, programmatic advertising capabilities and social media integration, can help SMBs address the challenges they face when it comes to advertising.
In summary, the key takeaway from all of these discussions is that effective advertising requires a deep understanding of your target audience, careful planning and execution, and the ability to measure and adjust your strategies as needed. It also requires a willingness to embrace emerging technologies and the power of creativity and emotion to create a lasting impact on your audience.
With the right tools and strategies in place, businesses of all sizes can harness the power of advertising and marketing to drive growth, build brand awareness and connect with their customers in meaningful ways. And with Buymedia's advanced advertising solutions, SMBs can level the playing field and compete with larger businesses, reaching their target audience in a cost-effective and efficient manner.
