Opinion: Navigating marketing & media in an inflationary environment
Inflationary pressures are mounting and have started affecting advertising budgets. Deep Singh – Vice President, Strategy – PHD India suggests the best ways advertisers can navigate these macro-economic challenges.
As markets around the world brace themselves for a period of economic slowdown, experts and citizens alike debate the imminent global recession which seems to loom large, coupled with rising inflation and tightening financing conditions. And while many may argue that the signs have been on the horizon for a while, as the state of affairs goes, the age of inflation is here and there is no denying that it impacts ad budgets and costs, with businesses trying to be prudent about the avenues of expenditure. Consumers also curb their spending habits and set priorities during this period, which leads to brands resorting to marketing budget cuts to optimize revenues.
However, global inflation is a double-edged sword since it also acts as a driver for growth, especially in markets like India, which is a net importer of energy. For countries such as India, during a recession, oil prices typically fall, and as a country, this reduces our current account deficit. Historically speaking, this has worked in our favor.
And while inflation and recession can impact ad spending and overall advertising budgets, reducing spends may not be a sound strategy for most businesses. Focusing on spending in the right areas and adjusting to the changing needs of consumers, both existing and new, is an opportunity to gain market share. Marketing budget cuts are not just limited to economics and businesses must consider customer perception during a period of inflation. A significant slash in monies being spent on media can lead to low market visibility and a subsequent reduction in the share of voice, which in turn impacts market share.
What may seem like an apparent period of gloom for businesses may not necessarily have to be so in practice. Just as every cloud has a silver lining, brands have the opportunity here to strengthen their position as key players and project an image of stability. By taking advantage of the situation and capitalizing on advertising spends, businesses have an opportunity to tap into the power of brand salience, which is a key driver of equity and brand value in the context of the Indian market. A dominating presence in the market also offers brands the advantage of pricing power, which in turn means sustained presence and holding power in the eyes of the consumer.
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Kantar recently advised that marketers should be ‘bold’ and instead of focusing on many ideas, focus on a few: “Kantar media effectiveness and touchpoint planning studies consistently show that a minority of touchpoints deliver most of the impact for brands. Across a wide range of markets and categories, we typically see that 20 per cent of touchpoints deliver 80 per cent of the brand impact. Having said that, multi-media planning is proven to be the most effective method of reaching consumers- activating at least 3 media channels (based on efficient reach) delivers the highest ROI and avoids concentration risk of overinvesting in a single media channel. Layering this further with research done by Amplified Intelligence on Attention (Eyes on Screen) suggests there is a long tail of channels to be avoided due to low attention- which essentially means that the real cost of delivering an impression is higher for channels with lower attention. With that backdrop in place, there are a few golden rules that marketers must take note of when navigating shifting landscapes.
Build a Sustained Media Presence
Marketing is a probabilistic science and not a deterministic one. If consumers are considering and buying from your brand weekly even during a recession, it becomes even more important to stay in the awareness set especially for low involvement categories. The Indian consumer is more likely to consider and buy brands they recall spontaneously than those they don’t. Aside from that, it helps a brand maintain momentum and amplify its strengths in a way that can considerably reduce the chances of a decline in brand health and brand market share.
Consider the Long-Term Impact of Investing in Media
Media contribution to sales is a factor that brands must consider when planning their investment strategy in a recession. For instance, media contribution to sales for D2C brands is significantly higher than non D2C brands. Presence on media can significantly boost ROI for brands that build ROI-based investment strategies. Even for non D2C brands, especially leaders in their category, under-investment in media can be deleterious to sales. Moreover, given the temporary nature of the recession, brands can come out of it stronger if they invest and seek long-term returns and do not cut down on budgets in the hope of stabilizing the revenue for a short time. Consider the long-term impact of media investment on a business to decide how much to invest.
Take Advantage of Excess SOV to Beat Competitors
ESOV (SOV-SOM) is critical to maintain during recessionary and inflationary conditions for brands that are looking to grow, especially immediately after a period of recession. Since many brands reduce or cease advertising spends, the ones that continue to stand their ground can find themselves in a dominant position and benefit from long-term profits.
Focus on Creating Emotional Resonance
Carrying out long-term campaigns that will create an impact far beyond a specific quarter or a year is more desirable than short-term campaigns that aim at hastily course correcting. Advertising decay of short-term campaigns focused on promotions is much faster than campaigns that emotionally resonate with buyers. Moreover, campaigns focused on creating emotional resonance are historically proven to deliver higher brand and business effects over rational and tactical campaigns. Orlando Wood in his book “Lemon: How the advertising brain turned sour” lays bare evidence to substantiate that in the technological age, advertising has suffered leading to lower business effects being generated from advertising. Focusing on long-term activities may not produce immediate results but it will help a brand witness strong growth during the recovery period and far beyond.
Keep Innovation and Creativity at the Heart of it All
During such a time, it becomes important for a brand to experiment with products/services to meet the needs of consumers. When demand drops significantly and the competition is sky-high, brands need to find a way to stand out in the market and focus on delivering better experiences. Secondly, creativity is going to be pivotal in propelling brands forward during this tumultuous time. As our own research and findings from PHD Media’s latest book ‘Shift: A Marketing Rethink’ and its subsequent podcasts go, leaning into creativity is going to be critical when a business has its back against the wall. Our industry is looking at an incoming Renaissance in creativity and it’s time marketers rethink marketing and where creativity fits in.
Play to the Strengths of Your Portfolio- Invest Behind Core
Brands must reassess their strategic position in a way that is relative to their strengths and find a way to identify the right opportunities to bank on. Investing behind the core brand in an inflationary environment can reinforce strengths and maintain equity across the portfolio. Having said that, the core brand must be re-engineered keeping in mind a consumer’s unmet needs, and made more accessible throughout the Digital ecosystem.
In conclusion, brands that stand the test of time and outperform their competition, continue to invest, and build relationships with their consumers even in inflationary circumstances. We live in a world where loyalties are fleeting, and brand associations need to be reinforced and built continuously with our consumers. Inadequate media presence during a recessionary period can impact brand equity and market share in the long term, particularly in an age of shifting loyalties.
This article is authored by Deep Singh – Vice President, Strategy – PHD India.
Disclaimer: The opinions shared in the article are of the author and do not necessarily reflect the opinion of the publication.