Mindful of what consumers are going through: Loo Fun Chee
Marketers across the country are bracing themselves for a hard grind in 2016, even as they try to talk the market up, fearing strategies could be trumped by a US election and the GST.
With a federal election looming – a traditional dampener on consumer spending – and the flow-on effects of the housing price boom in 2015 now hitting the budgets of new homeowners, the outlook is for tight budgets, and marketers are expecting to work hard to gain consumer attention.
But while the election and the economic outlook are acting as dampeners on consumer spending, the highlight event of the year, the Rio Olympics is expected to give marketers a major boost, even those not directly involved in the games.
While the retail sector is expected to have a tough year, telcos, automotive and finance are likely to be the spending leaders.
But media companies remain deeply conservative, if not concerned about the amount of money marketers will be willing to spend in 2016 (particular mainstream media) as spending continues to flood to digital.
Thomson: conditions “not auspicious”.
Speaking on the release of News Corporation’s second quarter earnings this week, chief executive Robert Thomson painted a grim picture.
“Macro economic conditions in most of our markets have not been auspicious,” Thomson said.
With the telecommunications industry one of the most active and aggressive sectors in Australia at the moment, marketers are buoyant about the year even as they admit consumers are facing a squeeze.
Vodafone Chief Marketing Officer Loo Fun Chee told Mumbrella she believes that people will be seeking value in brands.
“From Vodafone’s perspective, we are very excited about 2016,” said Chee.
“We are very mindful of what the customers are going through. There is a lot more pressure on families and on household budgets. That is why providing real value for the customer is critical for us.
“From a marketplace standpoint, from last year, competition has started to heat up so we do expect it’s going to be a competitive and tough market.”
Chee said that the brand was focused on its own game rather then trying to track its main rivals Telstra and Optus, as well as smaller, more nimble competitors such as Amaysim.
“We are very confident that we are keeping our eye more on the customer, not responding just to the marketplace.”
In the FMCG sector weekly household spending will be a prime focus of marketers as they work to entice consumers to brands at the same time that retailers are trying to drive conversion to home brands as household budgets are squeezed.
As a business marketing a mix of products in both the ‘household essential’ space and ‘discretionary spending’, Kellogg’s CMO Tamara Howe said there was no doubt consumers were being squeezed.
Howe: Kellogg’s is ‘confident’
“We are buoyant because the (breakfast) occasion is growing. That gives us a lot of confidence. It’s about ensuring our offering is relevant,” Howe said.
She added that 2016 looked to be a year where channels would offer growth opportunities and that these would come from continuing to work to fill the gaps they saw in the marketplace.
“That is why we are always renovating our food, introducing new products to make sure that we have the most relevant options for consumers to choose. Within channels there is lots of growth to be had.”
The retail sector will be the canary in the coal-mine for the marketing world.
One major retail specialist with exposure across multiple markets and sectors said the outlook for 2016 would be based on four key factors.
Tailwinds that are likely to boost spending and marketer investment include continuing low interest rates and low energy costs and fuel, which they believe is taking some of the pressure off household budgets.
“We are also seeing the NSW and Victorian economies very strong and so from the perspective of tailwinds, that is a very positive sign,” the marketer said.
However, they warned that both the Australian and US elections would put pressure on consumer spending habits, with the uncertainty about the outcome creating a headwind for marketers.
“There has also been some softness in Perth and it has been flat Adelaide and Brisbane.”
The retail market overall faces the challenges of the renewed talk about a GST rise, which could either constrict spending or provoke a buying boom ahead of the GST on international purchases.
So too, the debate over dropping Sunday penalty rates for retail workers from double-time to time-and-a-half could give retailers the room to offer better deals for shoppers.
In fashion, a space that also inhabits both essential and discretionary spending, one observer also highlighted the election as a major challenge to marketers.
“The election and talk of a rise in the GST later this year is a risk to market confidence plus the constant talk of interest rates, we all need to be right on our game during the second half of 2016.
“Customers want “new” and being the first to market with innovation is vital, as the Australian shopper is very savvy,” said the marketer.
From the perspective of consumer sentiment, it may be a challenging market for brands, but from the perspective of media companies, 2016 is likely to continue to be one of growth – albeit not at a rapid pace despite assistance from the Olympics and federal election.
Last year, Standard Media Index reported media agency bookings rose 4.5% across the year to record levels, despite a 6% slump in December.
The number was buoyed by 20.3% growth in digital spending while outdoor, radio and cinema also had growth years, while TV was close to flat.
In the end, Australia’s marketers know it’s a challenging road ahead, and as much as they want to be bullish, they just can’t quite bring themselves to say it.