Brands should be cautious and prepare for the post-lockdown hangover
Director of Analytic Partners, Jo-Ann Foo, offers a careful word against the positive industry press.
The post-lockdown “party” has kicked off in New South Wales, just in time for Christmas (woo!). There’s an overwhelming feeling of positivity and relief – Q4 media bookings are looking strong, we’re told consumers are poised to spend, and there are some expectations that we’ll bounce back quickly, “like last time”.
But this may not be the case. While brands which spend up big on marketing now may capitalise on any initial growth we see this quarter, they could be left with an almighty hangover once the post-Christmas dust settles.
A lot of our industry press has painted a rosy picture, but with marketing having a bit of a reputation within businesses as frivolous spenders, it’s worth being mindful of the consequences.
The level of financial support from governments this year has been less than 2020, meaning both households and businesses are in a different financial position. Plus, we’re clearly not returning to a zero-case situation – overall COVID cases will go up, there will be an uneven reopening of the economy (and states), and if Singapore and Canada are anything to go by, we’re likely to still face disruption. This means that even if we do see an initial uplift, there is much more uncertainty, and may take time for economic momentum to truly build again.
Looking further abroad, while China remains our largest trading partner it faces an economic crisis with the collapse of Evergrande. The US too has just averted crisis for now by temporarily lifting its debt ceiling. So, even if our economy doesn’t stutter, this global instability presents a threat.
There are two options facing brands: spend big now with the aim of squirrelling away as much profit as possible before the desolate winter sets in, or spend with a little more caution to ensure your budget will support you through all conditions. (Or embrace a third option: call BS on my ‘be cautious’ suggestion and expect the good times to continue.)
Option 1 could certainly work, and maybe gives you a chance of even greater success if the party kicks on. But you’ll be sacrificing efficiency – you’ll be fighting hard for advertising cut-through and paying a premium to be in market, meaning you’re getting less for your money. This is not to say don’t advertise now, because you do want to have some influence on consumers and need to drive sales, but whether it’s worth going all out to win the share of voice game when consumers are already pre-primed to shop and not have enough budget for later is questionable.
Some presence and spend in market is better than none. We see this through normal campaign planning (always on versus bursts), but also in the brands who last year were able to maintain some sort of spend through the pandemic and saw dramatic increases in ROI, versus those who had to stop spending, particularly when competitors pulled back.
While this may present a good case for getting more budget later if you spend it all now, it’s significantly easier to budget for caution with the investment you’ve been allocated rather than having to put a hand out later.
This puts me firmly in the Option 2 “spend with caution” camp. And best case, if you’ve been cautious and end up with budget later, it gives you the possibility of spending your money in a non-peak media period and get more bang for your buck (i.e. a higher relative ROI) then.
This strategy also protects brands from having to rely on solely on discounting later in order to hit short term sales targets. Discounts on their own erode brand value and force advertising to work harder later to rebuild brand equity. Having budget to support continued advertising alongside (hopefully) fewer discounts is a win all round.
So enjoy the party and freedoms, but don’t get led astray by the skewed positive picture our industry press paints. The financial and business press are much more cautious and, given this is what the finance teams consume, it’s worth being able to connect on their terms, by demonstrating the same caution and the importance of marketing investment’s impact on a business’ ongoing returns.
Jo-Ann Foo is the director of Analytic Partners.
