The topic of 2023 budgeting has been a focus for many of our clients over the past few months; what should they be spending and how should they be spending it? It’s no secret that with inflation hitting double digits, consumer habits will change, prioritising necessities and changing when and how they spend. So how should our plans to tackle the year ahead vary from previous years?
Before even looking at the numbers, it’s important to know where your sector is headed. Although evidence has shown that spending more than your competitors will earn you a higher share of voice - and with time, a higher share of market – as certain sectors are set to be hit harder than others in the cost-of-living-crisis, advertisers should assess competitor behaviours and market growth across the board before investing.
Once the predicted growth of your sector has been assessed, adjusting the budget to the size of your business is key. And this will come hand in hand with audience targeting. As bigger businesses have more available budgets, they can afford to target a wider set of audiences, where smaller business should focus their investment on their core audience. Although many businesses will be focusing on short term returns for the months ahead, it’s also important to invest in brand. Even though consumers may not seem receptive in the short term, maintaining brand presence will pay off in the long term where consumers will remember the brands that were there for them in times of crisis. The IPA have more than 40 years of evidence that a short-term reaction is never as effective as long-term investment – see their recent campaign tagline “Come back in a year and tell us if cutting your budget was a good idea”.
To avoid a race to the bottom, focusing on value vs price will be key. How does a brands proposition and messaging tackle this? In the 2008 recession, mid-market brands promoted different price ranges, from budget to indulgent, in order to compete with other low-cost retailers. This kept people shopping in the same place but allowed them to choose which price point suited them. During times of doom scrolling and bad news fatigue, consumers turn to escapism and prioritise both mental and physical wellbeing.
Equally, how will consumers decision-making windows change? Using the travel industry as an example, 90% of consumers still intend to go on holiday in the next 12 months, so will they plan earlier? Spread costs? Weight up more options? Understanding this will inform when and where media should be spent to help these shifting journeys.
Lastly, keeping on top of media inflation figures is key. According to the World Federation of Advertisers, digital channels are experiencing lower levels of inflation compared to traditional channels, such as TV and BVOD. Where budget is limited, advertisers should explore channels where inventory is untouched by competitors, such as digital audio and podcasts.
This is not an easy topic to tackle, especially during the highest inflation in 40 years, but a crucial one for all advertisers. Leaning on your agency teams for guidance will provide you with the support needed for the right business decisions.