From Hollywood to Silicon Valley, New York and everyone in between, people and companies across sectors are bracing for an upcoming recession — defined as two consecutive quarters of economic decline.
With the ongoing pandemic, rising inflation, labor shortages, supply chain issues and Russia’s relentless invasion of Ukraine, we’re at a very delicate moment in time — personally as well as professionally. But how will these factors impact the content marketing industry in 2022 and beyond? Let’s take a closer look at what some of our leading industry players have to say.
The consensus is in: Things are going to get worse before they get better. Cutbacks, confusion and anxiety are rife. At May’s Advertising Week Europe, to prepare for a possible recession, Digiday reports that “Procter & Gamble took ad dollars out of its pot for Q1 and poured them straight into its bottom line. Coca-Cola will do more advertising to try and justify price hikes as and when they happen. [And] Peloton has pumped the brakes on ad dollars so far this year…
“Marketers are jittery about advertising. Media owners wonder whether the future of their businesses will be less profitable. Even the seemingly invincible platforms are making cutbacks.”
“Worse still, so much of what’s happening is out of marketers’ control: public sentiment, government fiscal policies and — probably the most complicated factor — the unexpected contortions of the financial world.”
Bottom line: “The economic slowdown will really start to affect ad markets in the second quarter and third quarter, and [media leader] Magna anticipates lower growth over the period second to fourth quarter, as well as throughout 2023.”
“In frothy periods of national prosperity, marketers may forget that rising sales aren’t caused by clever advertising and appealing products alone,” according to Harvard Business Review. “Purchases depend on consumers’ having disposable income, feeling confident about their future, trusting in business and the economy, and embracing lifestyles and values that encourage consumption.”
During a recession, all that goes out the window. And since each recession is different from the last, marketers are faced with a new, unprecedented set of challenges. That’s why, instead of continuing to segment customers by demographic, during a downturn it makes more sense to focus on psychological segmentation “that takes into consideration consumers’ emotional reactions to the economic environment.” Refer to the table above for a good starting point.
Bottom line: When a recession looms, “Companies need to understand the evolving consumption patterns and fine-tune their strategies accordingly.”
Customers aren’t the only ones cutting back on spending. Companies across industries are following suit as well, though pulling all funding wouldn’t be wise. “We’re not seeing advertisers cancel budgets — it’s too early to do that,” said Dave Mulrenan, Head of Investment at Zenith UK. “There is, however, a cautionary note in a lot of the plans we’re working on now. Clients want to hold on to as much of their budget as possible while they wait to see what happens.”
Bottom line: Marketers can’t afford to cut spending altogether — “not when people are still showing a tolerance for high prices amid rampant inflation,” according to Digiday. “They can, however, be more cautious, opting to slow or even delay spending as they balance the need to persuade consumers not to trade down to lower-priced competitors with the need to offset some of their own higher costs or increase profitability.”
“Clients learned during the pandemic that the best course of action is to invest in marketing when they can and to try and sustain that investment,” says Mark Read, CEO of WPP. “I certainly don’t think we’re back in the situation we were at in 2020 where clients pulled spending in significant amounts as the pandemic unfolded.”
Others think we may not even come to the point of a downturn. “If there is a recession as people are saying there may be, for some businesses it will actually be important to hunker down and get the short-term sorted,” says Tom Roach, VP of Brand Planning at Jellyfish.
“But of course, there is evidence – quite a lot of evidence from the brand-building word – that the brands that cut back too much might leave that recession later and in a worse position than brands that maintain their spend.”
Bottom line: According to Digiday, “The glass-half-full takeaway from larger publishers at Ad Week Europe [is that] their businesses should at least still see an expansion. To them, macroeconomic disruption accelerates change that creates grounds for new winners to emerge.”
“People are very focused on performance, very focused on measurement, very focused on media mix modeling, very focused on first-party data and the signals and bringing them together in a meaningful way,” according to WPP Founder Martin Sorrell. “So I think [advertisers] will become more tactical.”
That means, in part, pursuing new ways of working together as well as thinking outside the box when it comes to content marketing. “Using our industry’s tremendous reach and creativity to create a force for growth and a force for good is creating uncommon collaboration at its best,” says Jane Wakely, Chief Consumer and Marketing Officer at PepsiCo, “and we need to ensure that continues despite the many short-term pressures that we will all face and need to navigate in the coming months.”
Bottom line: For brands looking to engage consumers amid inflation, the key will be not only increasing value but also reducing risks by focusing on the losses to come, Marketing Dive reports — and, according to J. Walker Smith, Kantar’s Chief Knowledge Officer for North America, “brands have an opportunity to be responsive to that.”