Ben McCallum, managing director, UM Sydney
A recent shopping sojourn with my daughters revealed Xmas-themed products have already started to find their way on to the shelves. And it’s only early-September.
As the volume of child demands increased with “I want...I need new…and all my friends have” I did what most parents do and turned on my imaginary anti-children-noise-cancelling-ears. Free from their demands I began thinking not about Xmas but more about the fact that 2023 isn’t far away. It made me wonder: are we as prepared as we should be, both professionally and personally, for a new year?
The COVID hangover is a real thing as we face the prospect of a challenging economic climate heading into 2023. Brands and businesses need to be aware of, and focus on, the challenges ahead to ensure they are as prosperous as they can be next year. So what can brands do?
To set the scene: we are experiencing levels of inflation in Australia not seen since 2001. The forecast predicts this will be surpassed before Xmas and sit somewhere close to 8%. The target is somewhere between 2-3% which means a lot more pain is on the horizon. This is a global issue with the likes of the US (8.5%) UK (10.1%) and Canada (7.6%) all struggling to arrest the spiral.
A significant contributing factor has been the recent level of disposable income available to most Australians. On average we have had access to 40% more disposable income than we did as recently as 2014. What did we do with it? We spent it.
Retail sales data from the ABS could not show this in a better way, it is the perfect Richter scale analogy of a flat line with dramatic spikes. We experienced a flat line for decades until 2020 when volatility became the new norm.
But what goes up must come down right? Consumer confidence has dropped for the 9th consecutive month, this is a 22% drop vs Aug 2021 and one of the lowest numbers ever recorded.
The RBA has announced another interest rate increase taking the cash rate to 2.35%. A 225-point rise since March this year. The goal is to reduce inflation and bring it closer to the 2-3% target by reducing the amount of disposable income in the market. So far, we have seen little effect as inflation continues to rise irrespective of significant falls in property prices, but this may stabilize with subsequent increases expected to take the cash rate to 3.35% in 2023 and possibly 4% in 2024.
Plus the prediction is for energy prices to continue to rise, and a projected rise in fuel costs of $0.25 per litre by the end of September. Let’s talk about Electric Vehicles another time.
What all this means to our industry is that consumer decisions are going to become more difficult as people decide where to spend their money, and brands must ensure they are at the forefront of consumers’ minds when this process occurs.
Brand presence is critical at times like this. Ensuring your Brand is front and centre and continuing to engage and interact with consumers. We know the Brand that continues to communicate throughout economical adversity will gain significant ESOV. Traditionally, brands that do not adopt this strategy find it difficult to catch up.
Customer experience needs to always be high on the list of priorities and even more so when the market is going through a downturn. Consumers will be risk averse and looking for signs to trust or distrust a Brand. Don’t give them one to distrust your brand.
Invest in yourselves, It’s elbows out time. It is not about spending money it is about investing in your brand’s future strength. Marketing is not a cost it is an opportunity. I am not suggesting you put the whole lot on Red and see what happens. Invest in a clear strategic direction that takes the Brand towards a goal.
Surround yourself with partners that connect you to the most valuable audience in the most effective way. Advertising can be unnecessarily complex. Simplify it and have a hard look at segmentation, positioning and targeting.
Continually optimize your strategy. Brands need to be nimble and learn quickly from mistakes. Making mistakes in normal circumstances can be valuable, it gives you knowledge others don’t have. In the conditions we face next year brands cannot afford mistakes however, we can and should still use the lessons learnt to gain an advantage.
Essentially, there is an opportunity in every challenging situation… you just need to look for it!