With war in Ukraine grinding on, conflict in Israel at its worst for a generation, a unanimous 'No' from all states in the Voice referendum here in Australia, and all of this taking the climate crisis off the front pages, the outlook seems a little gloomy.
Productivity has shrunk back to 2016 levels. Australia is in its first per capita recession since 2006. We have had our thirteenth interest rate rise since May 2022. Monthly mortgage payments have doubled, and we are firmly in the midst of ‘the economic slowdown we had to have’. Little surprise then that 2023 was the year that consumer confidence collapsed. Just look at the Westpac Melbourne Institute consumer sentiment survey – six of the ten lowest monthly reads in the last decade were chalked up in the first nine months of this year, with sentiment around family finances reflecting intense cost-of-living pressures.
How do households respond? We do the rational thing. We tighten our belts, cut costs and hunker down in the hope that this won’t last too long.
Many brands respond in the same, rational way, cutting budgets and postponing investment in new initiatives. Gut feel tells the CMO that this is the time to reduce surface area and move into survival mode. But this basic rational response fails to embrace the fact that marketing is anything but rational. The brands that push hard in this economic climate achieve disproportionate benefits, not just in terms of cost-effective share of voice growth – but through building a reputation for confidence and leadership, adopting a forward-looking posture that consumers want to associate with. We all know how Kellogg’s beat Post in the US cereal wars, achieving industry dominance as the economy tanked, by increasing its ad budget when Post chose to cut back.
Kia has done a good job here in recent years, investing in excess share of voice (ESOV - where share of voice exceeds share of market) and seeing impressive sales growth as a result. With many brands tightening their belts in a downturn, achieving ESOV just got way cheaper for brands that think long term. The big players know this, consolidating their position when the going gets tough. No prizes for guessing that the top media spenders in the first half of 2023 were Harvey Norman, McDonald’s and Woolworths.
The brands that hide under a rock when households are hurting don’t just tread water; they lose ground to their rivals. The brands with the confidence (and deep enough pockets) to sustain investment in marketing when the economic picture is ugly are the brands that will lead us out of the downturn, and consumers will reward them for it.
Harry Corsham, partner and director at Town Square