The advertising spend outlook for Christmas is uncertain with weak consumer sentiment, fueled by an unpredictable economy, and combined with a cautious short market, say industry insiders.
According to marketers AdNews spoke to, clients are looking to make up this year’s lost ground at Christmas but with marketing budgets and consumer spending down the return on investment is a mixed bag.
“If I were to take a punt I would say the end of the year will be no softer than what we have seen in recent months,” Chris Walton, managing director at Nunn Media Sydney, told AdNews.
This year’s end of financial year sales saw retail turnover fall sharply in June due to weaker than usual spending, according to the ABS.
Q3 Digital Economy Index shows Australians’ online spending has dropped 5.07%, equaling a $2.9 billion nation-wide drop in online spending year-on-year (YoY).
The market is definitely more cautious in pockets than in previous years but Ben Shepherd, chief investment officer at dentsu, expects some positive momentum in retail and consumer products.
“November retail momentum is hard to predict as retail sales have been holding up well in dollar terms despite cost increases in rent, mortgage payments, electricity, insurance, gas etc all constraining household spend,” Shepherd said.
Although Chris O’Keefe, chief operating officer Match & Wood, says overall marketing budgets will be down slightly.
“Brands with products that are focused on older-skewed, higher-income audiences, should still be spending as their audiences will be too,” O’Keefe said.
“However recent interest rate rises and inflation has affected young to middle-aged consumers harder, and the remaining brands will be in a fight for reduced consumer wallets.”
On the whole with big swings in client budgets, most client investment has ended up in line with or slightly above original forecasts, Pia Coyle (pictured right), managing director at PHD Sydney, said.
“Some are reporting seeing the market coming back in October and November, with a buoyancy not seen for 6 months in the retail rush to Christmas,” Coyle said.
“But others are struggling to capitalise on the positivity, perhaps because there is a lack of inventory to convert this late in the game.”
However, one thing is certain as this traditionally competitive period will remain the Olympics among media agencies.
“Across our client portfolio we’re seeing budgets on par with previous years. However we are seeing the expectation of what these budgets can deliver change with additional internal pressure, where KPIs are far outweighing any incremental spend YoY,” Trent McMillan, chief digital officer and founder of Kaimera, said.
"We’re expecting to see more aggressive competitor activity either from those who have held back budget or through deeper discounting and offers."
‘Christmas’ is now a different market
In the past few years, the adoption of Black Friday and Cyber Monday into Australian culture has made the discount frenzy period perform better than Christmas.
“December used to be split into two clear halves – two very busy weeks and two much quieter weeks,” Chris Walton said.
“For many clients December now involves four quieter weeks as focus is on maximising sales in the run up to and on Friday 24th November.”
However consumer behaviour shows that Black Friday is on par with Christmas, depending on the product.
According to research conducted by Honeycomb Strategy exclusively for AdNews, consumers are starting their holiday shopping earlier with half of Australians planning to use Black Friday or Cyber Monday deals for Christmas shopping.
Half (51%) of all Black Friday purchases will be gifts for others, rather than a purchase for oneself.
Consumer products in particular are a key driver for Black Friday including clothing, electronics, personal care and beauty.
But since technology and consumer electronics have been down this year, as has household products such as furniture and whitegoods, it's unclear if this trend will remain, Ben Shepherd (pictured right) said.
“Tech and CE have been big drivers of Black Friday momentum in past years but it’s unclear whether their past investment enthusiasm will sustain for November in 2023 given their overall spend is back significantly in 2023 CY,” Shepherd said.
“Balancing demand creation marketing activity versus demand fulfilment will be the toughest challenge this Christmas period.
“In a no growth market with high cost of living pressures, there is no tide to lift all boats.
“My view is the stronger brands will see small growth in the Q4 retail period off the back of being prevalent in the minds of their category consumers, and the weaker brands will be fighting it out over the remainder of the demand and paying a reasonably large tax to the platforms to do so.”
“It is also an important event for retailers to establish an association between their brand and value, create opportunities to engage with new consumers and reconnect with previous customers,” Sue-Ellen Osborn, Sydney head of investment for Spark Foundry, told AdNews.
But do the sales, discounts and higher consumer intent lead to incremental new customer revenue?
Adam Sharon-Zipser (pictured right), managing director at digital agency Elephant Room, has been exploring what revenue opportunity these sales moments drive from existing versus new customers.
“Looking back at prior years’ performance, we are finding an increasing trend for customers entering the high velocity end of year sales cycle as a one-off only buyer which is putting tighter grips on the media budgets available,” Sharon-Zipser said.
“Looking at customer expected lifetime value, and new customer acquisition costs, a payback period should be defined and incorporated with the boost in acquisition fees and revenue during the Black Friday and Cyber Monday frenzy.”
The cost-of-living Grinch who stole Christmas
Marketers predict due to the cost of living crisis’ this year Black Friday will be particularly important as consumers feel the pressure of higher rents and interest rates.
A quarter (23%) are planning to spend less on Christmas gifts this year, with 71% of those stating rising cost of living as the cause, with most others planning to keep their spending the same according to Honeycomb Strategy.
To compare, global data and insights company Pureprofile says 65% of Australians were curtailing their festive season celebrations, with 42% expecting to buy fewer gifts and 60% avoiding travel to cut down on discretionary spending.
The #1 category people plan to spend less on is toys and gaming, suggesting the volume of purchases for kids may be dropping.
Australians are being mindful of their budgets, John Bevitt, managing director at Honeycomb Strategy, told AdNews.
“It has therefore never been more important for retailers to focus on their pricing strategies during these pivotal sales periods,” Bevitt said.
Demonstrating value to consumers will be key to getting them to purchase your product over a competitors’ Sue-Ellen Osborn (pictured right) said.
“Black Friday, therefore, becomes a critical marketing opportunity to establish your brand as one that offers value to price sensitive consumers,” Osborn said.
Refining your offers, matching your channels with the right audiences, and looking for opportunities to steal your competitors’ traffic are key during this time, Chris O’Keefe said.
“Even in the face of economic uncertainty I think Black Friday will be bigger and better this year, as Black Friday isn’t a top funnel/brand opportunity, it is mostly used for bottom funnel sales acquisition,” O’Keefe said.
Certainly, some advertisers and categories have had a tough year, but they will now be looking to use the busy holiday retail period to re-engage with consumers and set themselves up for success in 2024, Sue-Ellen Osborn said.
Cutting through the clutter
The other challenge marketers identified in the run up to Christmas is cutting through in a cluttered market.
It’s a competitive time where everyone has a sale to offer Sydney Church, business director at Half Dome, told AdNews.
“To drive cut-through and be memorable, advertisers must be willing to show up in unexpected and unmissable environments and adjust their creative and messaging to stand out,” Church said.
“Loyalty is also increasingly challenging, particularly when consumers are just looking for the next best price.
“Rewarding existing customers and enticing them new through things like store credits, promos, and delivery options should be at the forefront of every advertiser’s strategy.”
The best way to mitigate this challenge is to focus on smart strategy and planning that maximises campaign effectiveness and is developed with business outcomes in mind, Sue-Ellen Osborn said.
“Plan and buy well in advance, so you don’t need to scramble or compromise on the perfect plan. Create a campaign based on what you know works for your business, not based on reacting to what your competitors are doing,” Osborn said.
But strategy isn’t easy, as to a large extent ‘strategy’ has gone out of the window according to Chris Walton (pictured right).
“This manifests itself in short-term flurries of activity,” Walton said.
“If there is one characteristic you hear from any rep about the current market, it is that it is short. ‘Marketing strategy’ is increasingly an umbrella term used in hindsight to describe a bunch of loosely linked tactics.
“The approach to appraising performance media has contaminated the approach to appraising brand-building media even though the two have fundamentally different roles.
“Having one of those mind erasers that Men In Black use would be quite a handy tool to have in these instances.”
Ultimately brands need to properly understand the unit economics of these sale periods. If a new customer acquisition cost is not properly defined, backed with an expected lifetime value they are ultimately flying blind, Adam Sharon-Zipser said.
“Not all customers acquired are equal and brands need to properly recognise this,” Sharon-Zipser said.
Can TikTok save Christmas?
Among marketers, social channels were identified as the most popular across all Christmas related briefs.
More than ever owned media is becoming the leader and focus for Black Friday, Cyber Monday, Christmas and all major sales events Adam Sharon-Zipser told AdNews.
“To effectively communicate this we are seeing the core performance channels leading the charge here, namely Meta properties, TikTok and search,” Sharon-Zipser said.
“Search in particular surges nicely at the end of October and many brands need to consider the budget headroom needed for the incoming search spike and ensure they’re not losing out impressions due to spend caps.”
Social channels and formats hold a lot of power in creating mental shortcuts to purchase, Sydney Church (pictured right) said.
“There are some brilliant case studies out there that showcase how advertisers are using platforms like TikTok to partner with creators and inspire shoppers, with some impressive results to follow,” Church said.
This surge in social and by extension digital channels is because clients want flexibility with the pressures of uncertainty continuing to bubble, Chris O’Keefe said.
Beyond social, the media channels that boomed this year will continue to be a no-brainer for Christmas. OOH will continue to do well, as will any media that can be bought short-term, such as radio and paid search.
And for brands who have played it safe this year, Christmas is a good time for experimentation Sue-Ellen Osborn said.
“Think about how you can use channels differently from how you would at other times of the year,” Osborn said.
“For example, with more people out and about in summer Out-Of-Home is a great channel to use, but look for ways to use it in new or innovative ways.
“Similarly, TV viewing habits and radio listening change around summer as regular programming goes on hiatus. They can still drive mass reach, but you may plan to use them differently from how you would at other times of the year.”
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