The cost of living crisis is the most important marketing trend of 2022
Only a select few brands can sell a product to people who will rarely ever buy the product
A one week hiatus for The Dispash due to deadlines and an unwell child. The two always tend to come together. Flexible working is a necessity in these situations.
Onwards
Inflation is one of the biggest challenges facing marketing in 2022.
What should be the most pressing topic marketing departments and agencies should be discussing today? The metaverse? Rising CPMs on digital advertising platforms? Whether TV really is dead?
Or how about energy prices, supply chains and disposable income?
Two years of Covid-affected economies, plus some very challenging global conditions, including a war between a large exporter of fuel and wheat (Russia) and a large global wheat exporter (Ukraine), and rolling lockdowns in China that cause constant disruption to supply chains has created the perfect storm for a rise in inflation. And that, in turn, gets passed on to the consumer. Money, currently, really doesn’t go as far as it used to.
It's a desperate situation when you consider that more than a quarter of British households (covering around 15m people) are now in what's classified as fuel poverty, to the point that MoneySavingExpert has just realised a Heat The Human guide with tips to keep energy consumption to a minimum.
Here in Australia, petrol has risen by 32% in a year. The USA's Consumer Price Index just had the highest year-on-year rise in 40 years. The words 'cost of living crisis' are now a daily feature on news bulletins around the world as prices rise but wages don't keep pace.
At a point in time where, in the UK, Marketing Week expects £12bn worth of spend on non-essential items to be wiped out as the average family disposable income falls by 6.4%. When a significant chunk of the population has to choose between food or fuel, an NFT drop seems very irrelevant.
The knock-on effect ripples throughout all businesses, at least in the short term. Sales forecasts are rewritten. Heavy buyers become light buyers, light buyers trade down or wait for discounts. Expensive contracts or luxuries are cut. Households drop one streaming service. B2B buyers opt to squeeze another year out of their hardware or put the SaaS tool they've been negotiating with for months on hold until the outlook is more certain. Supply chain costs cause profit margins to contract.
Not every brand or company will behave the same. There's still enough people with enough money who'll be insulated from the cost of living crisis to keep the luxury market moving, for example. More people may be willing to pay a premium for certain types of insurance. Some governments may spend more on infrastructure to stimulate the economy.
Choose wisely
For a lot of marketers, inflation and a rise in the cost of living means some hard questions and harder choices. The fun, tactical elements take a backseat. For the time being spreadsheets are more important than social media (and this isn't a criticism of social media - who knows, maybe the spreadsheets and strategic analysis may even suggest upping the social budget).
[As an aside, I thoroughly recommend reading Kantar’s short piece on brands and inflation, which the chart below is taken from - and the risks of getting pricing wrong.]
A hypothetical. What if the data shows that light buyers are trading down or potential buyers are walking away due to the cost? And that supply chain costs combined with a talent market that's forcing you to pay above the forecasted headcount budget to fill some vital roles means that your profit margin is getting slimmer? And at the same time, there's talk of marketing budgets being cut to weather the storm?
There are no easy answers. Discounting or offers may keep sales or retention volume high but at the expense of margin and profit. And if customers get used to discounted products, will they ever want to come back at full price? And supply chain costs may even require a company to raise prices, but will loyal customers perceive a price hike as a money grab?
Do you cut your marketing budget or change your jaunty campaign into one that solemnly says we understand your pain, as many brands did at the start of the pandemic?
Australian toilet paper subscription brand Who Gives A Crap is one brand who know their customer. Their email (below) informing customers of a price rise is clear and empathetic without ever being disingenuous. I suspect that Who Gives A Crap's customer base skews more affluent and socially conscious, making them a little more tolerant of a price increase.
SSE Energy sits at the other end of the scale. Their blog and email at the start of the year that suggested customers perform star jumps or cuddle pets to keep warm, while the industry as a whole was raising prices, is one of the best (or worst, depending on your viewpoint) examples of a non-customer orientated team viewing marketing as a to do list. Content for content's sake with no thought about the person receiving the communication.
The best of times, the worst of times
The value of sticking to a strategy even in uncertainty can be seen at P&G. At the start of the pandemic, they stayed on course and kept their marketing spend in place. Coca-Cola was one of the companies that did not, and reduced theirs. P&G grew revenue by 4% in 2020, while Coke saw net revenues drop by 11% in the same period (for context, Pepsi increased their net revenue by 5%).
The real world has a nasty habit of throwing up challenging situations that are completely outside your control, such as pandemics, wars, a rising cost of commodities, and even Facebook's algorithm. There's very little any business can do about these.
But it does separate the more well prepared teams from those who live tactically from month-to-month: those who have a good idea of their P&L, their profits and margins and how to course correct if necessary, even if that involves killing or offloading an unprofitable business line.
It also separates the teams who genuinely know their customer, know exactly what role their brand plays in their customers' lives, and can empathise with the personal financial challenges faced by another human who may, out of necessity or choice, use their product.
I'll finish with an anecdote. It’s not about the cost of living, but it does involve real life interrupting a carefully planned marketing campaign.
Several years ago, when I was working for insurer Direct Line, we were in the middle of running a well-received and effective brand-led social media and PR gifting campaign to support the brand's positioning as fixers. Midway through the campaign, just before Christmas, a large part of northern England was hit by severe flooding.
Immediately, we felt a little off to be sending gifts to fix broken heels or forgotten lunches when our customers - the people who had paid us good money to insure their homes - were facing a very real crisis that needed fixing.
We spent several hours discussing how to handle the campaign before coming to the conclusion that while we, the marketing department, couldn't fix a flooded house (something best left to the professional claims handlers), we could offer a little pick me up to fix the mood of our customers.
And with that, the whole team decamped to somewhere near Carlisle for a week and visited every single customer in the area with a box full of essentials, from portable phone chargers to teabags, plus a few extra bits and pieces. Meanwhile, the paid social budget for these weeks was directed to affected areas with details on where Direct Line's mobile advice units were positioned for anybody who needed help understanding their insurance policy and how to claim.
We didn't try to turn it into part of the campaign, other than a couple of messages on social media signposting that we were helping customers in Cumbria. It wasn't designed to show off. We just simply looked at the brand strategy and positioning and simply asked what would be logical and consistent for Direct Line to do in this situation. In this case, it was simple: live up to the brand promise.
But what’s the ROI on that?
I've no idea whether or not it had any contribution to brand metrics (although we were, I’m informed, one of the most visible insurers during the clean up). But I do know a few weeks later we received a handwritten letter from a customer thanking the team for taking the time to drop off a box and stay for a chat at a point where the family felt utterly helpless.
It was a scenario that served as a reminder that this was a product that genuinely made a difference to people's lives and no amount of amusing adverts or going viral would ever be able to gloss over the fact that if the product experience let people down, then the brand's positioning as a company that just got it done would also fall apart.
Reputations. Years to build, days to destroy. And often destroyed through a disconnect to the customer.
Whatever tactics marketers follow through what undoubtedly will be a tough time for many of their customers, both B2B and B2C, it's a mantra that should be in the back of their minds. If a brand' 4Ps of price, product, place and promotion are all misaligned with their target audience, then it's going to be a very long and unhappy few years ahead for both parties.
Interesting reading
Lego’s plans for the metaverse
Mark Zuckerberg may or may not be right when he predicts the metaverse will be central to our lives in the future. But so far his company seems to be trying to find a use for a virtual platform rather that adapts around the world we current inhabit (meetings, bars). Lego are a lot closer to the generation that are already comfortable with the concept of the metaverse today, which is to say gaming. There is rightly a lot of scepticism around the virtual world and the opportunities for brands, but Lego have a better shot than most companies. LINK.
Data: Ofcom on adult media usage in the UK
Ofcom’s annual report into media use and attitudes in the UK is worth about 30 minutes of your time to read in depth. It’s one of the first reports I’ve seen that notes that document and form filling or (complex?) product research is seen as harder on a mobile. Of more concern on a media literacy front: 52% of people didn’t understand how Google Ads work. LINK.
Netflix’s and adverts: never say never
Netflix has pivoted from ‘we’ll never allow adverts’ to ‘never say never’ after posting weaker than expected growth numbers. Netflix is talking more about moving into the gaming space, which is a harder fit with Sony, Microsoft, and even Apple better established. Analysts, on the other hand, think advertising is inevitable. It’s certainly logical, there’s plenty of demand, and Netflix could almost certainly command a premium. On the other hand, the product has been built around no adverts. The longer Netflix leaves this, the more chance a competitor gets it right, but this assumes Netflix will ever go down this path. LINK.
Bonus read: Netflix’s approach to accounting is almost as creative as some of their award-winning shows. LINK.
If you can’t beat online abuse, build a fence
Australia’s professional soccer league, The A Leagues, trialled software that shielded players and teams from abusive commentary. It doesn’t tackle the root cause of the abuse, although social media companies have been talking a good game around abuse for over a decade without actually achieving anything substantial. Meanwhile, sentiment software is good but not that good, so may be over zealous in what it blocks, although that’s probably less of a concern in this particular instance. Football culture can be especially toxic on social media, but in lieu of any proactive solutions from the platforms themselves this is probably a sadly necessary and logical solution. Expect to see more businesses trialling this, although other categories (eg financial services, not-for-profit) may find it harder to implement than sport, where a team or player’s relationship with the mass market is a little more clear cut. LINK.
Even creators dislike their own content
Professional social media content creators are at the mercy of whatever the platform’s algorithm deems worthy of attention. A handful will be able to break out of the platform and earn money elsewhere. A much smaller handful may even become powerful enough that they have some influence over the platform, much like the TV talent of the 80s and 90s. The rest are forced to make content that even they don’t like. Being a professional or aspiring content creator (or influencer) seems genuinely stressful and exhausting. LINK.
Recommended newsletter
Roberto Kusabbi, who once preceded me in a job role and who is somebody I enjoy reading, has started a newsletter with interesting links that he used to Tweet out. This was the same intention for The Dispash, but it’s ended up offering a lot longer commentary. LINK.
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Playing us out this week: Baker Boy - Song 2. If you were ever wondering what an indigenous Australian rapper covering Blur’s most ubiquitous track would sound like, look no further (hint: it’s very good).
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