iProspect has released its latest whitepaper on the continuing effects of COVID. Australians are well and truly ready to move on to better times, with consumer confidence lifting and people ready to embrace experiences but are now being faced with The Big Squeeze.
Author of the report, Sam Cousins, chief strategy officer, iProspect Australia: “We’re being battered by rising petrol costs, inflation, the usual increases in property prices and rental vacancy issues, along with global supply chain delivery still being impacted by floods and the war in Ukraine. All of this is impacting the cost of daily staples on the average consumer’s grocery bill. In advertising we can see that demand is there, but how do we convert customers who are battling with wanting to indulge in a variety of experiences, products and services, and at the same time trying to keep a lid on their spending. This report explores that.”
Deep in 2020 and 2021 ‘the numbers’ were a key factor in the daily lives of Australians. Now people have stopped looking, with most Australians starting this year with a desire to get back out there and to do and see things. The desire to live life is back to the forefront.
However, now Inflation seems to be the topic of the year, it is currently at 5.1% and is usually the result of strong economic growth. There isn’t a day that goes by without coverage of property prices, but now they are being bombarded with social and news talking up the high costs of living. Australians are feeling the pinch before it has even happened.
What does this mean for spending?
We know from our own shopper DNA research that decisions are increasingly made on personal values and beliefs and we will see this more and more as consumers create their own value equations. For example:
• When fuel prices go up, we see increased traffic in public transport
• When fuel prices go up, we see bike and scooter behaviours grow (escooter imports rose to 60,000 last year)
• When fuel prices go up, we see closer to home activities
• When grocery costs go up, beliefs we get more creative with meals and balance where we can pull back (commodities) and where we won’t compromise (alcohol)
Listed below is some key categories and made predictions on what this means:
We saw in the pandemic a rush to buy staples in order to retain an element of control. We may actually see consumers stockpiling staples to lock in the price before prices go up over the coming months. If you are a staple brand ensuring availability of products will be key. As consumers make concessions, brand connection and loyalty will still be important. People make fast decisions in the aisle and they aren’t always based on price so now is the time to keep brand activity strong and consistent.
During recessionary spending habits, alcohol always fairs well. Expect in-home consumption to continue to be the main driver, and on premise for more special occasions. New news or product launches will keep customers engaged and point of sale will become more important as people browse for the right experience to match their moment. In previous economic downturns people substitute brands for lower quality, but quantity tends to go up.
Gyms and fitness brands suffered great setbacks during lockdown. Early in 2022 sentiment for health and getting back to pre-lockdown lifestyles was high. However, when household finances get reassessed we see disruption. In a sea of negative news, health and fitness can benefit from consistent positive messaging and flip the focus to the benefit for mental health from physical health.
The cost of education isn’t expected to rise more than it already has. People leaning into long term courses will still aim to complete based on previous broken years. Short courses may suffer the most, so dialling up long term benefits in a market very buoyant with opportunities, in paid media could work here. The great resignation is more realistically the great re-direction. Many Australians want to better themselves for a more meaningful role, showing depth of courses and flexibility through advertising and even flexible payment options can stand out.
Entertainment at home, is still what Australians prefer, but making the decision to go out for a drink/dinner or to the movies or shows will be based on many things. Occasions that are lower energy will more than likely be done locally, but larger group or special occasions that need higher energy will likely be invested in. Knowing where you sit in the positioning of occasions will help drive effective paid media spend and messaging.
In the GFC sales in electrical goods went up when many consumers used their $900 stimulus payment. This time around we may see a similar spending pattern where people want to lock in planned purchases before money gets too tight. Competition will be fierce in this category as people will hold back on major purchases as their needs for essentials increase, so post stimulus consistency of message will be key. We anticipate that many may wait for EOFY sales. Our proprietary tracker shows this as a key spending period and Australians preferred sale time after Christmas and before Black Friday.
In the last GFC gaming sales were barely impacted by global recession. Many choosing to spend money on games for at home entertainment moments that grew. This behaviour has only accelerated during COVID. IBISWORLD still predict a 13.2% rise in market size in Australia this year. Competition may be fierce from content streaming services so showing moments in advertising of togetherness and fun at home can boost family appeal.
Necessary clothing is seen as recession proof, so if socks are your thing, you’re ok. Apparel is one area where Australians are leaning in more to sustainability. Textiles are now the largest filler of landfill, so expect customer value equations to weigh up the long-term effect of purchase. Anywhere you can recycle, rent or re-sell, or even biodegrade will help customers to favour your brand.
Betting was one of lockdown’s greatest success stories. We don’t expect to see much change to this category at all, and if anything it will get more competitive. Strict regulations prevent encouraging spend to enhance lifestyle and get ahead. Perhaps the goal is to keep betting in positive environments.
Whilst demand will still be high for all content services across both music and video content, there will definitely be an assessment about how many services each household needs. How Amazon prime has now bundled in AMC and Paramount channels has kept customers locked into their services with the perception of more content and higher value, in a similar way that Disney+ showcases Starz and Marvel to show depth. The average number of services is now 4.3, whilst we don’t expect that to go down, we may actually see standard content being switched out for gaming content and streaming.
Basic pet supplies are another category often seen as recession/COVID proof. Pet boarding, and luxury pet supplies like subscription boxes and additional treats may reduce in volume of purchase. But with almost 1 in 2 Australians having pets at home and treating them like members of their family, we don’t expect to see too much change here. Our iCCS data shows time spent at home with pets and stating pets as a passion has grown in the last 2 years, and let’s not forget the enormous increase in COVID puppies.
iProspect Thoughts for Success
1. Keep the lights on, don’t go dark. It’s been proven by Binet & Field that consistent advertising in times of economic crisis reaps rewards in the years following, requiring less investment.
2. Don’t confuse price with value, as we mention in this report. Deep customer knowledge through the data you have access to, should help you understand your value equation.
3. Align to positivity. We are being flooded by negative press with regard to the economy, and often this is a self-fulfilling prophecy. Aligning to good news and positivity can take your brand away from the drudgery of daily life. Balancing the need for views and reach with that of full attention ensures mental availability. In recent work with dentsu Dr Karen Nelson-Field has proven the direct link between attention and mental availability. This forms future memory structures to support physical availability when in market.
4. Push the category. It may sound counter-intuitive but if your category grows, you benefit and come out on top as the leader. If your category grows each brand gets a bigger size of the pie. So, if you can afford to do a category job don’t shy away from it.
5. Enrich the content strategy. Think audience first and look for new ways to connect with what people want to find by leveraging your customer’s data. Augmenting first party data with demand and intent insights from search to build a richer understanding of what will resonate right now. Tap into influential ecosystems that cross multiple touchpoints and build credibility through content partnerships with publishers.
6. Invest in agile and dynamic creative. Up to date and topical messaging around key events drives interest. It also adds a layer of personalisation to your messaging without having to fully lean in to first party data or addressable.
7. Invest in SEO. Capture existing demand by ranking highly for users in the moments that matter. Building and maintaining a healthy organic footprint will drive returns for the long term without paying for every click.
8. Keep the advocates. If you have strong loyalty from customers and great brand strength, don’t let it go by focusing on short term new customers. Keep an eye on customer lifetime value.
Says Cousins: “We know from previous downturns there is always an upswing, so keeping customers engaged and loyal during this period should be an always on strategy.”
The full report can be found here.