Is inflation boosting the case for marketing investment?
Eye-watering levels of inflation are hitting prices at the tills. But how can brands navigate through it?
21 February 2022
The prospect of consumers tightening their belts as inflation hits has thrown the plans of some marketers into disarray.
Inflation will inevitably lead to price increases - and pay rises are not matching the increases in raw materials - so what should brand owners do? Cutting marketing investment could lead to some savings that might be able to mitigate other price rises. But at what cost to the brand?
Of course, this is not a new dilemma. But should brand owners be investing in them long-term in order to convince consumers of their worth rather than paring back spend for short-term gain?
Dom Dwight, marketing director, Bettys & Taylors of Harrogate
As the pandemic begins to wane, it’s a rude shock for many businesses that our emerging context is riddled with even greater challenges. Cost inflation is rife: from steep increases in raw materials to unprecedented shipping costs. Throw in Brexit disruption and climate uncertainty and most brands have nowhere left to go except price increases and cost savings. Trying to do both can be impossible, however. To command a higher price when shoppers are even more budget sensitive requires a strong brand. This makes reducing marketing investment dangerous. Lower mental availability means your price hike might not land well, and a negative spiral begins. That said, bigger brands with more momentum could switch off their engines and glide for a while - but that’s a risky play. Your best bet is to double down, to grow your way out of trouble. But if budgets won’t allow it, just remember that the most powerful weapon at your disposal isn’t financial - creativity can reach the parts that money cannot.
Larissa Vince, CEO, TBWA\London
We all know that investment in marketing during a recession pays off over the long term. But with inflation at its highest since the early 1990s, we also know that the majority of people are going to be thinking harder than they have for years about what they spend their money on in the immediate term.
When there’s less money to go around, it’s vital for brands to make the case for why they are the right choice – not just by talking price, but by showing empathy for the position people find themselves in. And, if necessary, by being open about the reason for their own price rises so that customers have the info they need to make the right choice.
David Wheldon, former CMO, RBS
Rising inflation puts further pressure on marketing, media inflation increasing the price to reach people who are also finding their budgets tightening, so ensuring that the customer value proposition is right (don’t just pass on the price increases to your customers) and that the marketing investment you intend to make will make a tangible impact is key .
Metrics that matter will help you, outcome focussed , long term married to short term and focussed on your customers not your business alone. Easier said than done but it’s what makes marketing fun!
Xavier Rees, CEO, Havas London & Havas CX helia
A pertinent question, and, given this is not going to be a short-term issue any more than the pandemic was, one we can’t avoid. It’s important to remember brands only want to raise prices on their own terms – they’re at their chosen price point for a reason, and such a move will, essentially, be a last resort. We’ll see two perspectives play out: those who consider marketing budgets ‘fair game’ to cut into, and those who’ll protect them at any cost. The latter understands that a strong brand is insulation against price sensitivity. Or, more bluntly, that it’s the best chance they have of getting through this unscathed. They’ll also know a brand is built over the long term, and that any cut in marketing spend now will cost them down the line.
What those inclined to cut don’t understand – yet – is that cutting spend now is a sure-fire way to fall into the no-man’s-land between strong budget and premium brands. Which is precisely where you don’t want to be when consumers’ budgets tighten.
Gareth Mercer, founder, Pablo
Mark Evans [managing director, marketing & digital, Direct Line] said something to me that I also really believe in. Great marketeers and agencies can really capitalise from times of turbulence. Inflation was inevitable and our challenge should be to dig deep and ask - how do we offer more value to our customers? How do we make the lives of our customers better? In short, how do we use our work with a brand to make it the better, more valuable choice for consumers?
DFS has made it their mission to help the nation find 'their thing'. They know for example that there will be choices to make for customers as supply chain demands increase prices of home furnishing materials, so they have set themselves the challenge of helping the customer find the centrepiece of their personal space or sanctuary. A reflection of what makes them happy. The rest can flow from there.