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Finding a better way to grow in a downturn

Finding a better way to grow in a downturn

How to adapt to falling consumer sentiment and deliver growth.

In times of uncertainty, it’s common for brands to slash marketing budgets to save the bottom line. In pressured environments, many default to short-term thinking — deprioritizing sustainability initiatives or neglecting diverse audiences from their communications. But brands that do so, do so at their peril. Previous recessions have taught us that marketing rewards those who maintain their spend, and that those who stand by their values, support vulnerable communities and invest in meaningful societal and environmental change are rewarded with exceptional growth.

On a recent Campaign US podcast, technology editor Jessica Heygate led a discussion between Dennis Potgraven, chief strategy officer at Wavemaker US; Belinda Moon, group strategy director at Wavemaker US; and Melissa Martin, VP, marketing at Church & Dwight, about how brands can grow, even in a cost of living crisis.

Seeking a path to profitable growth

When Wavemaker delved into how consumers are spending today, it found “consumer sentiment is falling faster than inflation has increased over the last few months,” Potgraven said. Other factors including the war in Ukraine and supply chain issues are further eroding consumer confidence.

Not only is non-essential spending lower but consumers “are trading down in essentials and daily indulgences,” he added. These are turning into long-term changes as consumers find these products better suit their new behaviors. As a result, marketers “need to have a longer path to cater to consumers and to lead them back to pre-COVID and economic decline behavior,” he said. The key is to focus on value, protect a brand’s core base and build “growth in a mid- and long-term way with branding and longer-term advertising.”

It’s critical for marketers and agencies to “maximize and recoup profitability in the short term,” Moon said. This cost-of-living crisis is not a typical recession and “the biggest risk for marketers are in the behaviors that are adopted by consumers that may last longer than you imagine.”

Wavemaker found that consumers have become selective and smarter in their spending. For example, Potgraven said that 75% who switched to new brands say they fit their current budget and 90% plan to keep the new purchase behaviors over time. He noted that the biggest driver for consumers today is tangible value, which includes quality versus price as well as benefits like convenience and trust.

Martin agreed that consumers are making more affordable choices through mid- and value-tier brands, larger pack sizes, stocking up and shopping at mass and club retailers. “We see this as a time for our brands to either further solidify their relationships with their consumers or get greater loyalty from the consumers that are shifting into our brand propositions,” she said. “Because we’re showing up in this time of greater need, we’re driving higher brand regard and we’re ensuring that our messaging is leaning into those types of propositions in a very authentic way.”

Driving growth and ROI

Driving profit growth requires different strategic techniques and tactics. Of primary importance is protecting a brand’s core base. Moon’s advice: Think about those highly recognizable products and brand icons that people trust rather than solely focusing on new incrementality or innovation. “On average, we’re seeing brands and businesses tend to have about 75% of their sales come from their baseline versus just 25% in incremental sales,” she said. What Wavemaker found was “advertising investment works two times harder for the baseline.”

Often brand heroes are not supported as much as new products through advertising. “Success comes from this idea of more efficient growth by focusing the right resources on bigger bets, cutting out the distractions that require a lot of effort for marketers,” Moon added, noting that a 75/25 mix could result in a 50% jump in ROI. Rethink promotions and inefficient activities in order to protect the base with incrementality, she advised.

Current challenges forced Church & Dwight to prioritize core audiences, products with greater manufacturing efficiencies and its media mix to avoid fragmentation, Martin explained. “It’s placing that media in the appropriate platforms with both upper and lower funnel, building that equity and that stickiness post recession.” Trust is more important than ever. Ensure the brand is delivering benefits that consumers expect and demonstrating an understanding of their needs. “That can play into long-term equity driving in addition to elevating the brand's worthiness and trust in the consumers’ eyes,” she said.

Overcoming fragmentation in media planning — channel, audiences, placement, formats, moments and context — with a more consistent creative is critical. On average 50% of planned media channel investments are too low for maximum payback. Brand icons have a 15% HALO contribution to overall ROI and Masterbrands 20 to 30%. “It’s about creating bigger, longer media patterns that resonate more with how consumers are seeing but also perceiving your investment,” Potgraven concluded.

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