Return to Market: a thought leadership piece written by OMG UK’s Chief Market Analyst
5 reasons why now is a great time to return to market
First came the pandemic. Then came the economic shock. As Covid-19 cases rose, borders were shut and lockdowns enforced. Advertisers deferred, cancelled and paused campaigns, because in many cases there was nothing left to sell, and nobody able or willing to buy. Employees were furloughed, TV and film production shut down, cinemas were closed and the nation by and large was working at home. The second quarter was challenging to say the least; but as the UK economy begins to unlock, the outturn could present an unparalleled opportunity for brands that are brave, willing and able to advertise. Here’s 5 reasons why now is a great time to return to market.
There is a Share of Voice war to be won
There is a historically significant relationship between advertising spend and GDP. Advertising tends to fall deeper and quicker during a recession, but conversely grows quicker and stronger as economic conditions improve. Several studies, including the recent one conducted by Peter Field, demonstrate the value of advertising in recession. Businesses are reopening and advertising will be the main vehicle used to make consumers aware of that. Brands will be competing to win back consumers they have lost, they will be battling to retain consumers they have gained during the lockdown, and they will be attempting to win new customers as the world moves into the new normal. Whatever the new normal looks like, the fundamentals of marketing will still apply. History and effectiveness studies have long demonstrated that the route to customer acquisition and retention is through winning the battle for Share of Voice amongst your sector. It is crucial to maintain and grow brand equity. Not being on-air whilst your competitors are, will be detrimental to both short- and long-term profitability.
We’re in an audience bubble
The transition period as we move out of lockdown represents a sweet spot in media consumption. Whilst much of the population are returning to the office, there is still more time spent at home than prior to Covid-19. That means that there is continued growth in supply driven by in-home consumption. The supply of adult TV audiences has sustained its strong lockdown performance, last week adult impacts were up 6% year on year. There continues to be strong growth in digital radio audiences, up around 24% since lockdown began, and digital newsbrands have all enjoyed record platform growth, up around 30% year on year. At the same time, the nation is beginning to unlock – roadside traffic in the UK, excluding London is now above pre-lockdown levels. Cinemas are reopening, and newspaper circulations have almost recovered. There has rarely been a better time to maximise reach for commercial messaging.
Pricing will not remain this low for long
There were times in the second quarter where the market mechanics in TV meant that it felt at times like a fire sale. TV prices were down by 50% on broad audiences. Whilst we do not believe that we will see the levels of inflation in 2020 that we have come to expect over the past few years, these deflated prices will begin to diminish as demand begins to recover through the year. The sooner a brand returns to market, the more they are able to take advantage of these cheaper prices.
Consumer spending power
Whilst there has been a hit to household income levels during lockdown, spending has also fallen, and the government has endeavoured to protect finances through various support schemes. Data from the Bank of England certainly suggests that people have built up balances, and there is cash available to spend. British bank deposits have increased by £14.3bn in March, £16.7bn in April, and £25.6bn in May. Consumer confidence metrics for major purchases are also recovering quicker than in other areas. With a frustrated consumer willing to spend, now is a great time to put a product in front of them.
The market has evolved to help mitigate risk and enable flexibility
Whilst deferments due to extraordinary factors have always been present in media buying, the pandemic has certainly made them more prevalent. Confidence plays a crucial part in encouraging brands back to market. Media owners are fully aware that macro events could alter advertising plans, and as such have reacted pragmatically. Where money has been approved, they have shown a willingness to postpone a campaign without charge, if for legitimate business reasons. Brands shouldn’t let fear of potential disruption dissuade them from approving campaigns. And if brands are willing to sacrifice quality metrics in exchange for booking flexibility, some media owners have allowed monies to be approved late.
The past few months have been a difficult time for all businesses. With the worst of the pandemic crisis seemingly behind us, now is the time to reset for growth, return to market and look forward to the future.
Article written by Bhavin Balvantrai, Chief Market Analyst at OMG UK.