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Confidence begets confidence: the responsibility we face as an industry in a recession

The Drum 24 Jul 2020 02:53

Dan Plant, executive head of strategy at Starcom, on the ad industry's crucial role in restoring consumer confidence and getting the economy moving.

“I was asked what I thought about the recession. I thought about it and I decided not to take part.”

Those are the now famous words from Sam Walton, the founder of Walmart and at Starcom, we believe that they have never been more relevant.

The quarterly forecast from the OECD in June on the state of the UK economy don’t make for great reading. It suggests that a best-case scenario is that the UK economy will shrink by 11% in 2020 and that is assuming there is no second wave of coronavirus. We also know that in April, the first full month of lockdown, the UK economy slumped by 20.4%; an incredible amount that dwarfs all previous monthly downturns.

Given all this, it is clear that we are now facing a prolonged recession, and consumers are catching on to this very quickly. In March, consumers were relatively positive with a consumer confidence Index of -9, but in May, it dropped to -36, and whilst it grew in June to -30, this is still the lowest it has been since the depths of the 2008 financial crisis.

Marketing practitioners now face a number of questions; “What now is the role for brands? What is the sensible business response? Can we, by our actions, contribute positively or negatively to economic growth?”

At the beginning of the 2008 recession, the marketing consulting industry went into overdrive analysing previous recessions and how to behave. In doing so, a number of things became very clear.

Even though this became well understood it didn’t encourage advertisers to maintain spend. In fact having done an up to date analysis of GDP versus ad spend, we can see that in 2009 ad spend dropped 14% YOY, massively exceeding the 4.2% drop in GDP growth.

One of the primary roles of advertising is to give out signals about brands. Signals that a brand understands its consumers and what they need. By spending less on cheaper media, and focusing on short term promotionally led advertising, we are giving out signals that times are hard and that we are worried. Fear begets fear. If businesses behind the big brands (that we see as permanent and stable) are scared, then we should be too.

The good news is that making that investment would not be foolhardy. Recent GfK data showed that although some sectors haven’t done so well in the first months of lockdown (not many people are splashing out on big ticket purchases right now for example, and before last week, no-one was allowed to fly anywhere), that doesn’t mean that people aren’t spending money at all. In fact, there are a number of people who are now planning to make purchases, who had not planned to do previously.

We believe that brands have a significant role to play in building that confidence and in doing so rebuilding the economy, and history tells us that the brands that commit are the ones that will come out stronger on the other side.

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StarcomDan PlantSam WaltonUKOECD
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