June 16, 2022
The Recession Ahead and How to Prepare
Articles cited:
Inflation in America may be even worse than thought
https://www.economist.com/graphic-detail/2022/06/13/inflation-in-america-may-be-even-worse-than-thought
Consumer spending declines in May amid high inflation
https://www.thedenverchannel.com/news/national/consumer-spending-declines-in-may-amid-high-inflation
GroupM Forecasts Ad Spend Growth, Though Less Than Last Year's, Despite Economic Conditions
https://www.adweek.com/agencies/groupm-forecasts-ad-spend-growth-though-less-than-last-years-despite-economic-conditions/
The Supply Chain Crisis Broke The Marketing Rules. You Should, Too
https://www.mediapost.com/publications/article/374755/the-supply-chain-crisis-broke-the-marketing-rules.html?utm_source=newsletter&utm_medium=email&utm_content=headline&utm_campaign=126572&hashid=7639cEm8QMuvP1r55a7Zsw
WHAT PERCENTAGE OF GROSS REVENUE SHOULD BE USED FOR MARKETING & ADVERTISING?
https://www.zippia.com/advice/what-percentage-of-gross-revenue-should-be-used-for-marketing-advertising/#:~:text=A%20general%20rule%20of%20thumb,revenue%20peaked%20in%20June%202020.
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Transcript
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inflation america may be even worse than thought consumer spending declines in may amid high inflation group m forecast ad spent growth though less than last year's despite economic conditions all that and more out of home inside or daily the first audio ter sheet for media executives business development people and advertising enthusiast like the concept of the terror heet takes its roots in world of finance from an old practice where stock brokers at the s m p would tear a sheet out of their summary books to give investors a stock recommendation while this show isn't about hot stocks or financial tips it is meant be a rundown of the news that's relevant to our business to offer some perspective for you to consider when processing at all this show will not replace the out of home inside or guest spotlights that feature the best and brightest minds in around out of you'd rather compliment it as a part of your daily battle plan everything you hear about in this show will be linked in the show notes that you can follow along so you can follow up or so you can share with a call our client to day's episode surviving the recession were officially in a bear market down twenty two percent from market high s a year ago from the economist consumer sis in may where eight point six percent higher than a year earlier the greatest increase since nineteen eighty one and new research suggests that comparing past and current levels of inflation america may be misleading omanalists think that the federal reserve will be able to achieve a soft landing where tightening monetary policy brings down inflation without harming growth something has only pulled off once since nineteen forty five the ince released that point seven five per cent increase to the rate paul vulcar who presided over the fred fed during the great inflation tamed the beast only by pushing the economy into a deeper sess historical statistics may be providing false comfort by suggesting that the fed was fighting a much worse inflation problem than today recent study found that retail and food spending declined point three percent compared to april in the u s according to figures released wednesday by the u s census bureau when spending at gas stations is excluded overall spending dropped point seven percent nation wide last month what that means is that when you remove the expense of putting gas in your car the average american household is spending less money the only reason that spending isn't down more because gas is so expensive having read national record high last week any indicators in the media of spending is spending is up is really a false positive due to the price of gas please listen carefully consumer spending is slowing and that is not a good sign one possible impact on consumer spending is how inflation is out pacing wage growth according to federal data hourly ages wages are up five point two percent with inflation being up eight point six per cent that means if you got a five cent raise this year it wouldn't matter because it's costing you eight cents more just to survive this year over what it cost last year still don't believe me from ad week this piece by group m despite perilous economic conditions and geo political turmoil turmoil like the war in ukraine group group things global add spending will keep growing excluded political a spending group ms this year next year global mid year forecast expects eight point four percent growth and global ad spent this year the projection is just below its december estimate which put growth at nine point seven per cent so what does all of this mean unlike in twenty twenty when brand's pulled way back due to the uncertainty related to covidlockdowns it appears as though add spend may slow but shows no signs of stopping now obviously that's likely to vary between local and all advertisers big national brands multi national corporations historically add spend has been one point five percent to two point five percent of g d p growth which measures the overall growth of the conomy so you may be thinking okay how does that work in recession the reality is that despite an economy that is stalled or not growing there are still categories and companies that are growing so start familiarize yourself with concepts like we're talking about today and make sure subscribe to stay in the no on this stuff once you find the categories and companies that are growing or the ones that need to defend market share the most thing financial products banks insurance things like that it's important to underctand how they likely come up with their add budget most companies allocate seven to eight per cent of their overall revenue to add spend with more growth focused companies allicating ten to fifteen per cent of revenue to add spend let's take a company that does a hundred million dollars in revenue a year as an example that means they're likely spending about ten millions there's a year on advertising then the question ask is of that ten million dollars how much is being allocated to your channel case of out of home that's traditionally five percent that's going to give you a really direction to focus your prospect against things start to tighten up or to level set against competitors in your industry in fact there's a great piece the other day marketing inside title the supply chain crisis broke the marketing rules in you should do in it author rich being outlines a very logical case saying most advertisers have a balance of retail advertising and brand advertising and for most the retail budget is significant and unassailable here's the gift of the crisis it's time to reduce retail spend an increase investment in brand advertising this is imperative it's impossible to drive extra share or sales right now but it is possible to set up for your market sharing profit in the long term let's re cap ad spent stays in line with g d p so be tactical back into the numbers back into your budget what are the spend those based on the spend level which type of company should you be going after find categories that have to keep spending there's great reasons to keep spending contracting is a sign of weakness and con signal to brand's competitors to the market that they're pulling back gaining market share while your competors can serve that's a positive signal hold market share invest in the recovery find more cost of fat and channels that offer similar targeting and measurement marketers test remember to test responsibly empathize tell a better story out of home is perfectly positioned we've got deterministically behaviral targeted audiences that moved from point to point b we've got hands down one of the most cost efficient c p m with directional measurement in g a and other measurement solutions it's a really good idea idea of asking a long term growth emits a an economic crisis can be hard but building long term demand and the over the short term medium impact to your business is elly significant opportunity so make sure subscribe follow share this with somebody else who could benefit and make sure tuning tomorrow will bring you more from the front lines
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