Group think

Marketing and advertising budgets were again succumbing to “group think” among finance teams attempting to cut costs and get ahead of consumer spending declines according to a briefing to clients from Dentsu Media, which warned ad spend was declining 7x faster than other lead economic indicators. 

“Whilst economic sentiment so far in 2023 is subdued, the advertising investment reduction experienced across Q1 [calendar 2023] is incongruent with other key domestic economic indicators for the same period,” Dentsu said in a briefing to clients this week. “Generally, advertising spend decreases at a rate of 40 per cent higher than the economy. To date we have seen advertising decrease 7x the level of goods and services sales for the same period.”

Bass said industry bodies and media companies have typically done the heavy lifting on proselytising the case for continuing brand investment in economic downturns. But agency groups needed to step-up with stronger economic and business cases to convince finance and leadership rather than preaching to the industry converted, Bass said. 

“Group think” among business and finance teams that cutting marketing and brand expenditure is prudent financial management is gathering pace, said Bass, and arresting that trend requires strong, well-articulated evidence that it will impact revenues and the P&L.

Market short, pressure on price

“The market is short which obviously then starts driving all sorts of behaviours and pressure on price,” Bass told Mi3. “There's a lot of requests that we're seeing to help maintain budget. Marketers and the marketing community need more firepower in the boardroom as fewer CMOs are at board level. It's either to help them when those calls and meetings are happening or directly for the C suite – marketing budgets usually can be the second biggest item on a P&L. It's an easy thing to cut. I understand the pressure to either cut headcount or cut marketing spend, so we're trying to make sure there's as much information as there can be on the table. 

“In the past, media owners have done a lot of work with this and maybe the industry bodies – and we feel it's our turn. Conservatism seems to be sort of driven by group think and the perception of a coming bear market.”

Australian Association of National Advertisers (AANA) CEO Josh Faulks said as much in his opening address last week to the annual AANA Reset conference. “I have been saying to anyone that will listen that now is not the time to cut marketing budgets. Now is the time for us to invest in brands to position for the inevitable recovery,” he said. “There is plenty of research and evidence out there that supports the proposition that brands that maintain or increase marketing spend during a recession or downturn clearly outperform their competitors and are much better positioned for the recovery.

"So, there is a very strong argument that these economic times should be seen as an opportunity for brands; an opportunity to expand deeper customer connections; an opportunity to increase excess share of voice; and an opportunity to gain market share in the long term.”

Bubble and squeak

Bass said the industry tends to talk to itself about investing in a downturn.

“If we've got to be brutally honest as an industry, have we done enough outside of our own bubble, which sometimes we fall into, to genuinely explain to non-marketing people, senior decision makers, of the importance of at least maintaining spend during a period like this?” he said. “There’s no lack of proof points to demonstrate the importance of maintaining budgets but it’s just marketers talking to marketers and agencies talking to agencies. We’re trying a different approach and we would encourage every other agency group to do the same – because we all win from this.”

When asked about some of the challenges facing media companies and audience volatility now troubling advertisers – linear TV in particular – Bass acknowledged it was “getting complicated”. He said the proliferation of digital channels to reach and influence audiences was likely upweighting business appetite for direct response tactics that promised “delivering a very clear outcome” over brand building and that these two industry trends were “probably interlinked”. Programmatic trading was helping facilitate the move to short-term tactical advertising, Bass said.  

“The issue around linear audiences declining, that's been happening for some time now and no one knows that better than the networks themselves,” he said. “I applaud them for the work they've been doing there to grow other areas of their business. But audiences have been declining for some time and obviously it's a very sensitive area. Video remains highly valuable and that doesn't change – but I think the methodologies behind it need to keep adjusting to reflect other changes in market. I don't think anyone is happy with where VOZ [total TV measurement]  is right now compared to where we thought it might be a few years ago. So that's certainly not helping.”

Data pools and possibilities 

Bass said the networks “are really leaning in and it's in everyone's best interest to keep a healthy ecosystem” in a likely warning shot to advertisers not to shift too much spend into fewer, global audience platforms and ignore domestic media operations.

“The types of conversations we're having and the opportunities from the sharing of data pools with Australian media companies, for example, were probably not up for discussion a few years ago, are now,” Bass said. “So the value, even though audiences might be declining from a traditional perspective, the amount of data that's being found and shared and we can work together on, does bring new value equations to the table.”

Asked to elaborate on the “new value” being derived by advertisers with local media groups, he said: 

“Well, each agency group will be doing this but for us, particularly with the work we do with Merkel, we've invested heavily in understanding the consumer journey, ensuring that we place the media at right place, right time, right environment for the right return. The networks and the majority of media owners know an incredible amount of their users and obviously a lot of that stuff wants to be kept behind a wall for them. I understand that. But if there's ways of unlocking new revenue opportunities and new ways of client spending in other areas of their portfolios, that's exactly what we want to try and explore," per Bass.

Linking martech to media

“A client that's invested heavily in a martech stack over the past few years and may have taken some services in house, typically has a much better understanding of their own customer base. Most clients have enough data that they need right now but it's how can we share and give opportunity through deeper partnerships with others to create new opportunities. So it gets us back to the original question around how do we put more firepower into the boardroom – if a board has signed off a multimillion dollar martech investment, they're going to want to be seeing, and Mi3 has written on this, they want to see if that investment is paying off and delivering.”

Bass pointed to News Corp’s D_Coded roadshow last week as the latest example on how media owners are developing sophisticated data feeds with its “Total Commerce” suite of products. 

“That's quite a big shift from where News was five years ago,” he said. “If you look at the upfront season last year, what Seven is doing now is very different from what they've done before. And you could probably put that lens across most media owners. That sharing and cross pollination of data sources to get better, smarter media outcomes is exactly where we're heading.”

The challenges and innovation underway across the TV, streaming and video markets is a key theme at the Mi3-Future of TV Advertising forum next Tuesday in Sydney. The event includes a panel of marketing leaders from Tourism Australia, Hipages and Pet Circle, who will detail how they are shifting their screen strategies as linear TV audiences face steep declines. Ahead of the event, Tourism Australia CMO Susan Coghill said she was shifting her marketing mix from customer experience and martech investment in the past three years to more top-of-funnel brand building for brand Australia in global markets.