Advertising during a cost-of-living crisis

The cost-of-living crisis globally is forcing households to drastically cut back on spending, and while the advertising industry remains bullish about its prospects – consumer confidence is shaky. So, when it comes to advertising, what should brands be doing differently to reach consumers who are increasingly cautious with spend? Strategists and creatives share their thoughts on creating advertising that’s right for the current economic climate.

Stats NZ has reported the cost-of-living for the average household increased by 7.7 percent in the September 2022 quarter when compared with the same quarter the previous year. Rising food prices were the biggest contributor to quarterly inflation for all household groups – rising 4.1 percent for the average household. 

A Westpac Consumer Confidence report recently stated, “confidence has picked up over the past few months but
even so, it’s hard to describe the mood in the country as anything but grim”.

Jane Wardlaw, FCB New Zealand Managing Director, says marketers are under pressure at the moment and are often needing to work with smaller budgets.

“Marketing and brand advertising are often the first things to go when times are tight. We believe that is not the right thing to do. Consistent brands are the best poised in a recession because consistency builds trust. If you under invest during tough times, you’ll lose market share and have to invest even more to catch up.”

A recent Salesforce State of Marketing report suggests one in three marketers are feeling the squeeze of tightening budgets, all while consumer expectations continue to rise. The report shows 71 percent of marketers say meeting customer expectations is more difficult than a year ago.

FCB has worked with Pak’nSave for years to build a brand platform familiar to Kiwi consumers based around saving money. The face of that, Stickman, can be rolled out to represent the brand and reflect the current market, all while working within a consistent brand platform – the stability of which can be comforting for consumers during uncertain times.

“With market disruption from Covid and higher cost-of-living, it’s tempting to want to respond and react to everything, but we are focused on delivering the same message we’ve always delivered: everything we do, we do to save you money,” Jane says.

In October, Pak’nSave launched a rebuttal to the growing trend of supermarkets luring customers with collectible toys – reinforcing its position as a no-frills, lower price option. Pak’nSave Christmas messaging this year will involve fewer pleasantries about ‘the most wonderful time of the year’, instead cutting to the chase with deals that can genuinely help consumers feed their families. 

Peter Vegas, FCB Chief Creative Officer, says it is important to approach creative during difficult times with levity, without minimising the fact that people might be suffering.

“Supermarkets can be perceived as the enemy during tough economic times. We have to be authentic and honest while also being real and entertaining. You can’t always ignore the elephant in the room. If it’s raining outside, you can’t tell people it’s a beautiful day.” 

During the early days of the pandemic when many brands were delivering messages about ‘unprecedented times’ set to sweeping orchestral music scapes, Pak’nSave sent Stickman on a Mission Impossible-type adventure through the supermarket to demonstrate physical distancing.

“We are always reminding people of our brand purpose,” says Jane. “We don’t adjust the essence of Pak’nSave’s messaging with the times, we always just focus on what people really need with a relentlessly consistent brand strategy.”

The benefit of building a brand based on a small budget is you can fall back on already proven methods when purse strings tighten further, and marketers in New Zealand are used to working on shoestring budgets.

“It’s one of the cornerstones of the New Zealand advertising industry compared to our big, rich cousins overseas,” Peter says. “We get smaller budgets that necessitate more creative solutions. There are lots of ways to engage the public and keep our messages out there. For example, Stickman had a lot of success when he started his own Instagram account. It was a really cost-effective way of reaching his fans and interacting with the brand.”

FCB also has a long-term relationship with Mitre 10 – and with more and more people looking into DIY for financial reasons, Mitre 10 has adapted its ‘With You All The Way’ platform to suit. The messaging focuses on partnership and helping consumers feel confident with their choices. 

“Mitre 10’s messaging demonstrates that what you get is more valuable than the absolute lowest price. We do this in a surprising and humorous way because to walk away from the platform we’ve built over the years is inauthentic and New Zealanders can spot that from a mile off,” Jane says.

MYOB’s latest Consumer Snapshot reflects that the rising cost of living has prompted Kiwis to reconsider their Christmas budgets this year. The survey of more than 1,000 New Zealanders found that 32 percent of consumers are planning a small Christmas at home, and 30 percent are planning to spend less on gifts than they usually would. 

The average spend per person on gifts is expected to be around $132 – considerably higher than the $94 average in 2021 and $90 in 2020.

Recently, food prices have continued to outstrip inflation – rising more than 10 percent in the year ending October 2022. Consumers polled expect to spend an average of $413 on food and drink over the Christmas and New Year seasons, compared to $477 last year. 

Jo Tozer, Head of Go-To-Market at MYOB, says that while the research suggests spending will be comparable to 2021 on most levels, the return will likely be less. 

“With the dollar not stretching as far this year, especially on essentials like food, it’s likely many families will be adjusting what their traditional festive celebrations entail. As a result, it could continue to be a challenging end of the year for some businesses who will feel this pinch more than others as discretionary spending is reassessed.”

Matt Headland has recently taken on an Executive Commercial Director at Stuff after nearly three years in e-commerce growth at Glass Elephant. He says the way we spend across the board is changing.

“The main thing businesses and media outlets have to consider is that there is a market correction going on. Through Covid, e-commerce retail was huge. There is now a stabilisation in bricks and mortar retail.”

This is reflected in MYOB’s survey, which shows a resurgence in bricks and mortar shopping, with 43 percent of consumers planning to purchase most of their Christmas gifts at a retail centre or shopping mall.

“Given the widespread economic challenges we’re collectively facing, however, businesses will be closely monitoring their forecasts and reviewing their targets in line with changing consumer behaviour,” Jo says.

Media outlets like Stuff benefitted as a platform for advertisers through Covid because audiences tend to navigate towards trusted media during times of crisis, Matt says. Stuff saw a significant increase in audience during the pandemic, and although the numbers have now evened out, they still remain a platform that consumers trust.

“Our clients need to be as trusted as we are,” Matt says. “We create an environment for our customers and we encourage them to continue to be active during times of uncertainty. The market does soften and when that uncertainty lifts, brands that stay consistent will recover faster than brands that don’t. It’s about serving customers.”

One way to reach consumers during this difficult time, is to capitalise on sales events when people are looking for a bargain and they’re willing to spend, he adds.

“In New Zealand, Black Friday has now extended out that marketing period through until Christmas. You have to plan your campaigns to consider both and drive momentum from one to the other.”

Riding the sales wave until Christmas also changes what marketing spend looks like. The market is now shorter and clients aren’t laying down campaigns for long periods of time. However, Matt says they are still seeing normal trends coming into the summer period where clients, businesses and brands are still committed to driving success by investing in advertising.

Lisa Fedyszyn, Special’s Executive Creative Director, says it is critical for brands to maintain a visible presence in the market throughout financially lean times. 

“It’s been proven that brands that spend in times of economic downturn are more successful than those that don’t,” she says. “Having said that, brands need to prove they have both a practical and meaningful place to exist in consumers’ lives, and it’s how they need to act – not just tell – that will make a difference.”

Special has worked with a number of clients to adapt to the changing market. The agency launched Co-Own with Kiwibank, a home loan product that helps people purchase a house with people other than a partner – a direct response to New Zealand’s prohibitive first-home market. 

Similarly, the agency launched the ‘4th Trimester’ initiative with Contact which provides three months of free energy for Kiwi families with newborns.

“This initiative helps to ease some of the financial burden at a stressful time of life when we are in the midst of a cold home crisis. Because our clients are committed to acting on their purpose, our job is to actively help bring this to life,” Lisa says.

When working with clients who sit outside of the ‘essential’ space, Special pivots its strategy to focussing on quality and sustainability – values that remain true despite unstable economic times.

In the beauty industry, ‘the lipstick effect’ is the idea that sales of affordable luxuries – such as high-end beauty products – rise during economic downturns. Despite this, Lisa says higher end brands still need to deliver top-quality products that meet consumer expectations.

Earlier in 2022, luxury beauty brand Emma Lewisham appointed Special as its creative, strategic and media agency. Special launched the platform ‘A New Vision of Beauty’ for the brand that supports its circular system of refilling products and recycling packaging.

Meanwhile, household cleaning products remain essential despite price rises. Reckitt Hygiene’s brand catalogue includes Finish dishwashing tablets, Vanish laundry products and Dettol.

Florence Paoli, Reckitt Hygiene Head of Marketing, says they have been evolving to stay relevant and front-of-mind for consumers during the cost-of-living crisis. 

Innovations such as investing in sustainable packaging and more sustainably sourced ingredients are appealing to consumers who still prioritise values-based spending despite rising costs. 

According to Toluna’s Global Consumer Barometer Study, nearly half of Kiwis say they’re in a worse financial position than before the pandemic – with 66 percent stating the energy crisis and cost of living are impacting their spending plans.

However, despite Kiwi consumers feeling the pinch, they continue to focus on brand values.

For Reckitt, this is all part of maintaining consumer confidence, especially given how volatile this metric has been since the pandemic began and with Covid affecting consumer groups and habits in different ways.

“More recently with inflation accelerating, however, we have seen recent consumer confidence reads drop to lower levels than you’d expect,” Florence says. “Unfortunately, we can’t play a huge role in swiftly altering macro inflation driven confidence drops – but we can instead focus on ensuring our brands provide as much value as possible to consumers as they go through these difficult times by giving them improved experiences and offerings to meet their needs.”

Looking ahead to 2023, Reckitt is working on a layered sales focus with larger value pack offerings in key
segments to help consumers who are looking for better dose-to-value.  

This article was originally published in the Dec/Jan 2022/23 issue of NZ MarketingClick here to subscribe.

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