It looks like a routine meeting between the marketing team and the research agency inside the air-conditioned confines of a FMCG major’s head office. But it isn’t. The head of marketing has one single question to the research agency, how bad is the impact of the slowdown on various categories?
The sentiment in the last two weeks with the inflation drama picking up is definitely not good for the industry. With the input prices rising, it will now become a cause of concern for us. Whether advertising budget forecasts will be impacted is too soon to tell, but everybody is currently waiting and watching.
The crucial time according to marketers and media buyers would be the festive season this year. If consumers don’t respond to large advertising and marketing campaigns, the impact will be severe, with ad budgets being drastically chopped.
If the economy is going through a crisis, it would take a quarter for the advertising sector to be impacted. The worrying bit this year is really the upcoming festive season, which will actually throw light on the fact on whether the consumer has withdrawn into a shell. If the Diwali season does not deliver, ad budgets will be slashed.
A chief marketing officer of a leading consumer electronics company suspects a downturn in sectors already witnessing a slow down in growth such as the auto, airline and durable sectors. The advertising sector taking a hit in the next few months, but should pick up during the festive season, which will mark a crucial time for advertisers at large. However, marketers have also become mature and may realize that a downturn in the economy may not be the best time to actually cut ad spends. But, whether this behavior will be seen will only be known in time.
Even in a downturn, one can look at opportunities. While there are declines in segments, even within that, there could be opportunities which one can avail of and look to tap. While high inflation and slowdown is a reality, marketers have to look at different ways to continue tapping the market. One has to shape the market, not get shaped by it taking the slowdown into account companies are banking on innovation in product and services to ride the choppy seas. Even pricing will be determined by value to customers, not slowdown or fast growth.
Advertisers may also change their profile of advertising and will look at shifting funds from large mass media platforms to immediate sales tactics that would essentially translate into below the line sales promotion, say industry observers.
Advertising spend is proportionate to demand is the strategy of some successful companies in the inflationary economy. If the demand slows down, costs will have to be rationalized, which will then imply lesser budgets for advertising. Also, the last couple of months have seen the outdoor advertising suffer significantly, with most sites empty, which is a signal the ad industry must not take lightly.
Advertisers also said that in the current scenario, most spenders would look at maximizing every rupee that is spent in advertising. This would mean that advertising and media agencies will be squeezed harder for lowering rates, which in turn will reduce margins.
There is ray of hope for ad companies. In the slowing down of economy most marketers will have to launch some sales promotion or incentive campaigns from discounts to bumper prizes. For this they may have to reach the consumers through advertising in whatever form it is feasible for the products. It can be hoardings, internet, print media and if worth while the costly electronic media (TV).