WHICH CONSUMERS WILL LEAD US OUT OF THIS MESS
(Author: Dr Ross Honeywill – www.premium.net.au)
The architects of recovery will not be economists or politicians – they will be consumers. It will be a two-speed recovery and the fast lane will be driven by a band of recession-busting consumers known as the New Economic Order.
Consumers are, after all, the ultimate shareholders of the consumer economy, so ignore the future-shapers at your peril. So, who are they, and what are the building blocks of the next normal?
Twenty-four percent of consumers, the New Economic Order or NEOs are already shaping their new reality; and planning for what it will look and feel like to come out of the COVID lockdown. There are 4.7 million NEOs in Australia, 60 million in the US, and they are not called the New Economic Order for nothing – they are the most economically valuable consumers in the economy. History shows that if you follow them, you will find a better future.
The culture that emerges after the looming recession will be characterised by 10 pillars:
1. Purpose & Meaning (“If I’m not fully immersed, I’m just a spectator”)
2. Control (“We’re taking back control – in every part of our lives”)
3. Sustainability & social conscience (donate, protect, care, support, foster)
4. Hyperlocal (“At home or across the globe, I want an intensely local experience”)
5. Human scale (authenticity, artisanal deliciousness, and beauty)
6. Think Small (“Stop shouting at us, we just want the quiet truth”)
7. Inconspicuous consumption (experience something extraordinary that just fires)
8. Digital acceleration (expanding new online channels, live streaming & connectivity)
9. Post-material mindset (betterment in mind & body, art, culture, personal challenges)
10. Inclusion (a hyper-focused subject or purpose in online communities of interest)
Intelligent business leaders are already charting the new course back to growth. And the starting point is the consumer who embodies all 10 recovery pillars – the NEOs.
History and data science give us a glimpse into why this is an economic imperative for business.
Fundamentally, NEOs are more resilient than low-value Traditionals. Looking back on the economic impact of 9/11, SARs and the GFC, the data reveals that while NEOs may halt their spending on luxury products and experiences during the deepest period of uncertainty, they never stop their elective spending.
Then they’re back spending, borrowing and investing across the board sooner and more frequently than anyone else. And they recover months, even years, ahead of Traditionals. This reflects a NEO’s sense of their own ‘individual economy’ shaped by desires, personal confidence, optimism, imagination, and prospects. This is radically different from a Traditional’s reliance on perceptions of the traditional economy as their bellwether.
After the GFC of 2007/08, NEOs recovered sooner and their recovery rate was much faster. NEO resilience explains why by mid-2009 NEOs were 20 points ahead of Traditionals in consumer confidence (Roy Morgan). And by 2010 the lead had stretched to 24 points. Fast-forward a decade and the confidence gap between NEOs and Traditionals is still more than 20 points. It is systemic
A resilient consumer brand needs resilient consumers. So, as the COVID-induced recession bites, the smart money’s on the future-shaping NEOs to keep spending through the crisis and be back driving the fast lane of recovery, first and fastest. Australia’s 10 million Traditionals will remain stuck in the slow lane.
WHAT’S NEW IN MEDIA – SPORTS SPONSORSHIP FINANCIAL WOES
It is a safe bet that all sporting codes are going to be very nervous negotiating their next broadcast deals. The deals are done on 4-5 year commitments and as per below its getting much harder to justify the spiraling increases.
Rugby is in the midst of trying to negotiate but it is generally thought they are being offered half of what they were getting at around $30mil per season. Rugby League and AFL will be the next to negotiate and must surely be apprehensive about their sponsorship deals. Sport has traditionally delivered strong ratings however as ad revenues slide or remain static the TV stations simply can’t afford to keep paying more. This will certainly leave the door open for telecommunications companies (who have the money) to become more involved. Optus led the way paying $63million per season for the Australian coverage rights to the English Premier League which has been a big success for them. Either way we think all sporting codes will need to tighten their belts which is probably bad news for your pay packet if you are planning to be a professional sports person anytime soon.
DIGITAL – A DECADE OF SPEND THROUGH AGENCIES*
Ten years ago Digital made up roughly 10% of all advertising spend through agencies while today it accounts for 30%. The spend has grown from $700 million to over $2 billion in the 10 years. This was mostly through continuous double digit growth from 2010 to late 2018 when it started to splutter, as did all advertising spend. Digital spend has now been flat for the last 15 months.
Where we’ve advertised in Digital has also changed over the years. In 2010, Google accounted for 17% of all digital spend but today accounts for 36% and Facebook has gone from 2% to 13%. Together they now get 49% of every dollar spent on digital advertising. Nine Digital & News Digital are the next two biggest Networks and together make up a little under 10% of all spend. There has also been a trend to spend with the larger content sites (like Nine & News) at the expense of the very long tail of smaller sites.
How the money is being spent has changed quite a bit with Programmatic making up approx. 20% and Video becoming 10 times more popular sitting at around 25% of spend. HTML5 improved the video experience and its introduction in 2014 on smart phones certainly helped mobile video advertising increase. 2014 was also a big year for Facebook as it introduced “Premium” video ads (playing automatically on a users feed) as well as “Carousel Ads”. This increased Facebooks appeal as well as spend on mobiles.
Virtually all categories have ramped up their digital spend. Auto remains the largest with around $250mil spent annually and has grown from 10.7% share of digital spend to 12.3%. The second largest category, Retail, was spending $18mil in 2010 and now is spending $172mil. Its percentage of all Digital spend has risen from 2.9% to 8.4%.
So the past 10 years has seen enormous changes for Digital with how much we spend, where we spend and how we spend the advertising dollars. Given that it is now over $2 billion through agencies it is not surprising it seems to be settling down somewhat for its place amongst all media.
*Source: SMI
SMI UPDATE – MARCH 2020
The next six months are certainly going to be depressing reading for the SMI figures. March has just been released and is down 10.6% compared to March 2019. The declines can be expected to be more severe in the next few months. Although Covid-19 had some impact in March its real damage will be shown in April-June.
All media suffered and particularly Cinema (-41%) as they were ordered to close on the 23rd March. As usual Print recorded high declines, except national papers, however even Digital was down by 11.9%. In addition to Cinema, Covid-19 is likely to have most effect on Outdoor as people stay off the roads and airports are in lockdown. Auto, Retail & Travel (-33%) continued to decline compared to the same time last year. Whilst Domestic Banks (+35.2%) had a record March spend. Presumably, the Banks had allocated advertising budget for the Olympics which can now be used elsewhere.
FAST FACTS
- Deloitte has put lost wages and profits as a result of COVID-19 at $60 billion in the four months starting from 1 April, with cafés, restaurants, pubs and hotels predicted to take an $8 billion hit.
- Facebook Inc. added warnings to 40 million pieces of misinformation about the coronavirus on its main social network in March to stem the spread of bad advice and misleading articles
- The world’s first website was invented by Britain Sir Tim Berners-Lee in a lab in the Swiss Alps in 1991
- Apple’s “daily” profit for every day of the year is around $163million (USD)
- The average snail has well over 1,000 teeth