Procter & Gamble, Airbnb, other larger advertisers, see marketing opportunity amid inflation pricing

By Seb Joseph

Whisper it — because this unstable economy hasn’t kept anything true for too long — but larger advertisers are seemingly looking at advertising less as a cost, more as an investment.

It doesn’t mean they’re going to spend big during the downturn. Given inflation and supply constraints, it’s just not possible. It also doesn’t mean ad spending is going to be stripped back. But it does create a quandary: limit spending too much and advertisers risk being left behind at a time when price increases have become easy to make, but inflation still squeezes profits.

It’s neither an entirely good or bad predicament for the ad industry — it’s complicated. After all, inflation can be a good marketing opportunity to get consumers to pay more for a product they love when they’re braced for price increases. They’re making advertising investments now that they hope will pay off in driving growth.

That much is clear at this point in the current earnings window.

So far the largest advertisers have broadly said the same thing: advertising is more strategically important than ever because they need to push through larger than expected price hikes on the back of their strong brands. Which means those holding the purse strings at these companies are having to think differently about ad spending.

Where do the dollars go?

“We are actively shifting our spending from linear, non-targeted TV into programmatic and into digital spend that is a lot more targeted and a lot more precise in terms of delivering reach,” said Procter & Gamble’s chief financial officer Andre Schulten on the company’s earnings update last month. “It is difficult to describe media sufficiency in dollars.”

It’s led P&G to think about the reach metric with more clarity.

It moved more ad dollars from linear non-targeted TV into programmatic and digital media that’s more targeted and more precise when it comes to delivering reach, said Schulten. To do so, the marketers there must think less about building budget plans on the back of annual category spend, and more about a brand’s reach objection. Only then can they calculate what kind of media exposure is needed to hit the required reach objective, continued Schulten. Do this well, goes the thinking, and those brands should be able to hit the required reach at lower total advertising costs than what P&G has historically spent.

That last thing is key for P&G. Like so many of its contemporaries, the business has decided that the answer to higher commodity prices isn’t to slash costs to stretch out margins, but rather to pass those increases on to consumers and take the profitability hit. Eventually, costs will come down whereas price increases rarely do. So there’s no better time to try and convince people to fork out more for the same thing given they’re all too aware that inflation is everywhere. Better still if the business can do so without spending as much as they have done on marketing. A permanent step up in margins becomes steeper as a result.

“Consumers are …read more

Source:: Digiday