How to justify marketing spend during the cost of living crisis

Many leading grocery brands opted to scale back on multimillion campaigns to plug innovation in the past year.

Though UK ad spend started strong in 2022, growth began to slow in the second quarter as the impact of the cost of living crisis began to shine through.

In the first half, total ad spend rose 14.4% to £16.7bn, but the second quarter lagged significantly behind the first with value growth of 8.8%, according to figures from The Advertising Association and WARC.

As with NPD, this trajectory isn’t a surprise, says Nigel White of The Marketing Place. “Marketing is a discretionary spend and when times are tight it tends to get squeezed.”

That some brands continued to spend is testament to lessons learned from previous crises, such as the 2008 recession, when those companies that took a longer-term view and continued to invest in marketing recovered faster.

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Where they are spending – as with innovation – is on delivering value and demonstrable ROI. On the former, it helps that advertising is currently a buyers’ market, says White.

“From an advertising point of view, there’s definitely less demand, and so you can get away with what would have been silly deals that are now much more cost-effective than when times are booming.”

Hence a shift towards measurable digital channels, which increasingly offer sophisticated targeting, data metrics and real-time feedback loops. Those metrics ignore longer-term brand building, but “when times are hard, the one that’s easier to measure is the one it’s easier to make a case for”, White adds.

That explains the booming retail media sector. A Group M report from late 2022 found the channel already accounted for 10.7% of global ad spend, and is set to balloon to 60% over the next four years. By 2025, it’s expected to overtake TV. Already, major grocers are expanding opportunities to monetise their first-party data via Retail Media Networks.

“For brand and performance teams, the challenge now is where in their media mix they can reallocate budget for this entirely new marketing category,” says Hugh Stevens, head of strategic growth at LiveRamp. “This includes whether it should be drawn from other digital spend or traditional media.”