What current economic conditions mean for marketers

19 Oct

Whether you live in the UK, Europe, the US or beyond, an economic slowdown is afoot that has major implications for everyone in society. This is particularly relevant for marketers, who notoriously face major turbulence in these times.

We provide a detailed and emotive look at how marketers and the marketing industry will be affected over the coming months and years. In doing so, we use behavioural economics to establish the link between key economic indicators and people’s behaviour.

We aim to equip you with a broader view of the current situation than you’re likely to be reading in mainstream media by referring to robust country data gathered by the OECD. If you like to discuss the points raised further, or understand exactly how they impact your marketing strategy or business environment, please do get in touch.

Let’s get stuck in.

Interest rates

The last decade or so has been accompanied by some of the lowest interest rates that have ever been adopted by Western economies (see OECD data for your country). This stimulated growth, increased house prices and powered the consumption of many home products. For example, a person could purchase a property because of an interest-only Mortgage, safe in the knowledge that the property’s price would go up over time. However, that’s all changed in dramatic fashion. Interest rates are rising fast, and with house prices at record highs, partially driven by quantitative easing and the accumulation of savings during COVID-19, many homeowners are now facing unaffordable mortgage payments.

Inflation rates

Inflation rates have gone through the roof recently, which has dramatically changed the cost of living across Western economies. This has far-reaching implications, not least for those on the lowest incomes who have little or no way to find savings. They also have a more deeply rooted psychological impact on the way people view money. Consumers must seek a way to make better use of their savings as they devalue over time. Furthermore, constantly evolving prices have a naturally disconcerting effect on consumers.

Exchange rates

As exchange rates dictate the value of one currency compared to another, they can have a major impact on the import and export of goods and services as well as holidays. Unlike other economic metrics covered here, changes affect each country differently. Given economic pressures elsewhere, decreases have an even more significant impact on travelling abroad and contribute further to inflation within a country. This can be devastating for tourism impact, as the market size can drop rapidly and unexpectedly at a time when running costs go up. It is a difficult situation for businesses who subsequently need to make difficult marketing decisions.

Energy and petrol prices

The recent rises in energy and petrol prices across Western economies has impacted two areas of consumer behaviour. The first is the way people travel, with people thinking twice about whether and when to make additional trips with their cars. The second is the way people consider heating their homes. As the increases are so significant, the thought of whether to ‘heat or eat’ is more than just a slogan, but a way of life for an increasing number of households. Notably, this becomes relevant for marketers when a greater majority of households move into subsistence spending to balance their accounts.

VC investment

Innovation is made possible by VC investments, with the investors taking on great risk (and potential reward) for funding early-stage businesses. And like so many areas of society, an economic slowdown makes VC investments more risky. For consumers, this impact is difficult to perceive. They are yet to experience the innovations, but they can perceive economic stagnation as a stream of new ideas is turned off, along with the mindset and social mobility that entrepreneurialism inspires.

Collective changes in consumer behaviour

The metrics covered above contribute to major shifts in disposable income. And it is the combination of all these metrics that provides greater nuance into how consumer behaviour changes as a result. For example, across many areas of daily life, consumers are forced out-of-necessity to make a higher number of value-based decisions. The speed at which these changes are happening are no less significant as for many people, they will never have experienced these pressures before. The financial crisis created a major downturn, but not the broader economic challenges that we are seeing today.

What this means for marketers

It’s difficult to hide just how challenging the prevailing period will be for marketers. Still reeling from the COVID-19 crisis, many marketers are now faced with another existential challenge. On the face of this, it will mean that budgets will be cut to preserve the business stability of most brands. In addition, with so many marketers employed in marketing agencies that are dependent on growth businesses, the success paradox will become apparent.

Amidst this, there will still be major opportunities for businesses that deliver a clear consumer benefit and have a robust financial grounding. And although marketers can rarely select for these factors before interview, those that find themselves within these businesses will be faced with exciting possibilities.

For all marketers, there will be a focus on efficiency, with room to adapt storytelling and budget allocations to accommodate the changes in consumer behaviour mentioned above.

We hope you’ve enjoyed this blog. Check out similar topics, or get in touch. We look forward to hearing from you.

See you next time.