For as long as Dominic Mills can remember, adspend and GDP have gone up and down in sync together. But now it looks as though the link has broken, in a good way
It’s fair to say that the commentariat has worked itself up into a state of excitement at the news last week that P&G, a company for whom marketing runs through its DNA like a stick of rock, had upped its media spend by 12% in the year to June, and by 21% over the past two years.
Here’s Mark Ritson showering praise on its actions. It was, he says, proof of the value of advertising during tough times, the courageous thing while other major advertisers (eg Coke) blinked.
Absolutely. But what was interesting to me was the way in which P&G’s increase was double (12% v 6%) its increase in sales volumes over one year with a similar differential over two years (21% v 12%).
One interpretation is this is genuine investment — ie spending now for future gain.
Another is that P&G faces more competition than ever before, not necessarily from its peers but from a whole rash of small, agile competitors, many selling direct to the consumer or via Amazon, and many of which are backed by venture capital money.
The increase in ad spend therefore, could be construed as the construction of a defensive moat, an attempt to head off the competition by bolstering its own brands.
My guess is, it’s a bit of both.
Note too that the increase in spend beats increases in GDP.
Now hold those thoughts while we consider the broader picture in the UK, as demonstrated two weeks ago by the release of the AA/WARC figures looking at projected adspend growth of 18% for the whole of this year and 7.7% for next.
A remarkable figure for this year certainly, and pretty good for next too.
Now, some of this year’s spend may be seen as making up for lost time — getting overall levels back to where they were pre-pandemic and then some, and probably a mix of brand and sales. But apart from some big-ticket items where consumers may have held back, a lost sale is a lost sale, so I don’t think that is a full explanation.
Comments