The headlines around inflation in the U.S. may be creating uncertainty with your sales team. Inflation is a normal part of an economy that contracts and expands based on many factors. The question on your mind might be this: Is inflation impacting advertising spending? 

In this post, we’ll look at the data and then provide tips on working with advertisers when their dollars don’t go as far as they once did.

Inflation Rises to 40-Year High 

Inflation in the U.S. hit a 40-year high in May, and the consumer price index hit 8.6%, up 1% from April. The biggest contributors were costs for shelter, food and gas. These cost spikes put consumers in difficult situations, unable to catch up with cost-of-living increases.  

Both goods and services cost more now due to a variety of factors. One of those is post-pandemic demand for the travel sector. Those with discretionary funds aren’t culling spending. Another concern is a tight labor market, which is impacting almost every industry and its expenses. Currently, consumer spending isn’t slipping, so that’s good news for many advertisers.  

So, how does inflation impact advertiser spending? It depends on the advertiser’s industry and their audience. Are they selling in-demand items or things that are essential? Is their ideal buyer pulling back on spending, or do they have the ability to keep buying? No matter where your clients fall, they’ll all want to spend smarter in the months ahead. 

Economic Volatility Is the Norm and No Reason to Stop Advertising 

Companies often have a knee-jerk reaction to economic volatility. They want to root out waste and scrutinize every dollar. Advertising budgets are usually the first to go; however, that’s not always a wise decision. If they are seeing returns on advertising in the form of more sales, why stop something that is a revenue generator? Plus, it could be an opportunity to win market share. If their competitors pause advertising, they have a chance to win consumers over with relevant promotions and campaigns.  

Your clients may also need to use advertising for recruitment. That’s not something they should pull back on since this is an operational need.  

What may be in their best interest is to spend smarter. 

Talking to Advertisers About Smarter Spending 

The dollars allocated to advertising should deliver returns, whatever the goals are. Positive ROAS (return on ad spend) isn’t a given. It requires a strategic approach to integrated campaigns that accurately target their audience and have compelling messages. Inflation or not, haphazard ad buying with no reason behind it isn’t smart spending. 

As an expert local seller, you can guide advertisers on how to meet their objectives. When you provide insight into how they can achieve advertising goals, they’ll get better results and use budgets more effectively. It’s not about increasing the budget or the channels, which may be cost-prohibitive. Digital ad prices in North America are projected to be 5.4% higher in 2022.  

To help clients do more with less, you must demonstrate how their dollars will deliver results and what tactics will impact them most. 

Spending Smarter Requires Better Targeting 

Another aspect of smarter spending is targeting. How are these advertisers doing this now? Are they at all? They’ll waste less if they understand their customers and advertise for them. Digital advertising provides many ways to target audiences, from geofencing to demographics to preferences. Dialing these in with campaigns will be crucial to using budgets wisely. 

In-Demand Goods and Services Should Turn Up Their Spend 

Your conversation with categories in high demand will look very different. It might be the perfect opportunity to recommend upping budgets.   

To be clear, they shouldn’t spend indiscriminately and should always remain strategic. However, if they are selling to those not impacted by inflation or in an inflation-proof space, it makes sense for them to recalculate their spend and possibly seek new channels. The spend smarter message to them is about increasing brand awareness and taking market share from competitors. 

More Creative Campaigns Can Mitigate the Negative Impact of Media Inflation 

The other pivotal role you play in helping advertisers spend smarter is increasing the quality of the creative. A memorable ad that’s relevant to the person consuming it does better. Such ads have attributes of: 

  • Having a great hook 
  • Being distinct 
  • Triggering emotional responses, often through storytelling 
  • Using humor if appropriate 
  • Visual appeal 

If companies elevate their creative and the story behind it, the results they expect will follow. It’s normal for your clients to have apprehension about inflation and its impact. Addressing it with a strategy and creative ideas earns their trust and keeps their ad budget with you.  

For inspiration on creative ad ideas for your clients, check out our creative best practices posts! 

Inflation Is Part of Every Economy 

There’s no way to escape inflation, and it’s not an easily solvable quandary for any economy. Keep advertisers calm and be a problem solver when they ask you about inflationary impact. It could make all the difference in how they advertise today and tomorrow. 

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