• by James Flynn , September 28, 2021

Many marketers who pulled back on ad spend in 2020 have begun allocating dollars again throughout 2021 as the economy bounces back. However, for some it’s been touch-and-go as they try to keep up with rapidly shifting consumer habits and spending levels.

Currently, the increase in COVID cases is affecting consumers in a variety of ways. Below are some insights that could help develop your marketing plan, depending on your target consumer and vertical.

Consumer sentiment was looking up until August, when there was a steep drop off, according to the University of Michigan. It leveled off in September, but the drop was likely caused by consumers' shock of realizing the pandemic would continue on due to the Delta variant.

However, demand didn’t drop as much as it shifted -- away from services and toward goods, similar to 2020 trends. U.S. retail sales increased +.7% in August from July and +15% over August 2020, and clothing and accessories increased +39% (Dept of Commerce). The Wall Street Journal points to the country going back to school and work as a large driver. This article also notes a simultaneous cut back on travel and some cancellations of concerts. In other words, the Delta variant is hindering the recovery for services, but not goods.

Consumer target-wise, inflationary effects are not evenly distributed. Increases for essentials such as food are always disproportionately bigger for lower income individuals because food makes up greater percent of their overall expenditures. Though food inflation is expected to level off soon (TradingEconomics.com), it’s still relatively high, especially for some categories such as beef (BLS).

Keeping track of the above can be helpful additional insight when trying to plan your ad spend. One way to better monitor these effects ahead of time is to watch for supply issues, which drive inflation issues, which drive consumer sentiment/spending issues. Even if not in your specific vertical, large increases in key industries (like auto currently) can hurt spend overall for consumers.

Another relatively simple way to predict consumer sentiment is to keep an eye on prices for oil, gas and coal. A recent study found a strong correlation between energy commodity price indices and personal consumption expenditures inflation for services and nondurable goods. In other words, increases in these basic energy prices are strongly tied to prices of everyday goods. Rapid price increases in everyday goods will always affect consumer behavior. 

Being able to predict consumer behavior is key for most marketers. Though not always specifically applicable, broad strokes indicators like consumer sentiment and inflation can be helpful in trying to plan your ad spend. Keeping track of a few non-marketing trends such as big industry supply issues, oil/gas price indices and COVID case rates will put you ahead of the game in understanding incoming consumer behavior.