Rising prices cost families about $296 per month, according to data from Moody’s Analytics. This forces consumers to make difficult choices about what to buy. It may or may not have contributed to price increases of advertising for marketers, but it is forcing more consumers to use special offers, rewards and discounts.
Ad prices fluctuate based on demand in the auction, audience size and other factors. “Generally, the higher the supply of ads, the higher the price-per-click (CPC). The higher the demand of ads, the higher the overall ad costs paid by the advertiser,” says Matthew Mierzejewski, senior vice president of search and performance marketing at Merkle.
Mierzejewski says this varies by business and vertical, but if advertisers are setting goals by cost-per-revenue (ROAS), any increase in revenue by virtue of inflation could actually allow advertisers to spend more on advertising strategies.
He says a 5% increase in revenue due to inflation could theoretically allow for 5% higher investment in advertising to reach the same ROAS.
It could, in theory, cost advertisers more to keep or acquire new customers this quarter. “Consumers still want to purchase the products they have been purchasing for the past couple of years, but now they have new factors to consider,” said Jay Loeffler, president of fintech company SKUx, which is trying to change ad targeting and the way consumers find products.
Consumer prices rose 8.5% in March, compared with a year ago, slightly more than expected and the highest since 1981, according to the Labor Department, which released data on Tuesday.
Many young marketers might not have lived through this type of inflation in the past.
SKUx partners with brands, and through QR codes or serialized links, drives the click to a mobile offer from brands specific to consumer, who can use the link to make a purchase. Through the QR code or serialized link, the offer ties to the individual mobile device specific for the consumer — one time only.
Since 2018, SKUx has worked with a couple of hundred brands and retailers, he says.
Loeffler also believes the search for discounts will result in increased coupon fraud, as criminals seek to take advantage of the situation. Fraud will end up costing brands many millions of dollars, reducing their ability to help consumers.
Some believe in rewards rather than coupons and inceptives to support consumers through this time of inflation.
“Advertising costs did not rise in tandem with inflation, but programmatic and social media ad costs rose quite a bit last year,” says Julie Van Ullen, managing director and head of revenue at Rakuten Rewards.
Still, the ability to offer cash back is a unique reward system, especially during inflation. Consumers who are coming out of the COVID-19 pandemic and looking for savings have developed new shopping habits, new affinities to products, and new needs. Rakuten works as a performance brand, where advertisers only pay when a consumer makes a purchase.
When buying ad media, Jonathan Kagan, vice president of search at agency 9Rooftops, had some advice to share: “Be the last to raise your prices on products or services and you’ll avoid a faster downturn in conversion rate,” he said. “Also, play out all of your sales to repeat customers to retain them, rather than to just new ones.”