Gartner: How Economic Conditions Affect Campaign Strategies, Consumer Purchases

Many consumers do not see an end to inflation and seek ways to make their dollars go further.

Data shows they are less put off by higher prices and more concerned with less volume in a package -- now known as shrinkflation -- and reduced quality, or skimpflation, according to data from Gartner.

In the past 30 days, 90% of consumers noted a significant price increase in at least one product category they frequently buy, and in the past year 70% have noticed shrinkflation in at least one category, according to Kate Muhl, consumer and culture insights team at Gartner.

Findings from the Gartner survey shows 62% of consumers say they will stop buying from brands that change product size, known as shrinkflation -- or reduce the quality, known as skimpflation -- to cut costs as inflationary pressures build. Only 7% said they would continue purchasing from a brand that cut costs this way. 

Brands that consumers perceive as engaging in shrinkflation or skimpflation stand to alienate customers and potentially lose sales. A majority of consumers surveyed said they would stop buying from a brand that engages in these practices or would prioritize purchasing from brands that do not. Only 7% said they would continue to purchase from a brand that cut costs in this way.

Unfortunately, 75% of consumers expect prices to continue to increase in the second half of 2022 -- and 65% expect to cut back on purchases or stop buying altogether in at least one product category.

Some 45% said that companies should stop increasing the pay of high-ranking executives to limit price increases.

Marketers caught in the middle of this price war based on inflation have other challenges. As a consumer, they see the increases that must be made to drive revenue.

And as a marketer for the brands they represent, they must generate revenue or be deemed irrelevant.

Andrew Frank, distinguished vice president and analyst at Gartner, believes it is a given that the advertising market is hypersensitive to recessionary cost-cutting, but believes many of today’s signals are contradictory.

“While extreme economic uncertainty creates reluctance to commit to long-term media plans, fears of continuing inflation create an impulse to lock in prices with direct deals,” he wrote in an email to Search & Performance Marketing Daily. “Anticipating recession tends to shift spending from broad reach brand campaigns to performance channels like search and retail media, but loss of targeting and measurement capabilities like cookies has made these approaches less accountable while the growth of ad-supported streaming is luring advertisers back toward video.

Given that the high stakes of the U.S. midterm elections -- and as political advertising demand may keep U.S. media prices high even as other sectors cut back -- he said the advertising market today represents “a highly volatile state and may be in for a hard landing.”

Since the COVID-19 pandemic first struck in 2020, Frank said, he believes marketers have dealt with conditions that are well outside their experience and intuition. This meant relying more on data models and algorithms, most of which had been provided by the big walled gardens.

“With customer data growing more scarce and macroeconomic data growing more uncertain, marketers are looking even harder at advanced analytics and AI to provide some neutral guidance on advertising strategy,” he said. “This is not just true for digital advertising — convergence is here and marketers need an unbiased, unified approach.”

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