Global TV media costs surge almost a third post-pandemic
Media & communications budgetsAdvertising expenditure & forecasts
Media inflation is driving up the cost of advertising across channels, with TV most affected, according to an analysis by WARC Media.
TV costs are rising fast
The latest Global Ad Trends* report, The rising cost of incremental reach, finds that, globally, TV CPMs (cost per thousand) have increased 31.2% since 2019 – the steepest incline in more than two decades – and are up 9.9% year-on-year in 2022.
The trend is especially pronounced in the US, where TV CPMs are forecast to reach $73.14 in 2022, an increase of 40.0% on pre-COVID costs.
For some categories the impact is heightened. According to WARC Media data, advertisers in the food category spent on average 79.8% of their budgets on TV in 2019, and in the automotive category, 67.7%. If they were to have maintained that same level of investment, by 2021 the volume of impressions would have decreased by 18 percentage points.
Digital media costs are increasing too
This twin trend of declining linear television viewership and rising TV media costs is encouraging advertisers to look elsewhere for incremental reach, but price pressure is being felt across the online media landscape.
Paid social CPMs increased by 33% between 2019 and 2021 (source: Skai) and the growing popularity of retail media formats is pushing up the cost of advertising on platforms like Amazon.
Channels such as broadcaster video on-demand (BVOD) provide an alternative source of incremental reach. However, over-the-top (OTT or streamed video) ad costs are rising too: inflation in advanced TV formats in the US is forecast to reach 9.9% in 2022, as per World Federation of Advertisers (WFA) figures.
Relative bargains can still be found in channels like radio
The pursuit of incremental reach has generally focused on digital audio-visual channels, as they offer a more straightforward transition from television. In comparison, offline channels are often under-utilised, despite not having witnessed the same levels of price inflation since 2019.
In Australia, the cost of radio media in 2022 remains 1.1% below pre-pandemic levels, while prices in the US are largely unchanged three years on.
A similar picture emerges in out-of-home (OOH), incorporating both static and digital panels: in the UK, outdoor ad prices are 3.1% lower than before COVID-19, while, in the US, OOH remains 5.8% cheaper than it was in 2019.
“As the global economy teeters on the brink of an inflationary recession, media costs may experience further volatility. Nonetheless, non-video channels are worth consideration if they are right for the audience” – Alex Brownsell, Head of Content, WARC Media.
*Global Ad Trends is a bi-monthly report which draws on WARC’s dataset of advertising and media intelligence to take a holistic view on current industry developments. A complimentary sample report of WARC Global Ad Trends: The rising cost of incremental reachis available here.
How APAC can navigate inflation and recession to build brand resilience
Marketing in a recessionPricing strategyMarketing budgets
There are both short- and long-term measures that marketers can take to ensure their brands remain successful in the face of inflationary and recessionary challenges.
Why it matters
Amid tough conditions, marketers have an opportunity to build more resilient brands that deliver greater value for consumers and businesses with a short-term focus that creates a strategy to navigate an inflationary world, and a long-term view of creating excess share of voice and hence market share growth.
Consumer mind share is Alibaba’s most valuable asset
Online retailBrand managementGreater China
With one billion annual active consumers in China, consumer mind share is Alibaba’s most valuable asset, according to CEO Daniel Zhang.
“We don’t need to be paying money to induce the consumers to come back,” he said during an earnings call. “We have that mind share of the consumers, and that’s what’s capable of driving a lot of organic traffic; we get consumers coming back even when their willingness to consume may have weakened during the pandemic period.”
Why it matters
That user base, along with a portfolio of different apps, “positions us to further improve that mind share and capture the opportunities”, Zhang believes. It also plays into reduced marketing spending, as CFO Toby Xu reported the “sales and marketing expenses ratio decreased to 12% in June quarter [from 13% a year earlier], reflecting our efforts in optimizing user acquisition and retention spending across businesses”.
Alibaba’s three core strategies embrace consumption, cloud and globalization. On the first of these, “we will focus on growing our wallet share in different consumer segments instead of pursuing further absolute increase in our user base in China”, Zhang said.
Premium users are growing in number as consumers with the highest spending power show “strong loyalty to our platforms”, he added.
Alibaba is focusing less on the nationwide market and more on particular cities and regions to achieve local economies of scale. “The digitalized network integrating intercity commerce and fulfillment has become a new infrastructure in modern urban life”, Zhang noted.
On the Taobao app, more than half of products are now being displayed to consumers via short-form video, rather than images and text.
“The most valuable asset that Alibaba owns today, that we built up over the years, is mind share. Users come to Alibaba with a consumption mindset” – Daniel Zhang, CEO, Alibaba.
Clorox strategy takes inflation and COVID into account
Brand managementMarketing in a recessionPricing strategy
The Clorox Co., the consumer packaged goods firm, is paying careful attention to shopper activity both in response to inflation and as habits grow closer to their pre-COVID form in some categories.
Consumers not switching to private label
As yet, Clorox has not witnessed any “significant trade down” to private-label goods among inflation-hit consumers, Linda Rendle, its CEO, told investors on an earnings call.
“We are seeing some trade down within our own portfolio, for example, and we would’ve anticipated and expected this, and we’re working this as part of our sales plan,” she said.
Shoppers, for instance, could “move to some opening price points” for its products. “They still want the branded player, but they don’t have a lot of out of pocket and so they’re buying a smaller size,” Rendle said.
Other buyers are opting for larger pack sizes to get the “very best price per ounce”, and Clorox is working with its retail partners to find the right assortment in response.
The COVID “new normal” is still taking shape
Working alongside the rising cost of living is the on-going consumer reaction to the fluctuations of the COVID-19 pandemic.
“We’re seeing changes in more normal behavior coming from consumers, and we’re trying to understand: When are we at a new normal?” Rendle said.
In cleaning and disinfecting, for example, consumer interest is “definitely lower than it was at the height of the pandemic, but higher than it was pre-COVID,” said Rendle.
The cold and flu season, by contrast, has not been “normal” since the pandemic began, so the company will carefully monitor this area.
Price elasticity lags historical norms
The company has implemented three price increases, the most recent in July 2022. As such, it is able to monitor price elasticity, or whether consumers are switching away for its products.
Prior elasticity levels did not “play out over this last year” and have been “slightly better than that historical elasticity that we had experienced,” said Rendle.
Looking forward over the next 12 months, elasticity could be “better in line with what we saw pre-COVID given the level of pricing and given what's going on with the consumer,” she warned.
Ad support still key
Clorox will continue to support its brands with a nuanced mix of ads and promotions that will be adjusted in line with “where the consumer is”, its CEO reported.
“We continue to spend on our brands, we'll spend 10% of sales on advertising and sales promotion next year,” Rendle said. “And we’re proactively working with our retailers on tailored shopper plans to ensure that we’re offering the right value for the moment, depending on where the consumer is.”