Discretionary income, mail, retention budgets: 5 interesting stats to start your week

Middle-income households see spare cash fall by £116 per month

Discretionary income for middle-income houses has fallen by almost 10% since January 2021 to £116. Those households with the lowest incomes have seen the steepest drop in discretionary cash, and in January 2023 had 14.6% less than two years ago, equating to £75 less spare cash per month.

Meanwhile, the most affluent have seen their discretionary incomes decline by just 0.3% over two years, the equivalent of £12 less per month.

The least affluent are also spending almost two-thirds (64%) of their income on essentials, compared to the most affluent who spend less than half (49%) on staples.

The research from Retail Economics also finds the price of key essentials has skyrocketed compared to just a few years ago. In January 2023 gas prices rose by 194.1% compared to two years, with electricity prices up by 98.8% compared to January 2021.

Meanwhile food and personal care items have also seen a significant, if more modest price increase, rising by an average of 22.1% and 11.6% versus January 2021, respectively.

“There’s a significant polarisation between the least and most affluent in society which signals an uneven impact across the economy as we head into recession,” says Retail Economics senior consultant Nicholas Found.

“Many of the least affluent households will look to trade down, delay purchases and cancel some spending altogether as the reality of rising winter fuel bills, escalating food costs and rising interest rates punches a hole in spending power.”

Source: Retail Economics

More mail was read over Christmas than rest of year

More mail was opened (66%), read (77%) and retained (46%) during the Christmas trading period last year than at any other point in 2022, according to the Joint Industry Committee for Mail’s (JICMAIL) Q4 2022 results.

Christmas is a crucial time for retailers hoping to reach consumers. The “healthy open and read rates” for mail can give advertisers reassurance of consumers’ willingness to engage in the channel, says JICMAIL.

While open and read rates have improved, JICMAIL says the effectiveness of the mail channel has been maintained, with a year-on-year increase in mail’s effectiveness at driving brand discussions.

In contrast, the IPA’s latest Bellwether report highlighted direct marketing was being reduced in marketing budgets with a net balance of -0.6%.

In Q4 2021, the stats were 73% for mail being read, 62% opened, and 40% retained in the home and 13% for the mail being discussed with someone.

However, with 5% of mail prompting a purchase in both 2022 and 2021, that figure has stayed the same.

Source: Joint Industry Committee for Mail

UK marketers’ customer retention budgets equal acquisition budgets

Customer retention budgets in the UK are now equal to acquisition budgets for the first time, with 43% of British brands reporting they spend more than half of their budgets on each.

Across the EMEA region overall, 51% of marketers now invest more into retention than acquisition. There has been a 36% increase in the number of companies spending more than half their budget on retention.

The research from Braze also finds many UK marketers are approaching the goal of loyalty blindly. Over one third (34%) of brands intend to send more messages this year. However, data collection and management remains the number one challenge when it comes to customer engagement (44%).

The vast majority (78%) of UK-based brands report they are collecting too much data, leaving them overwhelmed.

Almost half (45%) of UK marketers are also concerned the lack of integration of data teams means they do not understand marketing priorities. Just under four in 10 (37%) believe a lack of data skills among talent is also holding their organisations back.

Source: Braze

Marketers to increase ROI through efficiencies, consolidation and in-housing

The vast majority (85%) of marketers are adjusting strategies to prepare for a recession, with the focus on return on investment moving up the agenda.

The most common tactics marketers are prioritising for improving ROI include reducing necessary spend (71%), consolidating marketing efforts (68%), and bringing technology and/or services back in-house (67%).

The research from DAC Group also finds six in 10 (62%) marketers are prioritising full-funnel media planning over the next year.

However, the research also suggests many marketers are facing barriers to this, including 70% who struggled to derive actionable insights from their customer data, 60% who found it difficult to track performance across a customer journey, and 58% struggle to adapt to market changes rapidly.

“Maintaining brand awareness is a proven strategy to support long-term brand health and share of voice beyond a recession,” says DAC Group London managing partner Mike Fantis.

“The upper funnel activity and media plan is likely to look very different in 2023 and beyond. We advise that marketers need to apply a performance mindset across the entire marketing funnel and hold every penny accountable.”

Source: DAC Group

Consumer confidence recovers slightly in February

Despite the ongoing cost of living challenge as inflation continues to outpace wage increases, consumer confidence made a surprising comeback in February. However, with the mood still “severely depressed”, brands are warned it’s “too early” to say if this signals recovery.

The latest GfK Consumer Confidence Index reveals a seven point rise in the headline score to -38 this month, though it remains 12 points lower than February 2022.

All five of the measures which make up the headline score improved compared to January. A particularly strong uplift was seen in consumers’ expectations for the general economic situation over the coming year, which has improved by 11 points to -43. This puts the score on a par with last year.

Consumers also feel more positive about their personal finances over the next 12 months, with the score increasing by nine points to -18. However, this is four points lower than in 2022.

Reflecting on the previous 12 months, perception of the UK’s economic situation over the year has also improved, up six points to -65. Likewise, consumers’ view of their personal finances during the last 12 months has increased by five points to -26.

The major purchase index, an indication of people’s likelihood to buy big ticket items, improved the least, up three points to -37. This score therefore sits 22 points lower than last year.

“While it’s too early to talk about ‘green shoots of recovery’, the uptick across all measures should be welcomed,” GfK client strategy director Joe Staton says, suggesting consumers may be expecting a milder recession than economists have previously predicted, or that they may be “simply fed up” with hearing bad news.

Source: GfK