The economy is going to be ‘meh’ in 2024 but your marketing plan can’t be

Last year Mark Ritson put forward his triple-cooked chips method for budgeting, but Grace Kite reckons it’s worth dunking them one extra time to take into account the strength of demand in the economy, your target market and category.

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It’s that time of year again. The kids are sporting brand new, slightly too big school uniforms, we’re tightening our belts and the purse strings after a jolly summer, and at work, the questions are all about next year’s budget.

This time last year, Mark Ritson said the answer to these questions is “chips”.

To make chips posh, he said, Heston Blumenthal fries them three times. And to land on a decent budget, you should take three steps too. Spend 10% of turnover on ads. Split it between long and short using Binet & Field’s guidelines. Air it, then evaluate it versus the objective you set at the beginning.

And he’s right, of course. On the most important steps that every marketer should take, he always is.

But for an approach that’s a bit more context-specific, a bit less one-size-fits-all, you need to dunk your chips in the fryer one more time.

Because it’s worth adjusting your budget in line with the extent of the opportunity ahead of you. That means the strength of demand in the economy, your target market and your category.

No recession, but growth will be slow

The good news is that in all the recently published forecasts, economists are much more optimistic than they were. Inflation is slowing and coming under control. And although higher interest rates will damage people’s finances, economists agree this won’t be enough to cause a recession.

But they also agree that economic growth will be moderate. Even the most optimistic analysts are predicting growth at less than half the UK’s long-term norm, and the average of seven reputable forecasts is a mere 0.9% up.

It’s the sort of picture that makes senior leaders plump for advertising budgets that are much the same as last year. Their job is to weigh up a whole range of possible investments for 2024, and when the economy is “meh”, that’s exactly how budget holders feel about spending on advertising.

The IPA Bellwether authors S&P Global foresee exactly this pattern. Noting a “gloomy” outlook for the economy, they’ve plumped for an advertising forecast of +0.1% up, or in other words, a spend trajectory that is boringly flat.

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Golden opportunities in the gloom

Despite the uninspiring outlook, it would be a mistake to believe there are no opportunities at all in the UK in 2024. Something that in total grows slowly, can be composed of big divergences under the surface. And that is very much true of the economy right now.

If your corner is one that’s growing, you’ll miss out on a good share of it by keeping your media budget flat. But if you’re in the parts that are contracting rapidly, you could be wasting your money with the same decision.

So where are the golden opportunities? Well, GfK’s consumer confidence score has been increasing through most of 2023, driven by people in social groups A and B who still have staying-in savings after Covid. A recent analysis of Barclays’ card transactions data showed these groups are spending less on eating out, but more in retail and on entertainment.

Necessity categories – things like shampoo, milk, energy, healthcare and cleaning products – are another place where there are possible wins. It’s because shoppers have to buy something from the category even if prices have gone up.

The chart below, from Warc’s recent trends survey, shows that in these categories, the response to price rises isn’t to delay or forget the purchase, but to shop around. That means customers who have always come to these purchases on autopilot – buying the same thing they always did – are, for once, winnable in 2024.

It’s a moment where challenger brands can absolutely get lucky.

If you’re selling an expensive treat, save your company’s cash for 2025

The situation is very different in categories where the product is an expensive treat. In the chart above the example is electronics, and it’s clear – the typical response to prices going up is to delay the purchase, perhaps forever. Very few people ignore the price increase and buy anyway.

It’s not an isolated example. The ONS carried out a robust, representative survey in August 2023 and found nearly two-thirds of people are spending less on non-essentials.

The chart above, again taken from the Warc study, gives a hint of which advertising sectors are most likely to be affected. It shows the percentage of people who have already reduced spending on each category in response to rising prices.

Because the cost of living crisis will continue into 2024, the chart is also a guide to next year. Demand will likely continue as normal if you’re focused on, say, healthcare and medicine, or utilities. But if you’re selling a glamorous dining experience or a luxury handbag, appetite is likely to be much lower. There is likely to be very little to gain by advertising to the 30-35% of people who are reducing their spending, or avoiding purchasing completely.

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Consider your 2025 credibility

Plans for 2024 are important, but the marketing department’s credibility in the organisation is even more precious.

Advertising isn’t fluffy or all about colouring in. It’s a legitimate and important tool for driving business success. The trouble is that CEOs, CFOs, founders and investors sometimes forget that fact. They’re sceptical about advertising at the best of times and often pull the plug when the economy feels wobbly.

It means the worst thing you can do is push a case for advertising when realistically it’s not the right time.

Whatever you sell, the outside world acts as a multiplier on your advertising effectiveness. If external changes are beneficial or at least not too harmful, your ads will pay back. But if not, it’s often best to save the money and your credibility for later.

Heston Blumenthal isn’t yet on to quadruple-cooked chips. It turns out there’s a limit to how much classiness additional frying can bring to the humble spud. The same is not true of pitches to boardrooms for advertising money. Your budget process needs four steps not three.

Grace Kite is the founder of Magic Numbers, which provides practical training and people-friendly analytics to help marketers drive growth.