'Hold your nerve': ad bosses outline strategies to cope with Brexit

17 Jan 2019  |  Michaela Jefferson 
'Hold your nerve': ad bosses outline strategies to cope with Brexit

Throughout the Brexit transition period, there has been a distinct lack of clarity about what impact advertisers can expect when - or if - we depart the European Union, which has made it difficult for businesses to plan for the future.

Instinctually, marketers may feel the need to cut their budgets - particularly as, following Tuesday's parliamentary vote against May's Brexit deal, we may be moving ever closer to a no-deal Brexit come March 29.

"A no-deal Brexit is hugely concerning for the UK advertising industry - a crucial sector that contributes £132bn to British GDP," said Stephen Woodford, CEO of the Advertising Association, in a statement released following the May deal vote. He added that he would rather see the no-deal option taken off the table entirely, "given its potentially huge disruptive nature."

According to an Enders Analysis report published earlier this week, that disruption could amount to the UK's first advertising recession in a decade. The area expected to suffer the most is display advertising - including TV, newsbrands in print and digital, out-of-home and online - which will be stripped of close to £1bn if the UK leaves the EU without a deal.

Meanwhile, fear of the effects of Brexit appear to already have taken hold of marketers. The latest IPA Bellwether report for Q4 2018 saw six years of continuous marketing budget growth end - an "understandable reaction" to "uncertain political and economic times," according to Paul Bainsfair, director general at the IPA.

In particular, main media advertising (including large-scale campaigns on TV and in newspapers) suffered, falling to -6.5% from +4.8%.

Warning marketers against pulling their budgets from brand building advertising too soon, Bainsfair added that, according to IPA research into what builds and destroys brands, “too much short-term sales promotion activity destroys brand value in the long term. Marketers need to weather this turbulent period and think ahead.”

Indy media agency the7stars is advising its clients much the same thing.

"In short, we're telling them to hold their nerve in a softening market," Simon Harwood, the agency's head of strategy, tells Mediatel.

“Some clients are understandably cutting budgets and adopting a ‘wait and see approach’, especially as the no-deal scenario would likely result in an advertising recession and a deflationary market for media, particularly TV. But we’re advising clients not to rush to cut advertising.”

The post-Brexit market is looking increasingly difficult to predict; despite expectations that consumers will tighten their purse strings in response to economic uncertainty, the7stars' own research suggests that consumers are not expecting to change their current spending habits drastically after March 29.

According to the QT, a consumer confidence and attitude tracking study conducted on a quarterly basis by the agency, most people are planning to spend either more or the same amount of money over the next year - despite retailers such as Marks & Spencers and Debenhams having been hit with lower sales this Christmas.

Interestingly, Remainers were more to blame for the Christmas woes of some retailers, with 17% of Remainers agreeing that they were spending less in the run up to last Christmas (2018) then previously, versus 12% of Leavers.

On the whole, Remainers are "most circumspect about spending" Harwood says. 32% of Remainers vs 23% of Brexiteers feel less comfortable on their income now than in November 2017, and Remainers are more likely to agree that they will spend less over the next year (20% vs 12%).

Harwood confirms that post-Brexit the industry can still expect consumer spending to drop, at least in the short-term, "as people wait to see just how much they are affected personally before jumping into any large purchases. As reality bites, it will be interesting to see how quickly the Brexiteers adjust their spending plans as well.”

However, with such uncertainty, "we need to monitor the situation closely and take a dynamic approach to decision making as it becomes clearer how the market is reacting."

Although expectations for consumer spend remain foggy, Harwood is confident that public engagement with media and advertising will actually increase post-Brexit - creating a missed opportunity for advertisers who pull their budgets too quickly.

"In uncertain times, people tend to seek out familiar voices and content that offers a sense of escapism"

Since the 2016 referendum, publishers have recorded an overall boost in readership across all platforms, including print and digital.

"We expect Brexit to drive an increase in audiences from newsbrands, as people look to be better informed of news stories and their implications," he says.

TV viewing figures also saw a boost during the 2008/09 recession, with people choosing to save money by entertaining themselves at home. If the UK experiences economic turbulence following its departure from the EU, TV may once again see its audiences grow.

According to Harwood, media owners don't currently have plans to adjust their sales targets following Brexit. “So with media rates set to be deflationary as advertising investment declines, but audiences maintained at the very least, brands can expect more bang for their buck.”

As such, advertisers should maintain rather than cut their budgets, as they will benefit from increased share of voice and will likely see their market share grow over the long-term, as prominence tends to drive increased penetration.

“Advertisers that offer a consistent tone of voice and show they can be trusted in a difficult climate, should also do well. In uncertain times, people tend to seek out familiar voices and content that offers a sense of escapism.” Plus, consistency of spend and message is "crucial" for avoiding adstock depletion and maintaining positive brand perception.

On top of that, Harwood reminds clients that it takes a long time to recover sales levels after a communication holiday, and that effects on profitability in the mid-term are potentially more serious than those on cash flow in the short-term.

If brands and advertisers fail to heed advice to hold their nerve, they can expect to see their competitors "substantially increase" the saliency of their brands, establishing an advantage over them that "could be maintained for many years".


@mejefferson_

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