Our 2021 forecast: forecasts about 2021 won’t help you

With so much still uncertain, John Bradley and Carrie Bradley recommend protecting what you already have: brand and price.

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By John Bradley and Carrie Bradley

Forecasts of sales and cash flow have almost completely lost their utility during 2020, so we have been obsessively examining the many implications this has for marketers and their agencies in our training and consulting.

Pre-authorized budgets disappeared; business continuity initiatives became much more important than brand growth initiatives; forward planning horizons shrunk from years to weeks – all because the future had become essentially unforecastable to any reliable degree of accuracy.

So, you can imagine our delight when we received WARC’s State of the Industry report for 2020-21, which informed us that global advertising investment is forecast to rise by 6.7% this year. We particularly loved the decimal point accuracy of the forecast. Not 6.6% or 6.8% – precisely 6.7%.

That prompted us to make two forecasts of our own:

1) Global advertising spend will not increase by exactly 6.7% in 2021
2) Marketers and advertisers who plan anything on the basis of forecasts like these will be re-planning their careers before the year is out.

We were equally dubious about Dentsu Aegis Network’s latest global survey of CMOs when it came across our desks, especially when we saw what they were spending their time worrying about.

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In our view, CMO’s aren’t much help to their employers if they are spending their working hours trying to understand what consumer behaviour is temporary or permanent and how to align with new and changing consumer spending, because these are still unforecastable.

But the unreliability of future forecasts and consumer mindsets does not mean advertising cannot play a crucial role right now. We believe that the biggest mind-shift that needs to take place is around the primary purpose of spending advertising dollars: instead of attempting to grow sales, they should protecting what you already have. Namely, price and profit margins.

With consumer spending down for who knows how much longer, and many brands suffering prolonged sales slumps, the temptation to throw price reductions into the mix to try and grab a larger slice of a smaller pie will begin to prove irresistible. But resist we must, because price premiums, even very modest ones, are the ultimate profit generators. They pay off in every single transaction, and it goes to the bottom line. CFOs and CEOs love conversations about these things because price is a much more certain profit generator than volume gains, especially at a time when volume gains cannot be believably promised or guaranteed.

Can advertising support price? Of course it can. Some of the most famous advertising campaigns in history were designed purely to support price, be it De Beers’ “Diamonds are Forever” and Stella’s “Reassuringly Expensive.” But we aren’t just talking about luxury brands. If your brand can’t carry any kind of price premium versus the cheapest alternative then you don’t have a brand, you have a product with a name that you are wasting valuable resources on.

Our advice to any marketer or agency in charge of a brand with any kind of price premium is to make all your brand investment conversations about being able to maintain price during these troubled times so that, when better times return, you will still have it.

Key to making advertising support price is getting the tone right. We like Patagonia’s current work in that regard – focusing on how moving away from fast fashion gets you longer lasting clothes that have less of an environmental impact – but we like McDonald’s showcasing its investments in Canada and Canada’s farmers even more; it’s a good reason to keep buying McD’s at the current prices.

We want to see more campaigns like this because every brand could do with justifying why their current price is worth paying versus taking the nuclear option of trying to buy volume. Whether you are a client or agency brand custodian, your ultimate custodial duty as we enter 2021 – given that you can’t guarantee to protect volume – is to protect price, margin, brand equity and future value. Because when you lose those, you have lost everything.

 

john and carrieJohn Bradley and Carrie Bradley are managing partners of The Bradley Group.