Inflation Causing Pullback in TV Spending By Advertisers

Concern over the impact inflation is having on business has advertisers pulling back on their TV advertising plans, according to a study by Advertiser Perceptions.

Advertiser Perceptions

(Image credit: Advertiser Perceptions)

Three of four U.S. advertisers said that rising inflation rates, as well as supply chain issues, are having a negative impact on their business, with marketers in the consumer packaged goods, auto and retail categories feeling the most pressure, according to the survey.

As a result one in five advertisers have reduced their marketing budgets, with the cutbacks averaging 16%.

Marketers put a pause on spending mainly on media channels aimed at awareness and brand building–what’s known as the upper portion of the marketing funnel, Hardest hit were connected TV, paused by 47% of those responding, digital video (44%) and linear TV (42%).

Four in five advertisers said the expected to restart budgets by the end of 2022, with the others planning to restart sometime in 2023. Three in 10 said they would restart spending on CTV as soon as inflation abates.

Brands in many categories are also rethinking their ad messaging in light of the way inflation is affecting consumer attitudes and behavior.

Inflation has businesses focusing more on profitability than on customer acquisition. In that environment, marketers will favor media channels that allow them to use data to target their best customers.

“Inflation and changing economic conditions will make identity even more important,” said Eric Haggstrom, director of forecasting at Advertiser Perceptions. “As brands shift focus from growth at all costs to profitability, being able to reach current and past customers reliably across channels will be paramount.”

Nicole Perris, VP of business intelligence at Advertiser Perceptions, suggests that business do four things in this environment.

● Prioritize media that orient toward customer lifetime value rather than acquiring new customers. Analyze channels according to ROI on nurture and LTV metrics, and work with partners for ways to lean into those channels more with appropriate levels of scale.

● Lean on retail media more, particularly looking at advertising opportunities around closeouts by stores overloaded with inventory.

● Buy more in media where bid density has lowered, such as digital video. Less competition means active advertisers will likely get more for their budgets than they did last year.

● Apply first-party data to addressable and connected TV advertising to reach precise audiences as efficiently as possible.

“Media with first-party data can make the strongest case for upper-funnel or brand advertising, especially where it’s becoming less expensive than performance channels,” said Perrin. “That’s a massive opportunity where the crux is context and audience rather than clicks.”

Perris adds that for CTV inventor owners, flexibility matters. By providing the creative and latitude for advertisers to move advertising across campaigns and ad products, she said, media can make it easier for advertisers to capitalize on temporarily reduced competition in the medium. 

Advertiser Perceptions surveyed 300 advertisers and media buyers in April for this study. ■

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.