OPINION17 July 2014

A confidence boost?

Recent reports have revealed growing confidence among consumers and marketers. Richard Sexton of Carat discusses the opportunities and pitfalls for brands.

This is just one example of how marketers are feeling increasingly confident about consumer spending habits; proof of the sustainability of this confidence is coming from all sides.

Similarly, a subtle but significant milestone was reached in last month’s GfK consumer confidence index report, which turned positive – just – for the first time since 2005. Even more significant for advertisers was their ‘Is now the right time to buy a major purchase?’ index reaching its highest level since before the recession started in 2007. Finally, a recent Mintel study has also shown that over two thirds of consumers ( 69%) now feel their household financial situation is ‘ok’ or ‘healthy’.

Clients are reacting positively to the broader economic indicators of continued low interest rates, decreasing unemployment (now at their lowest level for nearly six years, according to the ONS) and rising growth forecasts for the UK. More marketers predict increasing their marketing spend rather than reducing it. We are seeing this within our own client base, especially in the luxury goods sector.

At the other end of the spectrum, the fact that Lidl is encroaching on Waitrose’s territory, and will soon be launching a range of upmarket wines in its stores – including a Châteauneuf-du-Pape – suggests more consumers are willing to spend on discretionary purchases, as long as they continue to get value for money. That recessionary trend is looking to be permanent, and why Sainsbury’s and Tesco’s have been suffering of late.

“More consumers are willing to spend on discretionary purchases, as long as they continue to get value for money”

We haven’t had to rely on That Major Sporting Event this summer to drive incremental advertising spend this year (a good job, given England’s poor performance across a number of sporting pitches), and the market is continuing to look robust for the second half of the year. This is significant for media planners when they are creating media ecosystems for clients, because it gives them the confidence to recommend additional channels that will enhance the business value a campaign can deliver to a client – rather than worry about how many fewer TVRs should be on a plan year-on- year.

Our industry sector needs confidence to continue to strengthen, as future forces still have the potential to derail positive sentiment. The increasing pace of globalisation means marketing pots are more often than not being divided up at a pan regional level, and Europe probably won’t look too kindly on a Britain without Scotland, and a newly shuffled, more Eurosceptic Government. There is serious talk now of interest rates rising this side of Christmas – potentially just in time to dent that significant Golden Quarter for both brands and retailers.

Let’s hope consumers continue to hold their resolve, and that Beckham whisky is being drunk to raise more toasts, rather than drown a few sorrows.

Richard Sexton is chief operating officer at Carat.