Monday 25 November 2019 5:56 am

Confidence tricks: How advertising can predict a recession

Alex Hesz is group chief strategy officer at adam&eveDDB.

“There’s going to be a recession,” someone says at a dinner table or boardroom meeting, certain of the fact. “You can see it coming.” 

In advertising, we’re at the coal-face of confidence — the barometer and engine room of recession and recovery. What we look for are three measures of confidence which correlate with historic recessions: corporate, consumer, and creative. 

Spending on advertising is itself indicative of corporate confidence. Here, the news is positive. Total spend is predicted to rise by five per cent next year to £24.7bn, driven by continuing growth of digital and a resurgence in video. 

So far so good, but the second measure — consumer confidence — has been falling since the Brexit vote, with GfK’s scores declining from zero to minus 14. 

In advertising, we have a further layer of insight: ad response (the extent to which consumers respond to advertising versus historic norms). Here, we’re seeing a difference. A drop followed the referendum, but reverted quickly. For two years, people responded largely as before. 

But the last six months have seen deviation. Ads are becoming less effective, just as they did in early 2008. The gap is opening, especially in high-value purchases such as for cars.  

The final measure is the most subjective: creative confidence. Despite overwhelming data showing that distinctive, brand-building work drives long-term effectiveness, marketing departments become nervous when times are tight. 

This leads to “safe” advertising that’s sales-oriented and short-term. This is particularly true for campaigns that matter most, like Christmas campaigns for retailers. 

These nervous marketers confine creative bravery to less critical work, such as corporate social responsibility campaigns and one-off PR stunts. 

With the laudable exception of brands like Nike and John Lewis, more than 50 per cent of the highest awarded work at the Cannes Festival of Creativity was stuff that real people have never seen. Businesses were happy to be brave, but only when it didn’t count. 

Luckily, the data is just as instructive on how to avoid this crisis.

This is the formula: investment in brand, spend on broad-reach marketing, and bravery in execution. 

It’s not complicated, but the results show that it works in every category from B2B to grocery. The “safe” way to go is the real risk. Those safe paths — indicative of lost confidence — are how to bring about and then suffer badly through, a recession. 

But signifiers of confidence — going broad, brand and brave — will help avert one. And if it’s too late to stop a recession, this formula shows you how to make it through.

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