Retail in Asia


Should SEA brands cut their ad spend amid recession?

Advertising spending is decreasing, and more cuts may be coming, including in Southeast Asia (SEA) where digital media agency Next&Co sees average digital ad spend declining by SGD 1 billion in value terms during the first quarter of 2022.

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And so, for brands and marketers, this truly begs the billion-dollar question – should Southeast Asia’s brands cut their ad spend amid a potential recession? In view of this, Retail in Asia caught up with Rene E. Mendez, Co-Founder and President of Involve Asia – credited as a leading authority in the business and digital marketing space. Together we discussed post-pandemic ad-growth in SEA, how brands can stretch their marketing dollars, and what shrinking budgets look like for resurging sectors on the global rebound.

RiA: Consumers are becoming more conscious about their spending. Should we expect brands to cut down on advertising spending, as a result? What does reducing ad spending mean for publishers and brand marketers? 

Mendez: While it’s usually the first instinct for brands to cut out advertising, it can also be the most detrimental. Despite the world beginning to re-open, the after effects of the pandemic on consumer behaviour and brand-to-consumer engagements are here to stay. As reduced advertising spending by brands will result in revenues going south for publishers, the latter will need to strategise more on the creative formats on their platforms to drive the visibility of their advertising placements for their customers. From a brand marketer’s perspective, they will aim to stretch their budget to raise the most brand awareness, engagement, and conversion rates for their brand. Not all advertising is equal, for brand spend it can definitely be the case for cuts. However, for brands who use advertising platforms that are 100-percent performance-based, this period represents an excellent opportunity to get performance marketing at discounted prices.

RiA: Consumers are still facing global recession pressures and rising inflation. How is this affecting post-pandemic advertising?

Mendez: Just as there were winners and losers during the pandemic, the same can be said in the coming recession.

There is definitely shared sentiment among brands that the end of the pandemic was supposed to usher in a period of growth, but it hasn’t happened. Quite the opposite. As a result, we expect certain brands (namely luxury goods, entertainment, etc.) to see a slow down and as such, reduced spending. On the other side, we should see an increase in presence from (buy-now-pay-later) BNPL and other fintech players, as well as those in daily necessities like FMCGs (fast-moving consumer goods).

RiA: Should Southeast Asia brands cut their advertising budgets in response to a potential recession? In the first quarter 2022, what are the average digital ad spendings?

Mendez: We are certain that certain spends were in decline. However, for us, we’ve been seeing a continuous growth in spending. Some brands have been seen pausing spends, but shortly after will resume with us, as there is always going to be a solid demand for performance based advertising

RiA: How can brands accurately attribute the performance of their digital ad campaigns?

Mendez: Unlike traditional and organic marketing, performance marketing will only require advertisers to pay when the measure for success has been met. Such metrics include cost per mile (CPM), cost per click (CPC), cost per action (CPA) and lifetime value (LTV). Performance marketing is specifically used to drive action, track and measure those actions, all while attributing the ROI (return on investment) of each campaign.

There are specific platforms like ours that operate through integration with advertisers, in order to accurately attribute spends to sales. This allows brands to measure beyond the surface level metrics like CPM, CPC and so forth, and instead measure it directly to sales performance.

RiA: Is it possible for brands to stretch their marketing dollars by enhancing marketing strategies?

Mendez: It’s almost a rethink of how marketing should be done. Marketing has become increasingly complex with more platforms coming out with their own closed advertising ecosystems. Marketers need to look at audience owners instead. Working directly with audience owners allows brands to operate without being tied down to specific platforms. Operating with this in mind also expands to how brands incorporate niche audiences into their omni-channel marketing mixes.

The strength of influence that many people have in their respective niches must be leveraged effectively for brands to truly get sales, or adoption, that is sustainable.

RiA: As part of the marketing strategy, can different ad channels be used to reach new and existing clients?

Mendez: The strategy of focusing on one single marketing and ad channel is no longer efficient. To ensure relevance and deeper long-lasting connections brands need to adopt an omni-channel strategy to ensure they stay competitive and avoid saturation. Different marketing channels bring varying benefits and help brands meet a range of business goals. Using different channels creates multiple points of contact, and helps nurture leads and increase conversions from a diverse audience base.

Ad channels and formats are constantly changing and in many cases, new ones come and go within months. Keeping up with this can be extremely difficult. Instead brands need to look at how they can work with audience owners – this allows them to reach audiences on a single or multiple platforms. The audience always goes where the content is and this is an effective method to move along with them.

RiA: How do shrinking budgets affect resurgent sectors on the rebound, such as tourism and e-commerce?

Mendez: For industries rebounding or just growing in this period, shrinking budgets from other sectors should be seen as an opportunity to gain additional visibility through reduced noise from other brands.

SEE ALSO: Study shows 61 percent of Singaporean consumers prefer in-store shopping

The travel industry needs to adopt a fresh perspective moving forward by seeking to understand its customers as microsegments, instead of adopting a one-size-fits-all approach. Travel being deeply personal has immense scope for innovation and customisation while travel companies attempt to revamp customer-experience interventions as they broaden their view of what constitutes the customer journey. We will also see new and unconventional partnerships that will aim to restore travellers’ confidence, as travel companies prepare for the long term.