Consulting Insights

Ovative Outlook September 2023

by Leander Cohen |

The media landscape is ever-changing. Each month, Ovative reports on the essential considerations for today’s marketers, and what action they can take to unlock success. 

Consumer Trends

Trend: Consumers are feeling slightly less confident in the economy than in July

• University of Michigan and Conference Board measures of consumer confidence were down, bucking a trend of optimism in June and July. Contributing factors may include a rise in the inflation rate (+0.3%) and a slightly tougher job market (unemployment also rose 0.3%).^{1, 2, 3}

Trend: Consumers spent confidently this summer, but may pull back this Fall to save up for Holiday

• Consumers were eager to spend this summer, from a historically strong Amazon Prime Day to record projections for Back to School as we referenced in last month’s Ovative Outlook. However, with declining economic confidence and rising prices, we expect consumers to pull back this Fall as they look to save for Holiday.⁵  
• Despite the surge in spend this summer, lower-income consumers continued to trade down. Retailers such as Walmart, Dollar Tree, and TJX (TJ Maxx and Marshalls) saw a rise in sales in Q2 – particularly in essentials – as consumers prioritized value in response to higher prices.⁶

With declining economic confidence and continued rising prices, we expect consumers to pull back this Fall as they look to save for Holiday

Spending Intentions by Event, 2023⁷

• Most consumers are planning to spend less than $100 during Labor Day and Halloween, but over $100 during Thanksgiving and Christmas. 
• Marketers should therefore be selective in when they choose to promote deals. 

Action  

1. Marketers should invest in Holiday-centric strategies to generate awareness leading up to discounts while driving conversions from loyal customers during this slower Fall season 
2. Marketers with middle to lower-income audiences should prioritize value in their messaging – especially during Holiday – to demonstrate their products are worthwhile despite higher prices 

Retail & Marketing Trends | Why Consumers are Becoming Less Brand Loyal

Reason 1: Consumers are prioritizing price over brand loyalty 

• In 2022, half of consumers reported switching to less expensive brands, up from around one-third switching in 2020.⁸ 
• Gen Z in particular is contributing to this trend – 62% report that they will explore alternative options even when they have a favorite brand in a particular category.⁹ 

Reason 2: Consumers are trusting influencer recommendations over loyalty to specific brands

• While in-store browsing and search engines have traditionally dominated the purchase journey (51% and 49% in 2021; respectively), consumers are increasingly using social and video to browse for products.¹⁰ This is driven by greater trust in influencers; this year, 81% of consumers reported that influencers drove their interest in an item or service, up from 61% in 2020.¹¹
• This is especially true for Gen Z, who use social (49%) and video (41%) as their primary platforms for shopping inspiration and rely heavily on influencers. 58% of Gen Z respondents said that influencers expose them to new products and/or services, compared to 53% of millennials and 42% of Gen X.^{10, 12}

In 2023, 81% of consumers reported that influencers drove their interest in an item or service, up from 61% in 2020.

Action:  

• Consumers are more willing to switch brands than ever before. To drive retention even as customers look to trade down, marketers should consider strategies that emphasize value, including loyalty programs, discounts for returning customers, and lower-priced items to purchase even as customers save up for key moments like Holiday. 

• While it may be more difficult to retain customers, there is more opportunity to acquire. Marketers should consider leveraging influencer strategies for acquisition. Ovative’s influencer team suggests leaning into exploring partnerships with Nano and Micro creators who can produce content quickly and work as a production arm of your team. Budgets can go further within this group and reach can still be impactful with highly engaged audiences.

Channel Fast Facts: 

Here are the channel trends Ovative is seeing across retail clients ¹³ 

Paid Search: Search prices are rising as advertisers look to secure lower-funnel conversions from shoppers 

Paid Social: Meta remains lower-priced 

Upper-Funnel Media (The Trade Desk): is decreasing as advertisers prioritize lower-funnel spend to drive sales 

Headlines We’re Watching: 

• TikTok opened search ads to all advertisers. Brands will now be able to place ads alongside organic content that appears while searching the app, which has become a popular tactic for Gen Z users to search for brands and product recommendations.¹³ 
• Meta is considering rolling out ad-free, paid versions of its platforms in Europe. The move is a response to Europe’s stringent data collection policies, including a ban on combining user data collected across its platforms. While a similar move is, for now, unlikely in the U.S., it suggests social platforms like Meta may increasingly turn to subscription models if their ad practices are threatened, presenting a challenge for marketers.¹⁴ 

TikTok search ads may be new, but Ovative experts have been advising marketers on a more holistic approach to TikTok including search and influencer. Learn more in our article to leverage the full impact of TikTok.

So, What’s Next?

At Ovative, we are keeping a pulse on what is happening in the marketplace so we can best keep our clients ahead of the curve. Ovative can help your brand understand what’s going on in the media landscape and, more importantly, how to take action and drive impact with your marketing spend.  Connect with us to ensure your marketing is reaching its full potential! 

Sources: [1] UMICH [2] Conference Board [3] The New York Times [4] U.S. Bureau of Labor Statistics [5] U.S. Census Bureau [6] The New York Times [7] Numerator [8] McKinsey [9] Oliver Wyman A-Gen-Z Report [10] Statista Consumer Insights Global Survey [11] Matter Communications Influencer Survey [12] Insider Intelligence [14] O/g Platform Client Data – pulled for August 1 – 31 [15] The Verge [16] The New York Times