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News analysis: Moral dilemma? Advertising and the cost of living crisis

UK consumer confidence has plummeted to its lowest level for nearly half a century as the cost of living escalates. Can — and should — brands and agencies help?

A recent FT report cited a stark statistic from research company GfK: consumer confidence is at an historical nadir, falling two points to -40% in May, its lowest level since records began in 1974.

It’s for good reason that confidence has taken such a bashing. A catalogue of factors has fuelled the highest level of inflation in 30 years, the foundations of a cost of living crisis that is being exacerbated by stagnant wages, rising energy and fuel prices, the war in Ukraine and post-lockdown and Brexit-induced supply chain collapses. And things are set only to worsen.

As more people face unprecedented hikes in the price of pretty much everything — from heating and petrol to food and clothing — there’s increasing clamour for action from government and from advertisers.

While the Prime Minister advised recently that the best way the UK population could cope with the cost of living crisis was by working longer hours or getting a better paid job, some advertisers and their agencies are attempting to help offset the hit to consumers’ wallets.

Pete Markey, chief marketing officer of Boots, says that he and his department’s role is to “serve our customers’ wellbeing for life including in moments like this when finances are stretched and value for money is even more top of mind”.

“A key feature for all our marketing activity at Boots is value for money,” he adds. “So much so that it’s one of the key brand KPIs that we measure.

“My view is that most consumer brands right now should be working hard to keep in step with consumers’ lives and ensuring that whatever they are communicating, real value for money is front and centre.”

Some brands have been actively campaigning around the crisis, or at least acknowledging it. Earlier in May, British Gas launched a campaign featuring a single dad to raise awareness of the support available for energy debt.

Meanwhile, Michael Lewis, chief executive of the UK’s biggest energy supplier E.ON, said this month that one in eight customers was in arrears. The price cap for bills rose from £1,277 to nearly £2,000 a year and is expected to increase to at least £2,600 in October, with Lewis saying it could even rise to as much as £3,000.

Tangible solutions

According to Havas Media Group’s recent Cost of Living study, advertisers “must show tangible, meaningful solutions” to the crisis. The media agency’s research found a 77% net increase (compared with pre crisis) in the number of consumers saying they expected brands to help them save money. It also found that consumers were now attaching greater importance to “functional benefits such as delivering on promises (74%) and [the] offer of quality products/services (74%)”.

The functional benefit that has experienced the biggest increase in consumer expectation is fair pricing — with a three-quarters net increase in the number of people saying “it is more important for brands to offer products and services that are priced fairly for the quality than before the crisis”.

It is this that Boots has responded to. In light of tightening purse strings, the retailer has recently launched a campaign for its Price Advantage, which gives its more than 14.7 million Advantage Card-holders savings on 500-plus products in-store and online, which Markey says has saved customers over £8m to date.

“We will have rolled this out to over 1,000 products by September,” he says. “We’ve also communicated some of our other key value messages across the past few weeks, including more than 1,000 everyday essentials, priced at £2 and under, such as shower gel, toothpaste and tissues, in all our stores and online.”

Essential value

Clearly, there are certain goods that consumers need to live their lives and thus the gap between essentials and luxuries widens. As Matt Rhodes, chief strategy officer at Engine Creative, notes, in recessionary times, when consumers are feeling the pinch, people “make more active decisions”.

Particular categories have more of a duty to market responsibly during tough times than others. For Tony Mattson, head of strategy at Havas Media Group, supermarkets, utilities, telecoms companies, financial services and entertainment are “all categories with wide reach across the population and to which people pay significant and regular sums of money each month”.

“I think that does give them a duty of care. Supermarkets in particular responded well and notably to the Covid health crisis, so precedence exists.”

Rhodes concurs: “[Consumers] are more likely to ask themselves if they really need this product, do they need to choose this brand over another brand, and how they justify a price premium in terms of cost-benefit (if they can and if there is one)? Advertising helps brands communicate to help inform consumers better to make the decision that is right for them in the environment they are currently in.”

David Craft, senior planner at Forever Beta, makes reference to Mintel head of EMEA research Toby Clark, who argues that in recessionary times people become “laser focused on value”.

“But value doesn’t just mean price,” Craft says. “Value equals price plus quality. First things first: fair pricing should be a given. That being said, brands can’t get too fixated on the price aspect of the value formula. Advertising on price is a short-term solution with long-term brand health implications.”

Moral dilemma?

Advertising is designed to draw attention towards a particular product or service and, ultimately, to get people to buy it, and this, of course, applies as much to non-essentials as it does essentials. Does this present the industry with a moral dilemma?

Not according to Rhodes. “Persuading people to buy products and services isn’t always about trying to grow the market by convincing people to buy new things, or choose more premium options,” he says.

“Often, advertising is about helping people make the choice that’s right for them. And as an increasing number of consumers are either currently strapped for cash or changing their behaviour because they fear being restricted for money, they will need to make more of these decisions.”

Mattson is equally dismissive of the notion of a moral dilemma “Advertising and communications are a part of the marketing mix,” he says.

“Their role is to influence shopping decisions, but advertising doesn’t work by convincing people to do something. That is an outdated view, as Paul Feldwick shows in his excellent book, The Anatomy of Humbug. I believe advertising has an important but weaker effect on people more akin to the model that Les Binet has outlined.”

In essence, Mattson explains, Binet’s model posits that advertising increases or maintains sales and margins by “slightly increasing the chance that people will choose your brands, by making the brand easy to think of and easy to buy, and creating positive feelings and associations”. It does this via broad-reach brand ads that entertain and interest people and “target activations that consumers find relevant and useful”.

“When conducted correctly and responsibly, I see no moral dilemma in the actions of marketers and their agencies,” he says.

Jen Musgreave, strategy partner and head of insight at Rapp UK, agrees that marketing faces “no more of a moral dilemma now than it did the last time we weathered a recession in the late 2000s”.

Recessionary behaviours

She adds: “Brands need to recognise the pressures consumers are under and help them do what they want to do more affordably. We are seeing the return of recessionary behaviours, and consumers are reacting to the cost-of-living crisis in predictable ways.”

Musgreave cites reducing spend, trading down to a cheaper alternative, shopping smart, switching brands and treating themselves to small, occasional indulgences.

“The interesting outtake for recessionary consumer behaviour is that people are more likely to reduce frequency of spend on non-essential items rather than quality,” she says. “So, as consumers cut their regular subscriptions and memberships, this is balanced somewhat with less frequent treats from one-off providers.

“Brands that recognise and support recessionary behaviours will do better, including the occasional blowout that consumers will factor in. In fact, because it’s less frequent, the blowout will be bigger and better.”

Social conscience and commercial imperative

There is an onus on advertisers and agencies to act responsibly. Markey argues it is central to why Boots exists, noting social responsibility “extends to our work with The Hygiene Bank, where with them we support families in vital need of hygiene essentials”. As part of this tie-up, the retailer donated more than 222,000 toiletries to the bank in 2021 and established more than 465 donations points in stores across the UK.

But ultimately, advertising’s raison d’être is to persuade people to buy and, there are no two ways about it, the lifeblood of business is to sell. So how do advertisers balance commercial imperative with social responsibility?

Rhodes insists that the two are intrinsically linked: “Brands that are not socially responsible — or, at least, those that are socially irresponsible — will see negative commercial impacts in the long term,” he says.

“Being socially responsible is about understanding the customer’s context and communicating in an appropriate way. Brands that do this will see commercial success in the medium term to long term.”

Jen Musgreave is a Strategy Insight Direction at RAPP UK

This Article originally ran in Campaign in May 2022



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