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As the year comes to an end, it’s time for business leaders to take stock and realize the recession many of us feared this year did not hit. In fact, with consumers still spending healthily and sitting on lots of disposable income, now marks a bigger marketing opportunity than ever. In the December 2023 edition of Hitting the Mark – originally published in Barron’s – I share what leaders need to learn from the recession that never came.

As always, if you have questions or comments, please reach out to me.

Companies Cut Marketing as If a Recession Was Coming. It Didn’t.

Fears of a recession drove too many companies’ executive decisions this year. They hunkered down and cut marketing spending and maybe digital innovation, too. Then the news came that there was no recession—in fact consumers were spending on all sorts of consumables. Companies that bet on recession lost out.

The old, trusted brands faced little competition, since their nemeses pulled back. Consumers turned to familiar faces, and so the big companies pocketed market-share gains. Those chief financial officer-driven orders looked good on paper—in reality they cost businesses tremendously. Consumer timing outside of a recession is as impossible as stock market timing. Consumers often defy logic and expectations – and this year they were spending.

Pulling back wasn’t entirely irrational. This time last year just about everyone was scared of a looming recession. Reuters polled economists in Oct. 2022 and found 65% thought a recession would occur within the next year. In Dec. 2022, 80% of Americans thought the country was either already in a recession or would be in the following year, according to the Harvard CAPS/Harris poll.

But the recession never came. After steady growth all year the economy grew by 4.9% in the third quarter of 2023, driven primarily by consumers. Consumer spending increased 4% for the quarter and was responsible for 2.7 percentage points of the total GDP increase—signs of a strong economy.

Consumers Keep Spending…and Spending

Consumers turned out to have more money to spend than ever. Thanks to Covid-era stimulus bills and shutdowns, median net worth rose 37% from 2019 to 2022. Americans still have an estimated extra $1.7 trillion in savings. Even in the third quarter of 2023, disposable net income grew 3.8%, nearly triple what economists were forecasting. With the economy mostly returning to a post-pandemic normal, consumers are eager to spend on experiences.

Consumers went on a shopping spree this summer. Spending at movie theaters, restaurants, sporting events, and casinos all rose in August. Spending on international travel and airline transportation shot up in September. Overall last quarter, the consumer spending increase was spread almost evenly across goods and services.

It’s not just wealthy consumers who are opening their wallets. Retail sales have risen six months in a row. The holiday season is already off to a good start. Online spending for Black Friday was up 7.5% this year, according to Adobe. That’s right in line with a forecast of 7-9% for e-commerce holiday sales growth this year. Overall holiday season sales are estimated to rise 3-4%, less than the pandemic years, but that’s still a healthy increase.

The Challenger Imperative

So challenger companies that pulled back on spending wasted a whole year not getting their name out there and putting up a fight for new customers. Smaller brands suffer disproportionately when everyone cuts their marketing budgets. People will fall back on what they know rather than try new, unfamiliar things.

Companies need to recognize their mistake of pulling back in fear of the recession that wasn’t. The lesson for 2024 is to resist that fear again and think twice about cutting back on marketing and other engines of growth. Consumers are still sitting on lots of disposable income and the percentage of Americans who think the country will avoid a recession entirely has nearly doubled in the past twelve months. The Fed is holding rates steady and is hopefully done with its policy of economic blood-letting.

The established companies want the upstarts to keep doing nothing and giving away market share for free, but challengers must keep their foot on the gas pedal. They have even more ground to make up after this lost year. The recession never came, but the consequences were real and serious. Hopefully those trying to predict consumer trends will learn the lesson that many stock-market timers have learned—you pull back from advancing in the marketplace at your own peril.

Until next time,

Mark Penn

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Smart Spending & Spirited Selling 

It’s not enough to promote holiday deals; brands and retailers must take a more inquisitive approach and understand consumer behaviors and the economy. According to Allison’s “2023 Holiday Retail Landscape,” consumers have set budget limitations this holiday season, with 49% planning to spend less than $1,000. However, retailers should still expect an uptake in sales compared to 2022. Read the report to discover why a “back to the basics” approach will serve brands best this year. 

Pumpkin Spice & Everything Nice 

Does Mariah Carey kick off the holiday season, or does it happen earlier, when Pumpkin Spice lattes hit the shelves? It’s tough to say, but one thing is for certain: the flavor has cornered the market and culture year after year. Stagwell Marketing Cloud leveraged proprietary data from its Harris Quest brand tracking platform to discover the public’s true feelings about the iconic fall flavor (hint:85% still love it), and how brands should look to the pumpkin spice phenomenon as a model for making a lasting impression among consumers. Read the report.

Staying on Trend & Standing Out 

It’s out with the old and in with the new. Traditional shopping perks are still effective, but evolving consumer preferences point to new purchasing incentives, according to research by The Harris Poll and Nogin. Consumers want their shopping experience personalized – email promos and brand recommendations – all tailored to their specific wants and needs. Learn more about what consumers are looking for before they hit “buy” here.

Transforming Marketing This Holiday Season

Social media has encapsulated consumer shopping habits, so it’s up to brands to come up with clever ways to stand out and stay on target. Assembly’s “Influencer Marketing: Holiday Trend Report” captures top trends and considerations for planning your approach to holiday campaigns. Explore different ways brands can leverage influencers and nail consumer messaging here.   

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Mark Penn

At the end of October, I brought my bestselling “Microtrends” franchise to the Association of National Advertisers’ annual Masters of Marketing conference keynote stage, and now I’m bringing the insights to you. This month’s edition of Hitting the Mark dives into these small, counterintuitive trends that have big impacts on society and will shape tomorrow’s consumers. If you want to predict the future, you must have a better understanding of the present.

Today’s consumers are older, more health-driven, more diverse and more divided into microtrends than ever before. Our world today is driven by personalization and technology. The march in personalization has transformed our economy from the Ford economy (any choice as long as it’s black) to the Starbucks economy (150 choices starting with black coffee) to the Uber economy (infinite personalized choices). But the paradox of choice is that more choices available lead to fewer choices made.

Here are the key microtrends that businesses should consider.

Life is an accordion. And it’s getting longer as life milestones are getting pushed back for the young and the old.

• Footloose and fancy-free: Since 1980, the median age of first marriage has increased eight years for women and men to 29 and 31, respectively.
• Mid-life fertility: Birth rates are jumping for women in their late 30s and early 40s with the median age of women giving birth rising to 30, the highest on record.
• Nonagenarians: The 90+ population has nearly quadrupled in the past 40 years to over 2.5 million Americans.
• Senior spenders: Last year the 65+ population accounted for a record 22% of U.S. spending with healthier finances, less need to borrow, and little worry about layoffs. And Baby Boomers are retiring with $77 trillion in wealth.

Tech goes both ways. Many Americans eagerly seek out the latest upgrades, but other groups are starting to intentionally opt out.

• Self-data lovers: 43% of Americans now track their health and fitness information, mainly on smartphone apps.
• Technology-advanced people: 79% of Americans expressing interest in a device that would enhance their hearing or vision.
• Bots with benefits: Over a quarter of American households have Amazon Alexa devices. AI will help voice eventually replace links as the primary mode of communication between computers and people. Bots will soon be able to use personal information to mimic acquaintances and computer-people interactions will become more human.
• The new addicts: Technology comes with negative effects too. Half of U.S. teens, especially teenage girls, report feeling addicted to mobile devices.
• New Luddites: Tech backlash is rising among a growing group that doesn’t want constant connection to the grid. While 85% of users have smartphones, global “dumb phone” sales were projected to have hit 1 billion devices in 2021, up from 400 million in 2019.

Wagyu everything. We are seeing the rise of the super-premium marketplace – where there’s good, better, best and Wagyu. Wagyu consumption rose by 153% between 2020 and 2022 as consumers with the money choose deluxe whenever they can.

So how can businesses take advantage of these microtrends?

• Data is king. You will lose out if you have no personal profile of your consumers.
• Think services as much as products.
• For every marketplace, there is a counter-marketplace.

As always, please reach out with questions and comments.

Until next time,

Mark Penn

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It’s Not All AI, All the Time

AI was obviously top of mind for Stagwell at AWNY, but while the industry looked to things like Retail Media’s rapid rise for inspiration, we helped marketers understand the other big media story of 2023 and 2024: political media. In our AWNY “Three Quick Things” recap, get the scoop on what marketers need to track as the 2024 election – and political media spend – heats up. Spoiler alert: neither your brand, nor your consumers, will be able to run from politics in 2024. Learn more. 

Can Picasso Live in the Machine? 

How did our AWNY debate resolve? Panelists could agree on one thing: AI is not here to replace humans, it’s here to enable better creativity and more effective ways of working. Which is why we were excited to see this new work break from Stagwell’s Doner Partners Network for Staedtler. In the campaign, the team masterfully uses AI as a foil to showcase the limits of technology’s brand of creativity, and where human hands need to keep steering. Check out a recap of the work in Strategy magazine.

What’s It Take to Get AI Right? A Little Bit of Tech in Your Talent Mix

50/50. That’s the breakdown of creative talent and engineering talent within Stagwell’s digital transformation network Code and Theory. And to hear Pradeep Chelpati, Code and Theory‘s Global CTO tell it, that breakdown is a large reason why Code has been successful in helping clients (like Tipico) make sense of the AI boom. “For agencies who don’t have this, they use technology more as an executor than as a partner. At Code and Theory, we have forged a strong partnership between technology and creativity.”

We’re not just bragging: as brands think about emerging tech strategies for 2024, they should prioritize companies reflective of the specific collision of creative technology that drives winning digital brand experiences. Hear more from Pradeep about how Code bridges the two disciplines.

Microtrends at ANA Masters of Marketing

Artificial intelligence is transforming everything as we know it, generating dozens of “microtrends” in consumer behavior that will become the runway for sector-wide disruption. In this time of transformation, Stagwell Chairman and CEO Mark Penn will take this stage this week at ANA Masters of Marketing to deliver a keynote parsing the insights CMOs need to know as they plan for the year ahead. Learn more here. 

Originally Released On

PR Newswire

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Sarah Arvizo
pr@stagwellglobal.com

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Let’s Get Real About AI

AI will enable marketing organizations to move beyond the era of personalization to anticipation, creating products and experiences for consumers that pre-empt their needs and desires.  

So What? To unlock this, brands must get their first-party data houses in order so AI can effectively overlay, and drive promised efficiencies. It’s also on agencies to find new use cases for how AI can revamp brand experiences rooted in their creative toolbox. At the end of the day, we’ll have to work together to drive the message home that AI isn’t here to replace humans; it’s here to enable them to be even more innovative.  

Overheard at AWNY: “AI is to creativity what calculators were to math. It’s only going to make us better at our jobs, and in turn, better at serving consumers.” – Dan Gardner, Executive Chairman, Code and Theory  

Go Deeper: Click here to learn how AI enabled Code and Theory to help European sports betting brand Tipico disrupt the U.S. market. 

Integration Means Culture, Not Just Capes 

Everything from media channel disruption, shrinking CMO budgets, complex consumer regulations, and an ever-more-diverse consumer population means the playbook Adland runs needs, well, transformation. We strongly believe the solution is a modern integrated offering: bringing great strategy, creative, and data science leadership together to solve business problems.  

So What? Agencies will be leaning into the insight that simplicity is the source of stronger solutions in 2024. Brand leaders will benefit from streamlined partnerships – but as they chase integrated solutions, they should prioritize agencies whose cultures inherently break down the silos between capabilities rather than just going for whoever has the widest capes spread in a pitch deck.  

Overhead at AWNY: “This opportunity we have is so rare. While so many legacy names are being jumbled together, we are embracing an iconic industry brand and investing in building it back up for today.” – Brad Simms, Global CEO, Crispin Porter Bogusky on its next integrated chapter.   

Go Deeper: The new Crispin Porter Bogusky is a masterclass in integration; learn more about how four specialist, complementary agencies came together under the iconic banner from CPB North America CEO Maggie Malek. 

You Can’t Run From Politics in 2024

You’ve never seen an election cycle as expensive as the one unfolding in the U.S. right now – and your brand will have to care in the next 12-18 months (even if you don’t want to). A record $12B of political ad spend will flood domestic markets in the ‘24 cycle, clashing up and down the marketing calendar with tentpoles like the Super Bowl. No matter the sector, brands are facing a more competitive attention market.

So What? You will have to try harder to stand out – and be more diligent about preparing for the reality that your consumers will be using their “political brains” in the shopping aisles and on digital check-out pages, rather than their consumer brains.  

Overheard at AWNY: “Be deliberate. Whatever path you choose, don’t get backed into it. Choose a path and live up to it.” – Tyler Goldberg, Director of Political Strategy, Assembly, on the pitfalls brands face flip-flopping on issues they have spoken out on.   

Go Deeper: Get a preview of the biggest markets to watch for political media spend in 2024 in Assembly’s Election Outlook Report. 

Stay Ahead of Transformation in 2024

Finalizing your brand’s big plans for 2024? Contact Ryan Linder, Chief Growth Officer, Stagwell, to connect with experts from our 70+ global agencies who can provide solutions that turn 2023’s trends into 2024’s opportunities. 

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‘Ownership is the Single Most Important Issue’ in AI

“Ownership is the single most important issue. All other issues have a cascading effect from ownership,” says Dan Gardner, Chairman of the Code and Theory network (who will join Stagwell’s AWNY AI debate). Consumers and artists are reckoning with the reality that generative AI models are sometimes trained on copyrighted materials without the owners’ consent – and they are suing. These suits will shape early ethical frameworks for AI; marketers should keep their eyes on companies like Midjourney and StabilityAI, who are squarely in the crosshairs of this wave of action. Read Dan’s commentary in The Drum to learn about the other debates shaping genAI in 2024. 

Will AI Make Us More Creative or Destroy Innovation?

Consumers certainly have an opinion. “Creativity custodians,” the subset of the consumer market most worried about the impact of AI on creative pursuits, media and content, worry that all new media might end up feeling bland and unoriginal. One way marketers can bridge the gap? National Research Group suggests brands add limits to generative AI functions that prevent them from imitating the styles of specific artists, writers, and creatives. 

Are Consumers as Polarized by AI as the Industry Is? 

Consumers lean towards realism when it comes to AI, with 59% believing it’s a valuable tool for society, but only if used carefully and responsibly. Further, a plurality (35%) can be described as “Pragmatic Pioneers” – those who acknowledge AI is here to stay and are concerned primarily with how it is implemented and who has access to it. For those looking to navigate this evolving landscape, NRG’s Accountable AI Playbook offers a roadmap to align with consumer expectations and shape the next phase of AI implementation in your organization.

AI, Elections, and Evolutions at AWNY 2023

Stagwell will host a series of AWNY23 panels on all our favorite topics: artificial intelligence, the no-holds-barred battle between commercial and political advertising coming in 2024, and how to build modern, transformative agencies. Must-see panels from our team to catch next week:  

• Bots vs. Brains: Does AI Have Promise, or Does it Promise to Fail Us?  – hosted by Stagwell with experts from Code and Theory, NYU Stern, Enthusiast Gaming, and Google –Oct. 17, 2:10-2:40 p.m.
• The Creative Agency Identity Crisis – hosted by CPB and moderated by Campaign US – Oct. 18, 2:10-2:40 p.m.
• Balancing Act: How to Authentically Navigate the Political Circus – hosted by Assembly with Betches and Campaign U.S. – Oct. 18, 4-4:30 p.m. 

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Helen.Lafford@stagwellglobal.com

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Newsletter

Our Theme This Month: Leadership

Helen James, CPB Europe

Helen James in the CEO of CPB Europe and the co-founder of Creative Equals Business, a leadership programme and community for women in the creative industries. She is focused on ensuring more women in marketing and creative roles are able to thrive at the top. Read more from Helen in her monthly Marketing Week column.

Agency Spotlight

Anomaly partnered with MINI for its biggest launch in recent history. The work introduces the new range of All-Electric MINI with a campaign that unveiled an energetic and refreshing series of stylized looks promoting the new cars. Experience this exciting campaign here.

CPB London continues to break conventions with The Glenlivet for the launch of its Twist & Mix Cocktails. They created films and imagery to showcase the innovative, premium ready-to-serve experience featuring The Glenlivet’s collection of whisky-based cocktails.

Locaria founder & CEO, Hannes Ben weighed in on the challenges and opportunities of multilingual content creation, how AI can lend support, and why we need to move beyond ‘translation’ with LBB:  Beyond AI in Translation: Addressing Multilingual Content Creation

If you require any additional information on Stagwell, our agencies or what we’ve shared, we would be more than happy to assist you. Please don’t hesitate to contact us.

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Mark Penn

Stagwell’s Risk and Reputation Unit has been traveling around the country to brace business leaders for a contentious election cycle. This month’s edition of Hitting the Mark – my analysis of developments at the intersection of business, marketing, and politics for modern C-Suite leaders – dives into the three dominant trends we’re seeing this cycle: big business in the political crosshairs, rising polarization among consumers and a longer tail to recovery in reputational crises.

It’s become clear to me that business doesn’t have anyone on their “side” these days. Both Republicans and Democrats are more than willing to turn business into a punching bag to rally their bases. The government is zeroing in on Big Tech with historic antitrust suits, and a new battleground of AI regulation is forming. This debate season, even if your brand is not overtly political, you might find yourself mentioned by a candidate who wants to call out business to fan partisan flames – with little notice and millions of Americans tuning in live.

Rising polarization is making the situation worse. In a 50/50 country, brands that normally enjoy 80% support will fall to 50% if they enter politics the wrong way. To insulate themselves, brands need to avoid activating their consumers’ “political brains.” Once you make consumers think they’re casting a vote when making a purchase, you are dividing your base and subtracting from your brand support.

Brand crises and reputation recovery also look different these days because of that rising polarization. It used to be brands faced crises over their products, services or governance – like Boeing’s 737 Max tragedies, Wells Fargo’s fraudulent accounts or BP’s Deepwater Horizon oil spill. But after an initial dive, when those companies refocused on their competencies, their reputation started recovering within 2-3 years in a U-shape. Today’s corporate crises are driven by politics and culture war issues, and increasingly look like an L-shape with no reputation recovery in sight.

Bipartisan political counsel is one of the strongest tools a business can leverage over the next 18 months. Our integrated Risk and Reputation Unit is here to help businesses navigate the political minefield. For more information on the Unit’s multi-pronged approach for clients starting with an audit of major stakeholders, visit our website. If you would like to request one of our briefings or learn about our indispensable audit, a must for every business, please reach out.

Until next time,

Mark Penn

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HOT MEDIA BUYS

(hint: it’s not the national news) 

Marketers don’t just have to pay attention to the presidential election. Advertising spend is projected to hit $9B in down-ballot races concentrated in fewer and fiercer statewide races for Senate, U.S. House, Governor, and other state/local races. Consumers in Las Vegas, Reno, and Philadelphia will bear the brunt of the political advertising blitz, ranking among the “hottest” markets in Assembly’s predictions. Read the full report to learn more. 

HELPING BRANDS PLAY

AT THE ‘SUPER BOWL’ OF NEWS 

Risk isn’t the only thing awaiting brands this political cycle; there’s opportunity, too. The election is the Super Bowl of news and poll watchers, creating a huge, highly engaged audience for marketers to (carefully) tap.  Stagwell is partnering with RealClearPolitics to create an enhanced polling experience for all voters and fresh ways for advertisers to engage this underutilized segment. Dive in here.  

CAMPAIGNING IN THE AGE OF AI

69% of respondents to the July Harvard Harris Poll believe presidential campaigns are already using AI in their advertising — and 81% think presidential campaigns should disclose their use of AI. Learn more about the dos and don’t’s of AI in political advertising from leaders at Stagwell’s Code and Theory and Assembly here. 

Stagwell Can Help Your Brand Get Ready for Decision 2024

Hear from our CEO Mark Penn about our work on how to navigate risk, reputation, and opportunity in 2024; Reach out to request a consultation for your business.