Brian Wieser of GroupM and David Medori of William Hill
Brian Wieser of GroupM and David Medori of William Hill

Is supply uncertainty affecting advertising spend?

17 February 2022

Supply issues scuppered a lot of trade last year, including causing many firms to halt new products and models, so are there mid-term repercussions for advertising launches and promotions?

"Marketers know they have to compete for consumer attention before delivery"

Brian Wieser, global president of business intelligence at GroupM

“Supply chain issues are real but there are several reasons why they aren’t having a negative impact on the advertising industry at this point.

First, the entire industry is being buoyed up by non-physical products – digital services, app-based entities and mobile games. They have their own supply chain issues in terms of talent and access it but, when we think about supply chain issues, we’re referring to makers of physical goods.

Manufacturers are adjusting by prioritising the production of their more valuable products. And because most marketers assign budgets to advertising based on the percentage of revenue they expect to generate, if you are selling your more expensive product, you’re still spending money on advertising to support that product.

They are also reducing the number of chips or other inputs into the less expensive products. They are then selling the products, while still paying for advertising to support them.

In many categories, marketers know they have to compete for consumer attention in advance of delivery. Even without supply chain issues, customer perception of a brand might be formed well in advance of the purchase or the receipt of delivery of the product.

The economy is relatively strong. That’s why supply chain issues aren’t going to affect advertising. You could get to a point where supply chain issues cause more meaningful friction in economic activity – that’s when you get concerned. For example, if there were no demand for cars, and they had supply chain issues, you would see a reduction in ad spend. At the moment, however, underlying demand remains strong.”

"Those using the chance to gain new customers will be the winners"

David Medori, chief procurement officer at William Hill

“We are in the grip of a global supply chain crisis, originating from the pandemic. Some brands have been cutting low-funnel ad spending due to shortages but others are taking advantage of the opportunity to grab new customers, shift loyalty and promote other products and services.

These are the winners and those with ongoing ad campaigns are the most successful – they are the most well known, best positioned and most purchased. Some brands have inevitably pulled back on advertising but done so at the risk of damaging customer loyalty and, inevitably, future sales once the shelves are filled.

When the shelves start to fill, I would expect a significant uptick in advertising, particularly from companies that have had to make advertising cuts. Many other sectors are resilient or flourishing in this current environment and so are still spending similar amounts or more on advertising.

Companies have started to overcome issues by pivoting their communication strategies and offering solutions to ensure shoppers’ loyalty. Remaining out of stock while providing no alternatives will lead to missed sales now and in the future when the shelves are full.

Companies have continued to advertise, sourced alternative products where possible or changed supply chain partners and locations to improve fulfilment. All while continuing to communicate effectively with customers.

During the pandemic, customers have clearly substituted products and switched brands. You might not have been advertising but your competitors have and are picking up dejected customers. Just because a product is out of stock from one brand, it doesn’t mean other brands’ similar products have been out of stock.”

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