Head of Analytics, France,
Kantar
Inflation is like any other business lever: it is as much an opportunity as it is a risk. In this age of media arbitrage, the question you need to ask is “are you equipped with the right tools to manage it to a profit?”
Inflation is an extraordinarily volatile economic factor. Rates vary by country and unforeseen news events can spike rates by region or even globally. Think about what the invasion of Ukraine by Russia did short and long term to global prices. Last year the news was Turkey and Argentina, now those in the UK and US are seeing double digit numbers for energy and some consumer goods. Consumer behaviour can change overnight due to changes in pricing and there is no way to accurately predict consumer price changes.
To add to the complexity, media inflation rates are not necessarily strongly correlated with consumer price inflation. But they are key to drive efficient optimisation scenarios. As an example, in France, media rates are expected to be flat this year vs. 2022, except for TV which expected to rise by 12%.
Get Help with Unified Marketing Measurement and Optimisation (UMMO)
Econometric modeling is the only approach to marketing effectiveness integrating the impact of macro-economic drivers. Inflation is always a part of it; models can quantify how much it impacted sales. Across our various UMMO programmes in 2022, we have isolated an average impact of macro-economic inflation of -5%. Pricing impact is therefore adjusted for inflation in our models, so that its relative efficiency is driven by tactical & strategic options taken.
In terms of media cost inflation, it is critical to isolate and track response alongside media cost to arbitrage and optimize your media mix. Instead of matching inflation with budget increases, UMMO will give options to 1) adjust seasonality/flighting to exploit better fluctuating media costs across the year, across days and dayparts; 2) it will re-allocate budget across channels considering optimal mix based on campaign objectives vs. inflationary pressure, competitive activity, type of copy. Macro and micro factors are taken into account to drive optimisation.
Thanks to its holistic nature, UMMO allows to isolate, quantify the direct impact of inflation, whether it is general inflation or media cost inflation. Kantar brings to the party far more levers to turn inflation to a brand advantage. Brand is the biggest asset when it comes to protect and develop margins. Kantar Brand Z is our proprietary brand valuation database, identified through its premium index the specific strength of a brand allowing it to defend its pricing.
Brand is integrated in our models, so that its relative strength can be considered in arbitraging investment decisions.
Another key lever in turning inflation into opportunity is advertising creative quality. Between a top and average quality of copy, there can be a massive ROI difference (in a recent modelling, we found that TV copy of highest quality did generate a ROI 72% higher than that of lower quality copies), which means a sizeable opportunity to spend less by using top quality copies. Another driver that Kantar integrates in its UMMO models and used to generate optimisations.
Conclusion:
There are many levers to manage and sometimes take advantage of adverse factors such as inflation. All are incorporated in the UMMO modelling platform, allowing to quantify impact and optimise based on all actionable levers a brand possesses.Kantar’s UMMO solution offers a superior combination between domain knowledge – the beliefs that you already have about how your marketing works – and new information to form a more accurate attribution and prediction of business outcomes.
One measurement & optimisation….so many levers to act.