The Impact Of The Supply Chain On Ad Spending

Must read

Eight Candidate Types To Avoid When Hiring The Best COO For Your Company

A company’s chief operations officer—or COO—is responsible for one of the most important aspects of business: its day-to-day operations. Because the current and future...

How To Tighten Your Business’ Finances During The Looming Recession

By Andy Karuza, marketing lead at NachoNacho and founder of multiple technology startups. ...

3 Key Habits To Be On Your Professional A-Game

By David Henzel, co-founder of TaskDrive—we support sales and marketing teams with personalized lead research and outbound campaigns. ...

By Ben Zimmerman, president at Media Design Group.

getty

It’s a familiar story by now. The Covid-19 pandemic came crashing down in 2020, wreaking havoc on the economic path in front of it. And by 2021, global supply chains slowed to a crawl. These conditions were initially stirred up by labor conditions. As the virus spread, mask mandates, state-imposed quarantines and other factors impacted the overall availability of labor. Many workers were forced to miss work due to Covid-19 infections, which led to staff shortages. While some industries were able to transition to remote work, others were not—and essential workers on the frontline became the heroes of 2020.

Labor shortages never disappeared. Even as vaccines—and subsequent boosters—rolled out, the global economy stayed stagnant. New surges in Covid-19 cases created even more uncertainty in a country already weary from the public health crisis. Across the U.S., many workers looked inward and left their current work situations for greener pastures. In fact, McKinsey found almost two-thirds of U.S. workers said the pandemic caused them to consider their purpose. In what’s been dubbed the “Great Resignation,” workers left the workforce in droves. By the beginning of 2022, both job quits and job openings saw historic levels.

Even as late as June 2022, labor data still showed a gap of more than 5 million between open jobs and available workers. This perfect storm has not only led to historic economic imbalances—I haven’t even mentioned how inflation is the highest it’s been in nearly three decades—it undercuts the vulnerabilities and inefficiencies seen by a struggling supply chain.

Impact On The Supply Chain

This oversimplified version of the global economic crisis is not without nuance. In addition to consumers (by way of higher prices), businesses have paid the price. During the pandemic, demand for some products skyrocketed, while demand for others plummeted, forcing manufacturers to expand or contract. Remember the toilet paper shortages? According to Harvard Business Review, SKU proliferation—the process of adding products to a company’s inventory due to changing market conditions—was partially to blame. Manufacturers were forced to change their production lines to account for the demand for multi-ply rolls of toilet paper, rather than the single-ply stocked by hotel chains, restaurants and office buildings. Shifting production lines makes forecasting difficult while replacing products during shortages causes confusion—all of which throws off the equilibrium of an already strained supply chain.

As the HBR article posits, some things are unlikely to change. Consumers will still prefer lower pricing, while businesses will be forced to keep costs low due to competition—even if they’re stretched thin. Accordingly, some industries are still in recovery mode—specifically, the automotive industry. As MIT Technology Review points out, the “just-in-time” (JIT) supply chain model has become prevalent in the automotive industry over the past few years. Popularized by Toyota, this supply chain model relies on ordering raw materials and products only when necessary, in an attempt to avoid bloat and minimize costs. JIT works when the supply of materials, the production of goods and the demand of customers are in harmony. But when one falls out of alignment, it runs the risk of imminent collapse. Such is the case for the automotive industry during the pandemic. Vehicle sales plummeted at the onset of the pandemic, which caused automobile manufacturers to scale back on semiconductor orders. However, sales bounced back quicker than expected, and by mid-2020, there was a global shortage in semiconductors. This illustrates a massive break in the supply chain.

Advertising When Times Are Tough

While we’ve seen an increase in demand for new vehicles, semiconductor inventory hasn’t caught back up. This has led to low supply, high prices—and a whole lot of frustration. This has caused many manufacturers to reconsider their marketing budgets. In fact, carmakers have cut their ad spending by as much as 46%. Although we may be entering a bull market for vehicles, car companies are still pinching pennies. But is this wise in the long run?

I’ve written about advertising when the going gets tough. While it may not make sense to increase your ad spend per se, maintaining a steady budget can help you secure the share of voice you’ve already built with your consumers. Not all of us are lucky enough to have the same brand recognition as major car companies—and many brands are already stretching their margins to stay top of mind.

Think of it this way. What would you do if your top competitor cut back on their ad spend today? Would you reposition your brand in a more balanced market? Or would you sit on your hands and miss an opportunity to get in while the getting is good?

I believe it’s important to step up to the plate. While it may be instinctive to focus on driving quick wins (e.g., sales and conversions), it’s equally important to play the long game. Maintaining customer trust is critical, especially in an economy adapting to a post-pandemic world. Preserving brand equity can show resilience. But it’s also an act of self-preservation. For example, as the automotive industry bounces back (in whatever form it’ll take in the future), brands that preserved media spend may come out ahead. In the long run, preserving equilibrium allows you to stay top of mind, while also spreading out costs more evenly.

Of course, there’s no way to predict the future—especially in an economy rocked back and forth by a pandemic, a supply chain crisis and a fluctuating global market. But there are ways business owners can preserve their brand image. Maintaining a responsible, consistent marketing spend helps your customers know you’re here for them, even when times are tough.

More articles

Latest article

Eight Candidate Types To Avoid When Hiring The Best COO For Your Company

A company’s chief operations officer—or COO—is responsible for one of the most important aspects of business: its day-to-day operations. Because the current and future...

How To Tighten Your Business’ Finances During The Looming Recession

By Andy Karuza, marketing lead at NachoNacho and founder of multiple technology startups. ...

3 Key Habits To Be On Your Professional A-Game

By David Henzel, co-founder of TaskDrive—we support sales and marketing teams with personalized lead research and outbound campaigns. ...

How To Embrace The Era Of Talent Empowerment

By Tom Finn, co-founder and CEO at LeggUP, the first company to insure employee productivity, well-being and retention. ...