The Current State of Advertising: Branding or Price?

Why price-based ads will give way to brand advertising in the rebounding economy.

President’s Letter

by Jim Elliott

I predict we are going to see a major shift in advertising. Advertising is unique when compared to other businesses, in that it is one of the fastest areas to react to macro-economic environmental changes. In my 40 years of experience, I’ve witnessed trends come and go. In a growing economy, price-based advertising will see a modest decrease, while brand advertising will see an increase.

The environmental change I speak of concerns the latest trends in the economy. Despite our relatively high unemployment of 7.6% (source: The New York Times 6/7/13), we have seen a great improvement since 2008. When the great recession hit, we saw an immediate conversion to price-based advertising. Advertisers tried to convince consumers to buy their products in the face of huge uncertainty.

The recession did two things to the consumer: it caused spending insecurity and also, as a direct result, pent-up demand. Because consumers could not satisfy the impulse for their want, they did not let it go, but saved it with their money to be satisfied at a later date. That date being today.

With the average American net worth on the rise (source: U.S. News & World Report 6/7/13), the trend of price-based advertising will decline at equal speed. The psychological mechanism of “saving” will not be as effective to a consumer who wants something more than just affordability. Enter Brand. 

It is no secret that the magazine is the best advertising medium for branding. A still image will hold for as long as you look at it. A magazine ad can be a thing of beauty, torn out, and hung upon a wall. It’s a painting for a brand. It lasts longer than a jingle or spot. Think of how many frames a commercial requires. A magazine ad only needs one, and valued equal to content.   

What does an established brand afford? Comfort, trust, and familiarity, but also status. A brand no longer needs to squeeze you to buy its product. All it requires is to remind you of its existence. Gone will be the large body copy of all the terms and conditions that apply to selling you on the monthly rate of a car. In its place will be a photo of that car, in an exotic location, begging you to drive it. 

With pent-up demand being met by greater purchasing power, a chain reaction takes effect by association. Friends of the purchaser will try to meet or trump any acquisition to compete in the status environment of their social circles and networks. 

Now that the worst of the economic storm has been weathered, brand advertising has started to come back and will continue doing so. We see this with high-end luxury advertising in magazines. It is safe to say that more non-luxury goods will have their advertisements brand-based. Health products are prime examples of this. Beauty care and fashion products try to tie the consumer’s identity with the brands they wear.  

As the veteran salesman would say, “Don’t take my word for it” when you can just look at history to see these trends. This has happened in nearly every hill and slope in the history of our economy. Price-based advertising goes up when the economy goes down, while branding rises with the economy. 

What does this mean for potential advertisers? With the economy rearing its head out of the recession they will adapt to the change. What does this mean for the magazine industry? More ad pages.