The AdNews end of year Perspectives, looking back at 2024 and forward to next year.
Shah Ghaffurian, CEO, Magic
2024 was undeniably a tough year for advertisers. According to SMI, year-on-year ad spend saw a significant decline. Inflation hit its peak, GDP growth remained sluggish, and consumer confidence struggled to regain its pre-COVID levels:
Source: ANZ-Roy Morgan Australian Consumer Confidence Media Release Sept 2024
Faced with these conditions, brands largely shifted their focus towards the bottom line, prioritising short-term performance over longer-term growth strategies. Performance marketing, in particular, became more competitive, as advertisers battled for a share of the shrinking disposable income of Australian households:
Source: OECD Household Dashboard 2024
A brighter outlook in 2025
Looking ahead, 2025 is shaping up to be more optimistic. Globally, inflation is coming under control, and while Australia is lagging slightly, recent months have seen inflation return to the RBA’s target range of 2–3%.
Source: Australian Bureau of Statistics
This economic shift signals an incoming wave of rate cuts, with predictions of 25 basis point reductions in both June and December of 2025. These cuts are expected to boost discretionary spending, symbolising a broader shift in consumer sentiment that could positively impact advertisers across the board.
Search behaviours signal changing sentiment
Early indicators of this shift can already be seen in consumer search behaviours with ‘financial stress’ based intents dramatically falling in the last four months:
Source: Google Search Data, ANZ-Roy Morgan Consumer Confidence data.
Data from financial services categories shows sharp declines in search intent for deal-hunting terms, reflecting a decrease in price sensitivity among Australians.
Source: Google Search Data
2024 posed significant challenges, but the tide is turning. Core macroeconomic indicators are improving, with inflation stabilising and rate cuts on the horizon. Search behaviours, often a leading indicator of consumer sentiment, are also showing positive shifts in price sensitivity.
Looking into 2025
What should brands be thinking about as the macroeconomic tides start to shift?
Discounting and price-focused campaigns may lose impact
As discretionary spending increases, discounting and price-centric campaigns are likely to lose some of the sales impact they had in 2024.
This is great news for brands, as it alleviates some of the pressures created by the relentless race to the bottom.
Currently, many brands are stuck in sales cycles, discounting as much as the ACCC will allow while avoiding reductions to base prices. A prime example is the weekly product swap strategy employed by Coles and Woolworths, as analysed by ABC.
Consumers are also showing signs of discount fatigue, with diminishing returns on sales even when discounts are applied.
This shift presents a valuable opportunity for brands to rethink their pricing and discounting strategies, with a greater emphasis on profitability moving forward into 2025.
Creatively, brands must appeal to broader needs to demonstrate value
Over recent years, advertisers have heavily relied on pricing and discount-focused messaging, driven by digital metrics proving these campaigns’ short-term effectiveness.
Algorithms tend to favour serving messages to the audiences that are most likely to engage with them. For brands that rely solely on discount-centric campaigns, this has created a feedback loop that predominantly attracts price-sensitive, discount-driven customers.
As price sensitivity declines, brands need to diversify their messaging. While some campaigns should continue to capture deal-hunting audiences, others should focus on showcasing the problems their products solve and the broader value they provide.
By crafting a range of messages, brands can reach a more diverse audience, converting not only price-focused consumers but also higher-value, longer-term customers who are less driven by discounts.
MMM and modelling: a key to navigating changing macroeconomic conditions
Data-driven modelling continues to be a game-changer, giving early adopters a decisive edge over competitors in understanding the factors that have impacted their bottom line in the past few years.
As the macroeconomic landscape improves, businesses that deeply understand what’s driving revenue growth will continue to gain a significant market advantage. Simply scaling all expenditures in response to demand increases is a strategy fraught with inefficiency.
The pitfalls of misattribution are a cautionary tale. Many businesses that thrived during COVID mistakenly credited their marketing efforts for revenue surges primarily driven by external factors. This often led to bloated expenditures that eroded profitability and left these businesses vulnerable to downturns.
Brands that invest in robust modelling frameworks can avoid these mistakes by pinpointing exactly which levers are driving performance. This approach ensures sustainable scaling, better profitability, and the ability to weather market fluctuations effectively.
In 2025, the evolving economic environment presents a unique opportunity for brands to reset. Moving beyond price wars, diversifying messaging strategies, and leveraging sophisticated modelling tools will be the keys to navigating and thriving in this new landscape. Brands that adapt quickly and embrace these shifts will position themselves for long-term success.
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