Recession? No Thanks.
After the disastrous events of the last few months, no one can doubt we are in the middle of a serious slowdown.
But what is different this time is that the economy is digital. We think that consumers' use of the web to research purchases and find ways of saving will accelerate during this worsening economic environment, and that smart businesses can use targeted, efficient online advertising to take advantage of this and speed up in the slowdown.
Even in the last 6 months of 2008 as the slowdown took hold, online sales in the UK were up 16%. They now account for 17p for every £1 spent by consumers, a staggering proportion in such a short period of time. This picture contrasts sharply with the high street which hovered around 0% growth in the second half of 2008. Furthermore, whilst the British Retail Consortium reported a fall in retail sales of 2.6% in November 2008 compared to the same month last year, online sales grew over the same period by 16.2%
With just one-fifth of the population, the UK already has 60% of the ecommerce spend of the US. The slowdown is likely to accelerate consumer use of online, where consumers will look for bargains, share views and search for entertainment. There is no sign these figures are going to slip.
Nearly two out of three of the UK population are already connected to the internet with the numbers expected to rise to 43 million by 2012. We spend more time online – an average of 33 hours a month – than any of our European neighbours. So with less money to spend on leisure and an increasing wealth of entertainment and content found online, staying in is the new going out. Having more time and less money means families are more determined than ever to spend wisely. With the cost of internet access falling and its speed accelerating, the web is going to be an increasingly powerful tool for consumers. But it's not just the consumer who is desperately trying to ensure they get value for money in these cash-tight times. So are businesses.
September's Bellwether report found only 12% of UK companies reporting an upward revision of marketing budgets in the third quarter, while 35% reduced ad spend. But how do we know if reducing marketing spend is sensible during tougher economic times?
Smart bosses are beginning to ask legitimate and responsible questions about ad spend. For example, how do we know that £1,000 is the right amount to spend on a local press campaign? How do we know that we are paying the right price for that full page spread in a magazine? How do we know – I mean, really know – whether that 20 second radio spot increased sales?
And it is here that the internet comes in to its own, enabling companies – big and small – to market themselves to their potential customers in a way which is measurable, targeted and cost-effective. With search marketing and online advertising, businesses know precisely how much it costs to acquire a customer, thus removing the guesswork around marketing spend.
Search marketing enables businesses to target consumers at a time when they are actively searching for a product or service. It allows them to pay only for results and to monitor and control costs. It is no wonder the internet is forecast to take almost a third of all UK advertising by 2011. Online advertising is not an art form, but a science.
 IMRG Capgemini, e-Retail Index – percentage change Jul-Dec 2008 compared to same period in 2007
 Office for National Statistics (ONS), Retail Sales Index (RSI) – Jul-Dec 2008 compared to same period in 2007
 British Retail Consortium, Value of Retail Sales – November 2008 compared to November 2007
 IMRG Capgemini, e-Retail Index – November 2008 compared to November 2007