The outlook for luxury advertisers: Brightening
Growth has lagged the overall media economy, as luxury brands feel the effects
June 1, 2016
Most sectors of the media economy have long since rebounded from the effects of the recession. Luxury advertising has been much slower to come back. Last year global ad spending grew just 1.9 percent, or less than half the rate of growth for the overall media economy. Now, after years of declining oil prices and fears over global terrorism that have curtailed travel, luxury advertisers are finally opening their wallets again. This year ad spending in the category will grow 3 percent, including a 3.9 percent growth rate in the United States. The category has long favored print, for the strong brand building it offers. But next year digital will become the biggest medium for luxury advertising. Jonathan Barnard, head of forecasting at ZenithOptimedia, talks to Media Life about why ad spending has lagged, what prompted the recent comeback, and why print’s influence is waning.
Why is luxury ad spending growing more slowly than overall ad spending?
The luxury market has suffered more from the drop in oil prices, the slowdown of the BRICs and fears over global security than the economy as a whole.
Luxury goods are, pretty much by definition, more responsive to changes in the global economy than the market as a whole. When incomes slow, the luxury market slows further.
You note that global spending on luxury advertising slowed last year, but was that also the case in the United States? Why or why not?
Luxury advertising in the U.S. grew 3.6 percent in 2015 – well ahead of the global ad market, but below the U.S.’s 5.7 percent growth rate in 2014.
The strong dollar has deterred tourists from traveling to the U.S., so luxury brands have been reluctant to spend more on ads targeting tourists.
Has the United States always been a leader in luxury advertising? Why?
The U.S. has been by far the largest luxury ad market for as far back as we have data, but that only takes us back to 2012. It is largest mainly because its economy is far larger than any other country – 59 percent larger than China’s at market exchange rates.
How long has digital been the largest luxury ad medium?
We don’t expect digital to be the largest medium across the whole luxury category until 2017. Digital is particularly important for luxury automotive advertisers, and for them digital has been the largest medium as far back as we have data, to 2012.
Does that reflect a conscious effort by luxury advertisers to move into digital, or does it merely reflect the overall growth of this medium?
This has varied by brand and product category.
Luxury automotive embraced digital swiftly and deliberately, while fashion and accessory brands have been very cautious – they want to control the environments where their products appear to maintain product quality and exclusivity.
But even fashion brands are making deliberate moves online, using branded content and other controlled communications to create a seamless brand experience both offline and online.
Why do high luxury advertisers favor print?
For many high-luxury brands, magazines in particular provide an ideal complement to their brand values. They reach magazine readers when they are relaxed and at leisure, and can devote their undivided attention to what they’re reading.
What sort of publications do they flock to?
Luxury brands do particularly well in well-designed magazines with high printing quality, with glamorous and aspirational content. These magazines provide an ideal environment for brands to strengthen their association with these values.
Do you see this changing at all in the long term? What does this say about print’s dwindling readership?
The decline in print readership is certainly affecting how high luxury budgets are spent – in particular, brands need to go online if they want to reach younger consumers.
What’s the biggest misconception about luxury advertising?
Fashion, jewelry and watch brands are among the most iconic luxury brands but represent less than a quarter of all luxury advertising. Luxury automotive represents fully half the entire market.
What’s something media buyers and planners should be watching for in the coming two years?
Watch out for a resurgence in media inflation, especially in Asia and Eastern Europe.
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