New Engen 2024 Holiday Guide: Macro-Level Economic & Industry Trends

Q3 2024 Economic Snapshot

Inflation & Consumer Spending

Inflation rates are cooling down, but the memory of high prices continues to drive consumer decision-making. Said differently, consumers remain price sensitive and are looking for ways to cut costs, at times deprioritizing discretionary spending.

Labor Market & Interest Rates

Despite low levels of unemployment, the labor market is showing signs that it may be slowing down, including decelerating wage growth. Plus, elevated interest rates continue to impact households of all incomes.

Sector Performance & Global Trade

The technology and healthcare sectors are performing well despite stock market fluctuations. However, geopolitical tensions and supply chain issues are a detriment to economic stability and, consequently, global trade.

Key Economic Trends

Consumers, particularly middle-income adults, have decreased expenditures across categories in 2024, influenced by elevated prices and interest rates. This poses a challenge to advertisers attempting to stay competitive in a saturated digital market while simultaneously buttressing against low demand.

Shifts In Middle-Income Consumer Spending

Middle-income earners (those with an annual household income between $50K- $99.9K, according to Morning Consult) are rapidly losing their purchasing power. Consumers in this demographic are becoming increasingly frugal and exhibiting discretionary spending behavior typically observed in lower-income groups.

The weakened demand from middle-income adults is contributing to softer spending overall this quarter. It also intensifies the competitive pressure in non-discretionary markets and emphasizes the need for strong messaging on product and brand value.

Even High Earners are Saving Less

High earners may be driving consumer spending, but they are also putting less money away and increasingly dipping into existing savings. Both high-income and middle-income consumers are facing greater shortfalls, where expenses outpace income. Consequently, brands that appeal to luxury spenders are also feeling the intensified market pressure.

Gen Z is an Outlier in Income-Based Spending Behaviors

Gen Z adults are making more discretionary purchases than adults in other generations, though recent trends indicate they are showing restraint. This group favors online shopping (46%) and in-store shopping (44%) at higher levels than the general adult population (36% and 37%, respectively).

Gen Z is brand curious, constantly seeking out new labels, and the most likely generation to have purchased from a new brand in the last month. They consistently outspend older adults on apparel and personal care products, and more are inclined to open their wallets for new clothes or vacations.

The bottom line? It’s time to start building and executing against a Gen Z acquisition strategy.

The Digital Industry

Globally, advertising spend is expected to increase by 10% in 2024, with 70% of total investment going toward digital channels. In other words, digital is the single-largest driver of industry growth worldwide. Retail is the leading sector, expected to capture 29% of total digital spend this year. Overall, the increased spending will exacerbate rising media costs, which are up by 10% year-over-year.

Channel Diversification & Video are Table Stakes

Investment in video will increase by more than 20% in 2024, outpacing the wider digital ad market projections from EMARKETER. And, for the first time since 2014, Meta and Google are on track to represent less than half of US digital advertising spend. We’re also keeping an eye out for growth from Retail Media Networks, streaming, and “newcomer” social platforms (namely, TikTok).

Brand Building in Q3 and Beyond

The Problem with Budget Cuts

In times of economic uncertainty, business leaders face heightened pressure to meet short-term financial goals during market peaks. And more often than not, this results in divestment of brand-building efforts. But focusing solely on temporary sales targets and capturing only the “lowest-hanging fruit” can limit future brand growth. Brand building, on the other hand, is vital to sustained business growth in the long term.

Q3 Brand Investment for Q4 Success

Invest in your brand in Q3 so that you are top-of-mind for customers when they start shopping for the holidays. Here are three key reasons why:

1. Boosting repeat sales. Shoppers will be encouraged to return to your brand for holiday-related purchases, amplifying Q4 sales growth.

2. Creating a competitive edge. Awareness media nurtures customer retention and makes it harder for competitors to lure them away.

3. Reducing holiday overwhelm. Familiarity with your brand will simplify holiday shopping and enhance the customer experience, driving brand loyalty in Q4 and beyond.

Customer Experience is at an All-Time Low

According to research from EMARKETER, the two most important elements of a positive customer experience involve a clear understanding of the target audience and personalization.

As such, brands must ensure they are providing a strong customer experience by offering value through convenience, loyalty programs, website experience, reduced shipping costs, personalized services, and brand engagement and connection.

Customers Have High Standards

At this stage of the game, reviews are table stakes. This might seem obvious, but it’s worth noting that 77% of shoppers specifically seek out websites with ratings and reviews, and 90% of consumers say they consider these reviews before making a purchase.

You can’t have credible ratings and reviews without credible, high-quality products. Customers consistently name product quality among the key factors that go into their purchasing decisions, and they rely on reviews to evaluate product quality.

Building Brand Trust

Consumers are becoming increasingly skeptical of brands, and there is a significant gap between what consumers expect from brands and their perception of a brand’s actual ability to deliver meaningful change.

Research from Gallup found that 38% of adults in the U.S. support businesses taking a position on important issues, particularly regarding climate change and mental health. An overwhelming 88% say that businesses are in a position to make a positive impact, but only a fraction of respondents (8%) believe that brands are effective in doing so.

The 2024 Presidential Election

Finally, the 2024 Presidential Election will further contribute to the typically high costs seen in Q4 - CPMs are expected to ramp earlier than usual, likely beginning the week of September 23rd. Plus, key campaign dates and events (like Tuesday’s presidential debate) could divert audience attention away from advertising channels. Be prepared for CPMs to increase by as much as 10-15% between late September through October, with another spike on Black Friday/Cyber Monday.

Election years are unique and can drastically change the digital advertising landscape. That’s why New Engen analysts created a free, customizable Election Insights Dashboard to help brands stay informed on the trends that stand to impact advertisers and businesses alike in 2024. Check out our guide to using the dashboard and an in-depth analysis of recent trends going into November. Plus, review our brand strategy guide to make sure your brand is set up for success leading up to the election and the months that follow.

Finally, put yourself in your customer’s shoes. Election years are stressful, and consumers will seek out stability wherever possible, including in their purchasing decisions. Build connection and credibility with consumers now so that they feel confident in your brand, values, and product quality during peak season and beyond.