With today’s announcement of the Federal Election, marketers are racing to secure media inventory for May before the influx of campaign dollars. But, is this the right thing to do? Or are there categories in which purchase decisions are influenced by the election campaign itself? We looked at the evidence from previous federal elections, and compared it to the much larger body of academic work based on US presidential elections. The key findings are as follows:
- Consumer confidence tends to increase over the course of an election campaign. Over the last four Federal election cycles consumer confidence has risen by an average of 4.4pts on the Roy Morgan Consumer Confidence ratings. This has not prevented retailers from seeking to blame election campaigns for lower sales expectations, but on average over a series of federal campaigns, there is no clear pattern at a total quarterly retail growth level
- Evidence from the US from 2000-12 suggests that when an election results in a change of government there is a marked difference in consumer confidence immediately following the election between districts strongly supporting the winning and losing party. In the event of an ALP victory in May, auto dealers or furniture retailers may look to prioritise their local area marketing efforts towards suburbs more strongly supporting Labor.
- However, in neither data set is there any evidence that sales correlate to the shifts in consumer confidence in the way that we would expect outside of election uncertainty. There is some evidence (IBIS, 2007) that big ticket sales (auto, home furnishings, consumer electronics) will fall by 5-7% during campaign periods, but that almost all of this spending is deferred rather than lost: the purchases will still be made in the month following the election. So planning June/July promotional and pricing activity to take advantage of this likely rebound is likely to serve retailers in higher value categories better than competing for media during the election period.
- Discretionary purchases such as fashion and travel have also showed weakness in US campaign periods. However given the media cycle around US presidential elections this may simply be due to share of time rather than any confidence or uncertainty issues. Regular grocery purchases appear unaffected by election cycle uncertainty. And the sausage industry is of course rubbing its hands.
So the broad trend would appear to be that the less habitual the purchase decision in your category, the more likely it will be affected by the election campaign in the short term, and the more opportunity marketers have to reserve budget in April in order to maximise the small sales rebound in June.