While many components of product demand have fluctuated since the pandemic hit in 2020, one of the most significant known issues has been mobile chip demand.
If you’re not sure what that means, consider the automotive industry as an example.
Most of the newer cars are based on chip technology. During the pandemic, there has been an unprecedented shortage of chips, leaving consumers waiting months — if not years — for their new car.
Now three years into the pandemic, demand for the chip industry has taken a sharp turn for the worse — and fast.
So what does this sudden change in chip demand have to do with search demand? a lot.
Leading chipmakers issue grim forecasts
according to Financial TimesQualcomm cut 25% of its revenue forecast for the current quarter due to slow customer spending. Specifically, this affects smartphone sales.
Mobile chip makers aren’t the only ones making changes. It is estimated that PC processor sales will decline by 40% year-on-year.
This forecast was a stark change from a year ago when share prices were, at times, skyrocketing. These technological chips have been in demand across all sectors: cars, smartphones, virtual reality, and so on.
In addition to demand, supply chain issues have caused a domino effect of shortages around the world.
The dance of supply and demand
As marketers, you likely took an economics 101 class prior to your career.
supply and demand hypothesis, Simply:
- “Supply and demand is an economic model for setting prices in the market.”
The theory further states that the price of a commodity is directly affected by it availability (width) f Buyer’s request.
At the right price, the manufacturer will produce more of a given product to increase profit.
Now, return this theory to the low demand for mobile phone chips. How did this market collapse in such a short time?
In 2020, the demand for various industries, such as automobiles, has increased. Since consumer demand was very high, suppliers (brands/manufacturers) took advantage of the market by supplying more of this product. Winning, right?
When the complexities of economic challenges are factored in, such as supply chain disruptions or recessions, this throws a wrench into the supply/demand curve.
When manufacturers could not keep up with the increase in demand, consumers had to wait longer for their products. This is where widespread outages can affect consumer demand for the worst. The consumer knows that he will have to wait a long time to receive his product and then he may decide not to buy.
The second complication affecting this trend all of a sudden is economic uncertainty. With a highly volatile stock market, mortgage interest rates, job layoffs, and more – demand for certain products and industries can be affected almost overnight.
If a consumer’s disposable income is affected by any of the above scenarios, their consumer goods priorities shift higher to necessities. New cars, phones, or computers can be considered luxury items for some. So when disposable income falls, demand is likely to follow.
How can advertisers strategize about demand (or lack thereof)?
Back to the marketer’s point of view – how can advertisers change their strategy around changing consumer demand?
#1: Be proactive in analyzing market conditions.
As an advertiser you might think this should not apply to your role.
Think again.
Keeping abreast of economic conditions and fluctuations in demand allows you to be proactive and fluid in your marketing efforts.
#2: When demand drops, take advantage of diminishing competition.
Typically in search campaigns, the lower the competition, the lower the CPC.
If you notice this trend happening on the keywords you’re bidding on, you have a chance to reduce your CPCs.
But before you say, “I could cut my budget this month” because of that, here’s where a change in strategy can occur.
If you can estimate or anticipate potential CPC savings in the event of low demand, try running an awareness campaign on another platform.
Awareness campaigns usually have a lower CPM because you reach a wider audience. In this scenario, you can see the potential savings in search campaigns to run an awareness campaign afterwards, which can help you Spark a new request.
#3: Be assertive when the demand is at its peak.
I admit this is easier said than done.
If your marketing budget isn’t stretched, be prepared to see a higher CPC when demand is high.
When demand is high, more competitors usually come out of the woodwork in an effort to increase profits.
In the case of increasing your CPC, you must ensure that your campaigns are the best.
- Is your ad copy attractive enough for a user to notice?
- Are your users having a great user experience on your website or app? If you spent all that money on One Click but sent it to a bad or slow experience, you’ve wasted this opportunity to sell.
- Is your negative keyword strategy aligned with your intentions? There is nothing worse than broad keywords becoming scams due to a lack of negative keywords.
Now, if your marketing budget is really tight and you’re dealing with high competition, all hope is not lost.
Try to use target audiences in your search campaigns to target your most qualified users.
This makes you more aggressive with your bids to a smaller audience. So while your CPC may still be high, you stand a higher chance of selling if your targeting is narrow.
Furthermore, you can change your search strategy to use RLSAs on expensive keywords.
This strategy gathers some awareness to create remarketing lists that are large enough to be targeted specifically by search later.
summary
Search does not create demand. seek Pick up Requests. Since both internal and external factors influence brand performance, marketers must have proactive and pivotal strategies depending on the situation.
When demand drops, search volume is likely to follow. But this does not mean that you are doomed. Use this as an opportunity to test new campaign types, platforms or audiences to maximize your reach and retain the most revenue possible.
Featured image: Andrey Suslov/Shutterstock
