What Does Chip-Making Demand Tell Us About Search Demand? via @sejournal, @brookeosmundson

While so many elements of product demand have fluctuated since the pandemic in 2020, one of the more significant known issues has been mobile chip demand

If you’re unsure of what that means, consider the automobile industry as an example.

Most newer vehicles rely on chip technology. During the pandemic, there has been an unprecedented shortage of chips, leaving consumers waiting months – if not years – for their new vehicle.

Now three years into the pandemic, chip-making demand has taken a sharp turn for the worse – and quickly.

So, what does this sudden change in chip demand have to do with search demand? A lot.

Leading Chipmakers Release Bleak Forecasts

According to The Financial Times, Qualcomm slashed 25% of its revenue forecasts 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’s estimated that sales of personal computer processors will decline 40% year-over-year.

These projections were a stark change from a year ago when stock prices were, at times, sky-high. Demand was there for these technology chips in all sectors: auto, smartphones, virtual reality, etc.

In addition to demand, supply chain issues caused a domino effect of worldwide shortages.

The Supply and Demand Dance

As marketers, you’ve likely taken an Economics 101 class before your career.

The premise of supply and demand, simply put:

The theory further states that the price of a good is directly affected by its availability (supply) and the buyer’s demand.

At the right price, a manufacturer will produce more of a particular product to maximize profit.

Now, bringing this theory back to the mobile-chip demand decrease. How did this market plummet in such a short time?

In 2020, demand skyrocketed for various industries, such as automobiles. Because the consumer demand was so high, suppliers (brands/manufacturers) capitalized on the market by supplying more of this product. A win-win, right?

When the complexities of economic challenges are factored in, such as supply chain interruptions or a recession, this throws a wrench into the supply/demand curve. 

When the manufacturers couldn’t keep up with the increase in demand, consumers had to wait longer for their products. This is where widespread interruptions can influence a consumer’s demand for the worse. A consumer knows they’d have to wait so long to receive their product and then may decide not to purchase.

The second complexity that affects this trend so suddenly is economic uncertainty. With a highly volatile stock market, mortgage interest rates, job layoffs, and more – the demand for certain products and industries can be affected almost overnight.

If a consumer’s disposable income is affected by any of the scenarios above, their priorities of consumer goods shift higher to necessities. New cars, phones, or computers can be seen as luxury items to some. So when disposable income declines, demand is likely to follow.

How Can Advertisers Strategize Around Demand (Or Lack Of)?

Returning to a marketer’s standpoint – how can advertisers shift their strategy around changing consumer demand?

#1: Be proactive in analyzing market conditions.

You may think as an advertiser, this shouldn’t apply to your role.

Think again.

Staying current on economic conditions and the fluctuations in demand enables you to be proactive and fluid in your marketing efforts.

#2: When demand falls, capitalize on the decreased competition.

Typically in Search campaigns, the lower the competition, the lower your CPC.

If you see this trend happening on the keywords you bid on, you have an opportunity for lower click costs.

But before you say, “I can reduce my budget this month” because of it, here’s where a strategy shift can come in.

If you can estimate or project the potential CPC savings in a decreased demand, try running an awareness campaign on another platform.

Awareness campaigns typically have low CPMs since you’re reaching a wider audience. In this scenario, you’re able to see potential savings on Search campaigns to then run an awareness campaign, which can help spark new demand.

#3: Be aggressive when demand is at its peak.

I acknowledge that this is easier said than done.

If your marketing budget is not strained, be prepared to see higher CPCs when demand is high.

When demand is high, typically, more competitors come out of the woodwork in an attempt to maximize profits.

If CPCs increase, you must ensure that your campaigns are tip-top. 

Now, if your marketing budget is already limited and you’re dealing with high competition, all hope is not lost.

Try using targeted audiences on your search campaigns to target your most qualified users. 

This makes you more aggressive in your bids to a smaller audience. So while CPCs may still be high, you have a greater chance of a sale if the targeting is narrow.

Even further, you could shift your search strategy to use RLSAs on expensive keywords.

This strategy combines some awareness to build large enough remarketing lists to target them specifically by searching later.

Summary

Search does not create demand. Search captures demand. As internal and external factors affect brand performance, marketers must be proactive and pivot strategies depending on the situation.

When demand falls, the search volume will likely follow. But that doesn’t mean you’re doomed. Use this as an opportunity to test new campaign types, platforms, or audiences, to maximize your reach and retain as much profit as possible.

Featured Image: Andrey Suslov/Shutterstock