Why brands shouldn’t stop advertising during uncertain times

Lessons from previous crises taught us the importance of staying the course

Key points:

• During uncertain times, the message that asset management firms and higher education institutions send to their target audience is to focus on longer-term objectives, but not all marketers put their own advice into practice.
• During a crisis, some marketers cut their budgets and a few even stop advertising all together. However, research has shown that this harms their brand in the long run.
• Good marketing will increase sales in future buying situations as the probability that your brand comes to mind when the buyer is in market increases. The brand that gets remembered and has a consistent, strong presence more often than not wins.

This year marks the 20^th anniversary of Fundamental Group. Over the past two decades, we have gone through several crises, from the 2008 financial crisis to the Covid-19 pandemic. And while none of us can predict the future, we can say with absolute certainty that new challenges and crises await us in the next 20 years. But learnings from past crises can prepare marketers to weather future storms.

During uncertain times, almost all asset managers recommend investors to stay the course and avoid any rash actions. Higher education institutions, meanwhile, remind prospective students that investing in a degree is a good option in a struggling job market affected by the crisis.

But while their message to their target audience is to focus on longer-term objectives, not all marketers put their own advice into practice. During a crisis, some marketers cut their budgets and a few even stop advertising all together. However, research has shown that this harms their brand in the long run.

There’s a lot of marketing research out there that reinforces the fundamental truth that perceived short-term gains invariably lead to long-term pains.

Professor John Dawes from the Ehrenberg Bass Institute postulated the 95:5 rule. He says that at any given time, only 5% of B2B buyers are in market to buy right now. Or 95% of all B2B buyers are out of market and may not buy for months or years. Similarly, consideration to enrolment into an MBA can take 12-18 months or more.

Simply put: the marketer doesn’t move the buyers in market; the buyers move themselves in market based on their needs.

So what does that mean? We need to do what the asset managers preach: stay the course, because there is a pay-off in the long run!

Good marketing will increase sales in future buying situations as the probability that your brand comes to mind when the buyer is in market increases. The brand that gets remembered and has a consistent, strong presence more often than not wins.

In times of crisis, when the going gets tough, everyone is asked to make sacrifices. Very often the area where you can easily save money with limited impact is marketing. Or so we think.

The PIMS (Profit Impact of Marketing Strategy), a study initiated back in the 70s by General Electric and Harvard Business School, now has millions of data points from thousands of businesses over decades, leading to three fundamental tenets about advertising in a recession:

1. Decreasing budgets will not hurt you – yet…
2. Maintaining budgets will grow your market share
3. Increasing budgets will deliver growth in the recovery

This is not some brand-new insights but tried and tested. A hundred years ago there were two cereal companies dominating the American market. Then the Great Depression came. One of the players cut down on advertising, the other one doubled spend. Who they were? Kellogg and Post – you can guess who did what.

It is a big ask to maintain or indeed get an increase in marketing budget if times are tough. It certainly repays though because – here is the science bit – it’s all about something called ESOV.

There is an equilibrium between Share of Voice (SOV) and Share of Market (SOM). The difference between the two denotes growth and is called Excess Share of Voice (ESOV). If you have a SOV of 10% and a market share of 10%, and then increase your SOV to 20%, eventually your market share increases to 20% as well and a new equilibrium is found.

Now what happens in a crisis?

We are going through a recession-like scenario and we have to expect that some companies will be hesitant and travel down the well-trodden path of reducing marketing spend in a downturn.

Here lies your opportunity. We’re using ESOV again to illustrate and make some very drastic assumptions. If you simply maintain your budget while your key competitors reduce their spend by 50%, a flat budget will double your SOV and eventually your SOM! Growth in market share is exponentially greater if you increase your budget as it would yield double the return it usually does in this scenario.

In conclusion, while cutting marketing budgets seems an easy way to save costs during challenging times, in the long run such drastic actions will damage your brand. Staying the course and maintaining, or even increasing, your marketing spend will yield greater results in the years after the crisis.