Advertising in a Recession It pays to maintain marketing pressure: A review of the evidence Guy Consterdine Guy Consterdine Associates 24 February 2009
Objective To assess the research evidence about the importance of continuing to advertise in a recession Most marketers’ actual behaviour: cut adspend Best policy: maintain adspend
Long list of studies examined Institute of Practitioners in Advertising (IPA), 2008 Millward Brown, 2008 Data2Decisions, 2008 Malik PIMS, 2008 Peter Field with IPA Databank, 2008 Ehrenberg-Bass Institute, Australia, 2008 Penton/Coopoers/BSI, 2003 ABM Guidelines, 2002 McKinsey & Company, 2002 Pennsylvania State University, 2002 Yankelovich/Harris, 2001 Prof. Patrick Barwise, 1999 Tony Hillier, 1999 McGraw-Hill Research, 1985 American Business Press, 1975 Buchen Advertising, 1961 Harvard Business Review, 1923
Budget-cutting options compared: Typical brand (modelled) Source: Data2Decisions
Budget-cutting options compared: Typical brand (modelled) Eliminating budget in Year 1: sales take 5 years to catch up Halving budget in Year 1: sales take 3 years to catch up Profit foregone while sales are lower is likely to far exceed short-term profit gain by saving adspend in Year 1 Meanwhile market share likely to be lost long-term
Conclusions: 1 Immediate profits protected by cutting adspend, but benefit is very short-term Neglecting brand support in downturn will weaken brand & make it less profitable post-recession Price promotions damage profits and brand values Brand values impaired in downturn are hard to restore in upturn
Conclusions: 2 Share of voice matters Keep share of voice equal to or above share of market It’s likely to improve market share in medium and long term A brand maintaining adspend while rivals cut theirs automatically increases share of voice Price of buying media space or time falls in recession – exceptionally good value available
Conclusions: 3 Recession provides opportunities for marketers: - to attack competitors - to gain market share - to gain market leadership Can improve company’s stock market valuation Consumer markets B2b markets
Conclusions: 4 Results not broken out by medium “Magazine advertising has all the characteristics that we would believe makes advertising especially valuable during a recession” Keith Roberts, Malik PIMS
Advertising in a recession It pays to maintain marketing pressure in a recession A review of the evidence