- Business

Why advertisers must spend their way out of recession

As businesses come to terms with COVID-19, marketing investment, especially advertising, is inevitably under the microscope. Discretionary spend to promote sales at a time when most companies are experiencing feast (supermarkets) or famine (airlines), may feel gratuitous. Instincts suggest turning out the lights and praying for better times. These instincts should be resisted.

Not unexpected sentiments from an adman, but hear me out. Smart, successful businesses will, to borrow a popular phrase right now, ‘follow the science’ and continue to invest in their brands, with sound economic reasoning to back them up.

The first is history. We’ve been here before. OK, not exactly here, but we know what happens when brands ‘go dark’. In 2000, as the dotcom bubble burst, businesses cutting their marketing budgets entirely took 5 years to return to the sales levels of those who sustained their spend. Similarly, in 2008, brands that were strong going into the recession and stayed strong during it, recovered 9 times faster than competitors in the years that followed. Every study, all the available data, for recessions in the 1970s, 80s, 90s, even post-WW1 in the 1920s, have the same consistent finding. Slashing advertising during a downturn is a sure way to make a serious problem a whole lot worse.

The marketing textbooks are also full of brands who did the opposite and stole a march on their rivals. Kelloggs during the Great Depression. Nescafe Gold Blend and Renault Clio in the early 90s. In 2008/09, all of Heinz, Hovis, T-Mobile and Virgin Atlantic doubled down on their advertising and reaped the rewards.

Which brings us to the second reason. Opportunity. Not opportunism. We’re not talking about profiteering or making a fast buck. But when competitors stop communicating with customers or prospects, a vacuum is created. A rare opportunity for other brands to make their voices heard.

Why speak up? Again, the answer is in the science – increasing share of voice (the % share your brand has of total category ad investment) typically increases share of market. Achieve excess share of voice, ie. spend above your market share, and the growth correlation is even greater. And at times like these, much more affordable.

To illustrate, brand owners should ponder this: UK homes are watching a third more TV during lockdown, but lack of advertiser demand means the cost of TV airtime is half what it should be. That’s Xmas telly-watching volumes at Summer holiday period prices. Beyond TV, digital subscriptions of newspapers are up, radio listening too. Want the attention of those hard-to-reach 16-34 year olds? They’re home, they’re bored, they’re all ears. Of course, by definition, when restrictions are lifted, optimism returns, ad revenues rise, attention is dissipated… and that window of opportunity slams shut.

The third, more particular to current events, is responsibility. People don’t want brands to disappear right now. In a WPP study conducted last week, almost 2/3 of US consumers said, ‘it’s very important for companies and brands to use their voice during this crisis’, rising to 84% who say they will ‘base their future purchase behaviour on actions of companies during this crisis’.

Overclaim? Sure. But there seems little doubt that brands which serve, entertain and innovate through this crisis will be remembered for the right reasons. Among our own clients, Telus in Canada, Toyota in Spain, NatWest and British Gas here in the UK, all are putting their heads above the parapet, knowing the impressions they form now will last longer than much of the better-planned marketing that comes before and after. Businesses will be judged on actions more than words, but advertising remains critical to offering support, empathy, even optimism to customers.

The final reason is legacy. One day, relatively soon, this will all be over and life will go back to normal. But what will normal look like? A shock this great will leave its own legacy; major and minor shifts in attitudes and behaviours that businesses will have to understand, respond to and ideally, get ahead of.

Take Toyota, the world’s largest automotive manufacturer and our largest client. What will the legacy of the dramatic COVID-induced reduction in carbon emissions be and what does that mean for how Toyota should communicate its Hybrid range today? Equally, what will the legacy of a COVID-immobilised world be and what are the implications for how Toyota communicates its pioneering new range of mobility products and services now? All businesses and brands will face significant strategic questions and they should begin to anticipate and answer them long before this crisis is over.

Thinking long-term. Nobody would suggest that marketing investment right now doesn’t have to be re-thought. Clearly, there are businesses in the eye of the storm who must cap all extraneous expenditure just to stay afloat. Obviously, there is advertising spend designed to harvest demand that is superfluous now where that demand has temporarily disappeared.

Yet for most businesses, marketing and advertising will be anything but extraneous or superfluous in helping them stay robust. This isn’t about sales today, but it is about sales tomorrow. What are your long-term goals? Building affinity in a category that’s hard to love? Creating consideration for a purchase that’s long in the making? Cementing favourable habits that customers have picked up while cooped-up at home?

Follow the science. Learn from history; seize the opportunity; take – and be seen to take – responsibility; and leave your own legacy, sustaining your marketing investment to lay down the strategic foundations now that will assure your brand’s success as it emerges, healthy, into a post-COVID world.