Advertising in Recession — Long, Short, or Dark?

Editor’s Note: Enjoy this special encore post, which was one of our readers’ favorites in 2020 and which was contributed by Peter Field, a B2B Institute Research Fellow. 

Executive Summary

As I write this, it looks increasingly sealed there ’ mho going to be a receding. It will probably be different to ‘ normal ’ recessions, but many of the lessons about advertise from former recessions still apply :

1. Continuing to invest in brand advertising is recommended (if resources are available) but there is a diminished role for short-term sales activation in the current crisis due to consumer demand patterns, with a few exceptions. Data from the 2008 recession shows the value of investing in brand.
2. Featuring humanity and generosity in advertising are advised: the use of emotions and humor can be helpful.
3. Demonstrating humanity and generosity through behavior is also advised: brands should ask themselves the question, ‘how can we help?’

Keep Calm and Carry On

even as we wait to discover merely how big the impact of the COVID-19 virus pandemic is going to be on economic natural process, it now looks about certain that there will be a receding. Though governments will move eden and earth to ensure that it is as unretentive and ampere shallow as possible, the enticement for many in the occupation populace will be to cut market and advertise costs to the minimal, specially if this is their first recession. The lapp uncertainty about what to do was evident in 2008, at the start of the Global Financial Crisis, when no one was sure how bad things would get and the lifelike temptation was to assume the worst. But is that the best approach ? And can we learn anything from previous downturns that will help us weather this one and emerge stronger ?

During the last recession in 2008-9, I wrote a report for the IPA (Advertising In A Downturn, IPA 2008) that pulled together expert evidence on the best way for brand owners to manage advertising budgets. Much has happened in marketing since then, including the publication of The Long and The Short of It in 2013, in which Les Binet and I revealed the risks of one common response in 2008: the shift to short-term sales activation.

In this article, I have examined the IPA data from around 50 case studies covering the 2008-9 recession period : while limited, the data however reveals how different investment and strategic approaches performed then. The data source is the compulsory confidential data submitted aboard entries to the IPA Effectiveness Awards contest in early on 2010. The datum covers inputs such as advertise scheme and budget, and a number of business outcomes, such as plowshare and profit growth, allowing us to form a horizon about how the erstwhile influences the latter.

The first caution is that what we face is improbable to be a ‘ normal ’ receding : it will be the first disease-driven recession of the modern earned run average. Already it is playing out in very unusual ways. As in most recessions, the effects depend greatly on the sector : people placid have to eat and take concern of themselves but can delay discretionary purchases. Already the deviation between all-important and discretionary buying looks like it will be much more marked than in former recessions. frankincense far, many essential categories have been characterized by elevated or evening panic bribe, not the more common postponement or down-trading, so what should brands in these categories be doing ?
The answer largely depends on how scalable the clientele is and how flexible its delivery. For most physical products and services, demand is exceeding the ability to supply, but scalable businesses delivering authoritative needs to house-bound customers, such as television stations and video conferencing platforms that are not pendent on workplace use, are fortunate exceptions. They are enjoying – and meeting – bumper necessitate, so there is a potent case for these businesses to exploit short-run demand ( by means of run generation activeness ) to build long-run market share. Brand build and short-run sales activation both make perfective sense for these brands in the current crisis. For the many brands that are unable to meet demand, however, extensive manipulation of short-run sales activation would make short sense. But, for them, does trade name building at such a time make any more common sense ? Can continued stigmatize advertising sign authoritative reassurance ? With allow sensitivity to the awful state of most people, brand build may in fact be the best border on, as we will see .

With appropriate sensitivity to the fearful state of most people, brand building may in fact be the best approach, as we will see.

In some discretionary categories where revenues have fallen to levels that threaten the survival of companies, such as airlines and catering, there may be no choice but to cut all ad to conserve cash. In these situations, where goods or services may not be deliverable, or customers non-existent, there is surely no point in trying to attract short-run buy. But, if the resources are available, the arguments in favor of mark build are stronger. This may not be in the shape of costly conventional advertising but could possibly involve attention-getting initiatives that reflect the mood of the times. Already we are seeing acts of generosity and humanity by some companies – these are praiseworthy in their own proper and help to support the esprit de corps of staff and stakeholders during the crisis. But these acts besides help to keep the brands salient and hopefully create convinced aroused associations that will prime or remind future purchasers when markets recover .
The effect on B2B markets will be complex, with many differing sector-specific patterns. In many cases, they will be deoxyadenosine monophosphate severe as the worst of B2C. As we have seen in China, nowadays is not a good time to be a sub-contractor for a business serving discretionary consumer markets ( e.g. automotive ). With many employees now working from home, there is besides probable to be a big affect on goods and services that support the workplace, unless they can pivot to support working from home .

Now is a good time for these businesses to be building market share through a balanced mix of brand building and sales activation, assuming they can meet demand.

On the other hand, businesses supporting those that serve essential consumer markets, or the current colossal careen to working from home, are more likely to see smaller or evening positive impacts. now is a good time for these businesses to be building market share through a balanced mix of brand building and sales activation, assuming they can meet demand .
But for B2B businesses whose customers and prospects are unable to buy, or who can not meet existing customer demand, pursuing bottom-of-funnel, short-run, sales activation makes little common sense unless it can help shore up existing relationships. For these brands, investing in long-run relationship-building is a better path forward. For the many activation-focused B2B brands, this will necessitate quite a lurch in scheme .

Because the sales funnel in B2B purchasing is generally longer than in B2C, the arguments in favor of supporting long-term growth through brand building are likely to be even stronger in B2B than in B2C. B2B Brand associations created now are likely to bring the greatest sales benefit during the recovery period, precisely when the rewards are biggest. Brand advertising is not about profiting in recession, it is about capitalising on recovery.

historically, most recessions concluding around a class, sometimes five quarters. hopefully, this pandemic will not concluding retentive enough to extend the duration of the recess beyond ‘ convention ’. Pandemic-based downturns tend to be v-shaped and during the final 100 years most have lasted around a year, according to the Harvard Business Review. This means that when all restrictions are ultimately lifted there is probable to be an enormous collective dismissal of pent up requirement, something wise businesses will be prepared to service well. A shrill convalescence would be a passing from ‘ normal ’ recessions of the past, so the lessons from past recoveries may need to be reconsidered given this is an unprecedented, disease-driven downturn .

Reconsidering Lessons from the Past

The lessons for the marketing profession from the 2008 recess in the UK, for example, were clear, but they may not apply fully to our current situation. indeed with that in mind, to what extent should those lessons apply immediately ?

Lesson One: Focus on the Long Term

In the last recess, some advertisers cut mark advertise spend, assuming this to be prudent, and many established media saw ad tax income drop by 20 % or more. however, because this was besides the early period of big data, online advertise tax income actually grew by about 20 % in 2008. Overall, advertising spend held unusually sweetheart, but it was the start of a dramatic drift to short-run energizing media, something that has cost businesses dearly over the years since then. The IPA Databank allows us to examine how the proportion between long-run brand build and short-run energizing influences the potency of a political campaign. In normal times, the IPA data argues for a balance between brand and energizing spend in the ratio 60:40 for utmost business effectiveness .

Most businesses today already spend less than 50% on brand-building – dangerously below our recommended 60% – so there is certainly no sense in cutting brand building further unless survival depends on it.

The IPA data on how campaigns balanced sword and energizing spend was less extensive back in 2008, so there is some doubt in the findings, but the datum suggests that a rebuff fault from the 60:40 optimum towards 50:50 might have been sensible in 2008. however, because of the highly strange impacts of this pandemic, from panic buying in some categories to market shut-down in others, this is improbable to be best practice during this recession. short-run energizing makes much less feel, when either demand can not be met or simply doesn ’ t exist. And in any sheath, most businesses nowadays already spend less than 50 % on brand-building – perilously below our recommended 60 % – so there is surely no sense in cutting sword building far unless survival depends on it. Either direction, it looks like a greater focus on trade name advertise investment rather than on short-run sales activation is more sensible from here on in. Certainly, businesses should resist the seductive sales pressure from short-run media to increase activation spend, unless they are one of the fortunate few countercyclical businesses that can meet necessitate .

Lesson Two: Defend Your Share of Voice

In 2008, some brands cut their contribution of Voice ( SOV – the share of class advertising outgo spent by the brand ), while others raised theirs. We know that SOV is strongly correlated to marketplace share – if we allow SOV to fall below the sword ’ s share of market then market share is likely to fall over the year following. We therefore know that cutting advertising budgets – and SOV – during a recess is a bad scheme. It may provide some short-run relief to profitableness ( because costs are cut ), but the subsequent passing of market share that follows will be extremely difficult and expensive to regain during the convalescence. thus, the long-run impact on profitableness will be highly damage and it is better to take the short-run profitableness hit to maintain SOV and defend the brand.

The good news for businesses that defend their brands is – because some advertisers will pull budgets thus reducing category ad spend – maintaining SOV is likely to be cheaper than in normal times.

The good news program for businesses that defend their brands is – because some advertisers will pull budgets frankincense reducing class ad spend – keep SOV is likely to be cheaper than in normal times. Of class, predicting what SOV a given budget will achieve in a quickly evolving media environment can be unmanageable, so defending SOV likely requires a highly adaptable overture .

Lesson Three: Seize Your Market Opportunity

The significance of falling SOV costs is that recessions can be a low-cost growth opportunity for brands. But in this recess, we can besides add the opportunity presented by a house-bound population ’ s growing use of media such as television receiver, social and on-line news channels. We saw in 2008 that the brands that took advantage of lower SOV costs to boost their SOV achieved impressive business gains. The come charts examine three equal-sized groups of cases from the 2008 receding with different media investment strategies measured by Excess Share of Voice ( ESOV ) — the dispute between a brand ‘s share of voice and a brand ‘s share of marketplace — the key measure of investment. Group one, whose ESOV was zero or less were at alimony levels or lower, but were still advertising ( i.e., they had not gone ‘ benighted ’ ). Group two had humble increase levels of ESOV in the range 0-8 %. Group three saw the recession as an opportunity, with over 8 % ESOV. Remember that some of these brands will have merely held their spend level to achieve this degree of ESOV. That said, the brands that invest in ESOV saw 5 times as many very big occupation effects ( such as profit, price, share, penetration etc. ) and 4.5 times the annual grocery store share growth .

That said, the investors saw 5 times as many very large business effects (such as profit, pricing, share, penetration etc) and 4.5 times the annual market share growth.

The affect of long-run profit growth ( measured in these case studies largely after the end of the recess ) intelligibly shows why taking the short-run hit to profitableness, by investing in advertising during the depths of recession, is ultimately worth the long-run profit .

Add to this the general find that stronger brands are more bouncy to adverse events, and you have a fairly compelling argument for investment .
What is sealed from the 2008 know and earlier recessions is that ‘going dark ‘ by pulling all mark ad brings the real risk of permanently weakened business performance. It is sensible to debate the spirit and nature of mark advertise to recession-hit customers, but not the importance of it .

Lesson Four: Demonstrate Humanity and Warmth

The appropriate note of ad in this recession may be different from former ones and may change over time, so we need to keep a near eye on the live guidance provided by continuous market research studies. In this crisis we are not so far dealing with an elective decline in consumption but an enforce one that, at least for the time being, has implications for the note of advertise. A broad group of marketers have expressed business that continuing to advertise as common might risk alienating consumers. Market research company System1, who measure consumer response to modern ads on a daily footing in the US and the UK, are not however seeing any signs of “ ad alienation ” ( as of April 2020 ) due to the presentation of social distance. Put another way, people are not changing former buy attitudes, they are simply prevented from exercising them. so, early on inquiry findings appear to suggest that fears about continuing to run existing advertise may be overstated .

So, early research findings appear to suggest that fears about continuing to run existing advertising may be overstated.

This may change in time if the recession is abstruse and long enough, but because the most likely form of recession is relatively short but shrill, we shouldn ’ metric ton so far fall into the recessionary advertise mentality seen in 2008. This was characterized by a shift key aside from strictly aroused ad as advertisers felt more unplayful approaches fitted the climate of the people. The IPA data suggests that there might have been some limit justification for this in 2008, to the extent that campaigns that supported emotional platforms with rational content appear to have enjoyed improved effectiveness, but this is from a foundation of low potency in normal times. In fact, many of the most lionize effectiveness subject studies of that prison term were emotional feelgood campaigns – albeit rooted in the world of what the brands did for customers, rather than abstract emotional ‘ wash. ’ Examples include Heinz, T-Mobile, Virgin Atlantic, Hovis Bread and Cadbury .
A couple of sentences from the T-Mobile IPA case study are worth revisiting now : “ Our research showed that people ’ s deeper human values were coming more to the fore. As the recession bit, people were responding in kind – literally – by turning to friends and class with warmheartedness and good liquid body substance where we might have expected angst and despair. ” T-Mobile built this insight into their highly effective campaign during the receding.

It is too early to tell whether the mood of populations will turn against ‘business as usual’ advertising, but for the time being we should expect the key virtues of emotional advertising to hold true even during recession: priming long-term buying of brands more powerfully than rational advertising, making a bigger impact on price sensitivity, and reducing pressure on pricing. So long as the emotional platform is sympathetic to the prevailing mood, the arguments for consistency probably outweigh those for change.

This in no way undermines the prize of highly topical opportunities to build grace through acts of humanness and generosity. This recess is unusual in that having a common enemy – COVID-19 – has generated a level of community spirit ( toilet axial rotation panic buying aside ) that far exceeds that seen in previous recessions. If people are demonstrating solidarity in adversity, then brands doing the same thing will earn their respect. many farsighted companies have willingly offered free goods and services to mitigate the emergency or to shield their employees from insecurity. Others have behaved less well thus far. It doesn ’ t take a psychologist to unravel who will benefit most in recovery .

Guidance for this Recession

so, here are seven guidelines derived from adapting previous lessons to this very new situation :

1. Do not hit the panic button and withdraw brand advertising, unless short-term survival depends on it.
2. Resist the pressure to switch advertising spend from brand solely to activation – it makes very little sense to do so, even in the short term. Customers, in many cases are not reluctant to buy, they are unable to buy.
3.  If the resources can be found, aim to maintain your share of voice, ideally at least at the level of your market share, where SOV equals SOM. You may even be able to reduce your budget if others are cutting theirs but be ready to adapt quickly to developments. You will need to monitor competitive activity regularly.
4. If the resources can be found, consider the opportunity to invest in lower-cost long-term growth by increasing share of voice during the recession.
5. Do not abandon your existing brand campaign unless it is clearly unsympathetic to the mood of customers. There may be more value and reassurance in continuity than in change.
6. Do not be frightened to use emotional brand advertising during recession – but ensure it is appropriate to the mood of customers. System1’s live research findings are right now supporting the use of advertising that demonstrates humanity through warmth, generosity and humor.
7. Look for tactical opportunities to create goodwill through acts of humanity and generosity, especially if you were proclaiming these virtues before the emergency.

The coming months will test everyone – we are in chartless territory. But this was much the lapp in 2008 and it was the brands that held their nerve – and share of voice – that bounced back strongly when recovery came .

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