Ad spend cuts are false economy, says study

Brands which maintain their ad spend during a recession – particularly those in a declining field – can substantially increase their market share, according to new research.

A report from Dr Stephan Buck, Michael Brown of Taylor Nelson Sofres and media auditors The Billett Consultancy shows that cutting back on ad spend can be a dangerously short-sighted economy. This adverse impact is likely to continue into the post-recession era, says the report.

The research updates an earlier study published in 1991 called “Television Advertising in the Recession”, which looked at associations between advertising spend and market share during 1977-82 and 1989-90.

The latest study covered the first six months of 1991 and the first six months of 1992, and analysed 127 brands in 46 product fields.

According to the report, the highest-performing brands had increased their total TV ad spend by seven per cent, with average market share up by 1.1 per cent. The lowest-performing brands had reduced total TV ad spend by eight per cent. Average market share dropped by 1.6 per cent.

In this lowest-performing bracket, ad spend also had the greatest effects. The report explains: “When there is little natural buoyancy in a market, and hence other positive factors such as innovation, development and competitive force are not strongly at work, the relative power of advertising is increased.”

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