Just when it feels like the pandemic, with its lockdowns and quarantines, is finally over, the world is facing yet another major challenge: rising inflation and energy costs, plunging stocks, supply chain issues – the threat of a recession is looming. Brands need to brace themselves because winter is coming – and you can either freeze or keep on fighting.
Faced with issues on all fronts, the first temptation for many is to freeze their actions or run away from the impending loss in revenue by cutting costs. Next to heavy impacts on the workforce, the marketing budget is often the first area to get hit by the measures while brands scale back their activities – especially media investments.
But panicking in this situation and freezing media spend is not the answer. In fact, slashing budgets and stopping communication exacerbates losses. Instead, business leaders must make informed decisions and adapt their strategy to sustain growth and future-proof their brands for long-term success.
Cut your media investment and you’ll cut your growth
Over the past two decades, Analytic Partners has collected a vast quantity of marketing intelligence across industries and countries. This intelligence lives and breathes in ROI Genome, an evolving endeavour that goes beyond traditional ‘you are here’ benchmarking, to understand and quantify the drivers of ROI and performance at a fundamental level, and establish principles and truths for success.
This collective marketing intelligence includes insights on spend during the recession in 2008-09 and the coronavirus pandemic. The biggest key takeaway: brands must not go dark in times of uncertainty. While some may feel inclined to pull back on media spend, this can have detrimental effects.
For example, two-thirds of losses in incremental sales during the last recession were driven by lower investment in media, not because brands’ ROI was declining. And, on average, brands that reduced media investment suffered a 18% loss in incremental sales. However, the brands that maintained or increased their media investment during the recession came out stronger – in both the short and long term – and saw a 17% growth in incremental sales and ROI.
Other studies of the 2008 recession revealed similar results that counter the tendency towards freezing spend in a crisis. For example, Reckitt Benckiser increased advertising for more expensive, high-performing brands during the financial crisis. As a result, the company grew revenue by 8% and profits by 14%.
Continue communicating for continued relevance
Cutting media spend and not communicating with your customers and prospects also has a negative impact on long-term brand building. We have seen that brands that stop advertising completely are facing a loss in base sales in the upcoming months, which often can’t be countered by short-term activities such as promotions.
A recession communication strategy should, first and foremost, be centred on providing and communicating value, which comes in many forms for different industries. As a retailer, it may be real and perceived discounts, as well as unique value propositions and superior experiences – a balanced value mix that must be continuously communicated to both existing and potential new customers.
Continued media activity can also lessen price sensitivity among consumers. We have seen that brands with higher investment in media are experiencing fewer losses in sales as a result of price increases.
And remember: your marketing channels are not fighting the recession battle on their own. Our ROI Genome shows a strong case for a combined multichannel approach to drive campaign effectiveness – combining offline and online channels is 45% more efficient than offline alone and more efficient than online alone. The more channels, the stronger the return on investment.
Use analytics to fight the right battles
The reason why many brands are freezing in a situation of market disruption, rather than keeping on fighting, is that they aren’t prepared, they lack training – in other words, they don’t have enough information to make informed decisions in periods of uncertainty.
But, given the amount of market disruption now – whether it be the looming recession or the death of the cookie – it is more critical than ever for brands to ensure they truly understand their audience and their needs, and to never stop talking to them.
So, how can brands know which battles are worth fighting and when to turn the other way? Analytics can provide them with a stable foundation; for example, with an individually set up training plan that allows them to continually assess, monitor, plan and optimise their performance.
This results in a powerful tool to ensure the brand adapts to a changing environment, such as by testing adapted messaging or campaigns, and can showcase the impact of spending on performance. It gives them the opportunity for scenario planning to showcase the short- and long-term implications of those cuts, and prove out the value of marketing. Moreover, this helps them better and more strategically allocate resources in the short and long term, and surface new growth opportunities.
And the results speak for themselves: we have seen that companies that adopt data-driven decisioning and build their own individual, adaptable training plan can achieve five times more growth than those that don’t. They see stronger ROI and continue to build their brand even in economic downturns.
Are you ready to fight?
Kevin O’Farrell is associate vice-president at Analytic Partners.