ANSWERED: THE BRAND DILEMMA – TO SPEND OR NOT TO SPEND IN 2021?

It’s the classic response. Trouble hits, markets contract, consumers retrench, recession looms and marketing spend is chopped as part of cost cutting measures to maintain cash reserves. And advertising, as the most public face of any budget, is always the first to go.

 

That’s how a crisis is SUPPOSED TO happen. However, what we’ve learned with COVID-19 these past 12 months is that the “rule book” of handling emergencies has been ripped up and thrown away.  This time, rather than acting en masse, Brands reacted in very different ways to the pandemic.

 

As a result, the spending decisions of last year have come home to roost in 2021 with varying outcomes, depending on the choices made.

 

Those who cut budgets, culled campaigns and paused new initiatives are now having to play catch-up as their visibility dropped (in some cases faded) and consumer engagement fell, exposing their market share to more active competitors.

 

By contrast, brands who took a different route and were guided by data driven insights and commercially savvy decision making from the agencies they work with, were able to successfully navigate a volatile landscape of market and consumer sentiment. Through continual advertising they were seen to be useful and relevant, informing consumers how they were supporting them with new initiatives, offers and – in some cases such as insurance companies – money-back schemes.

 

Interestingly, these brands also upweighted spend on digital and radio to reach more purposefully into local communities around Ireland and translate national marketing messages into local engagement. As a result of taking this different approach, these brands have built customer loyalty, generated increased revenues and secured (or expanded) their market share.

 

So, what have we learned and how can those learnings be applied to spending decisions going forward?

 

As the pandemic hit in early 2020 the uncertainty and unprecedented nature of the crisis led to many businesses giving into their instinct to stop spending; in some instances, this was a necessity rather than a conscious decision.  If we are to learn anything from previous years, it is that now is not the time to go quiet.

 

Research into the impact of advertising during a recession published in 2009 by Tellis and Tellis held three key findings:

 

• There is strong evidence that cutting back on advertising can hurt sales during and after a recession, without generating any substantial increase in profits. Such cutbacks can actually result in a loss in capitalization.
• On the other hand, not cutting back on advertising during a recession could increase sales during and after the recession.
• Firms that increased advertising during a recession experienced higher sales, market share, or earnings during or after the recession.

The motor industry is a great example; 2008 and 2009 saw car sales slump while 2010 sales exceeded the strongest pre-recession year. Pent up consumer spending often favoured those brands who invested in brand equity.

 

Further research from McGraw-Hill claims the decisions made during a recession have a lasting impact for several years. Simply, brands cutting spend continue to lose market share long after marketing spend is resumed.

The full and undivided attention of the consumers is every marketer’s dream.  This dream could become a reality for many industries if they take advantage of their competitors silence. People are at home more than ever before. People are consuming certain media more than before – namely TV, Radio and Online. In this instance, what happens when a large number of brands pull their advertising at the same time? Noise and market clutter decreases, ad volumes drop and the exposure for brands left standing goes through the roof.

 

Brands who hold their nerve and maintain spending will get massive bang for their buck.  There is an opportunity to win both ways – reduce spend while still maintaining market share. This theory implies the reduction in competitive noise ensures a higher share of voice and increases the effectiveness of the ads of those brands still spending.  A win, win.

 

Consumers continue to spend throughout this pandemic on essential items. As the earlier car sales example shows, the likelihood is when the market opens up once more there will be a pent-up demand for large ticket items. Consumers can use this time to research their purchase and preferred brands.  Who do you think will be top of the list; brands who have continued to engage with their target market and build their brand or those who went silent and waited for the storm to pass?

 

Sources:

https://www.metrixlab.com/whitepaper-advertising-during-the-covid-19-crisis/

https://customerthink.com/marketing-advertising-in-times-of-covid-should-brands-spend-or-not/