Advertising in a RecessionAdvertising in a Recession

It pays to maintain marketing pressure:A review of the evidence

Guy Consterdine

Guy Consterdine Associates

24 February 2009

Objective

To assess the research evidence about the importance of continuing to advertise in a recession

Most marketers’ actual behaviour: cut adspend

Best policy: maintain adspend

Long list of studies examined

• Institute of Practitioners in Advertising (IPA), 2008• Millward Brown, 2008• Data2Decisions, 2008• Malik PIMS, 2008• Peter Field with IPA Databank, 2008• Ehrenberg-Bass Institute, Australia, 2008• Penton/Coopoers/BSI, 2003 • ABM Guidelines, 2002 • McKinsey & Company, 2002• Pennsylvania State University, 2002• Yankelovich/Harris, 2001• Prof. Patrick Barwise, 1999• Tony Hillier, 1999• McGraw-Hill Research, 1985• American Business Press, 1975• Buchen Advertising, 1961• Harvard Business Review, 1923

Budget-cutting options compared:Typical brand (modelled)

1/0 2/0 3/0 4/0 1/1 2/1 3/1 4/1 1/2 2/2 3/2 4/2 1/3 2/3 3/3 4/3 1/4 2/4 3/4 4/4 1/5 2/5 3/5 4/5 1/6

Sales

Quarter

Budget maintained every year

Zero advertising in Year 1, back to usual weight Year 2+

Half budget in Year 1, back to usual weight Year 2+

DOWNTURN STARTS

Source: Data2Decisions

Budget-cutting options compared:Typical brand (modelled)

Eliminating budget in Year 1: sales take 5 years to catch up

Halving budget in Year 1: sales take 3 years to catch up

Profit foregone while sales are lower is likely to far exceed short-term profit gain by saving adspend in Year 1

Meanwhile market share likely to be lost long-term

Conclusions: 1

Immediate profits protected by cutting adspend, but benefit is very short-term

Neglecting brand support in downturn will weaken brand & make it less profitable post-recession

Price promotions damage profits and brand values

Brand values impaired in downturn are hard to restore in upturn

Conclusions: 2

Share of voice matters

Keep share of voice equal to or above share of market

It’s likely to improve market share in medium and long term

A brand maintaining adspend while rivals cut theirs automatically increases share of voice

Price of buying media space or time falls in recession – exceptionally good value available

Conclusions: 3

Recession provides opportunities for marketers:

- to attack competitors

- to gain market share

- to gain market leadership

Can improve company’s stock market valuation

Consumer markets

B2b markets

Conclusions: 4

Results not broken out by medium

“Magazine advertising has all the characteristics that we would believe makes advertising especially valuable during a recession”Keith Roberts, Malik PIMS

Advertising in a recession

It pays to maintain marketing pressure in a recession

A review of the evidence

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