MARKETING SPEND

Yes – boosting your spend in tough times will benefit the brand

By our News Team | 2022

The knee-jerk reaction in a recessionary environment is to reduce spending on marketing. But study finds it’s detrimental in the longer term.

Marketing professors teach it at business schools, but in real life CEOs and boards tend to baulk at the concept of increasing marketing spending and head count in recessionary times.

Now a new study out of the US purports to show the dangers of cutting marketing investment in a recession, while emphasising the opportunities for bold marketers who maintain or increase advertising in these times.

Marketing spend

Photo by Anna Nekrashevich from Pexels

A study by Analytic Partners – a cloud-based managed software platform that operates in the Americas, Europe and Asia-Pacific – entitled How to Maintain Advertising Effectiveness in Challenging Times found that 60% of brands which increased their media investment during the last recession saw ROI improvements, according to analyses of hundreds of billions in marketing spend. 

Brands that increased paid advertising also saw a 17% rise in incremental sales, while those who slashed spend risked losing 15% of their business to competitors who boosted theirs.

The study’s data shows that organisations which cut spend are likely to lose ground to rivals during and after a recession, while those who maintain or even increase spend stand to boost their ROI, becoming even more efficient at a time when efficiency is all the more important. 

Counter to driving success and shareholder value

“This challenges the consensus that the first move during a recession should be to cut paid ad spend and marketing headcount to preserve margins,” Analytic Partners notes in a media statement. “However, this actually undermines margins and is counter to what most businesses should be doing to drive success and shareholder value.”

The report also revealed strategies for brands to recession-proof their marketing strategies. For example: 

  • Using multiple marketing channels can increase advertising impact by 35%.
  • Half of brands that increased marketing investment during the last recession saw ROI growth in back-to-back years.
  • Brand messaging outperforms performance messaging 80% of the time, so refocusing exclusively on performance messaging will lead to losses.
  • Two thirds of the opportunities to improve video advertising performance lie in improving the quality of creative.

Overall, the study identified five main factors in advertising success. These are, in order of impact: amount of investment, creative quality, halo (the power of advertising for one product to boost another product), mix of media, and channel optimisation.

“The best way to get through a possible recession, and prosper on the other side of it, is to think long term by investing in your brand and your relationships with customers,” said Mike Menkes, SVP at Analytic Partners.

“Short-term thinking might make some shareholders happy at the next earnings report, but it undermines growth, and therefore margins and true shareholder value over both the short and long term. A strong advertising strategy will lead to continued brand success that is stable and here to stay.”

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