When a recession comes don’t stop advertising

Now, thanks to Covid-19, what we have on our hands is a market as bearish as any in the last 70 years. But as Winston Churchill once remarked, do let a good crisis go to waste. The economic uncertainties of a world in lockdown could provide bold marketer with opportunities.

A quick trip down memory lane throws up plenty of examples of brands emerging from the recession stronger and more profitable than when they went in. Post used to be America's number one breakfast cereal until the 1920s. In the Depression, Kellogg doubled its ad-spend, trebled profits and became a category leader. Where it remains to this day.

When McDonald stopped advertising in the recession of 1990-91, the sales declined 28%. Pizza Hut kept spending and saw sales grow 61%.* After the crash of 2008 and at a time when its own headline asked â Print Dying? The Economist invested in brand advertising and saw circulation figures rise.

LoveFilm, an online film and TV rental company, saw membership increase by 40%. Right now, with tens of millions of people loitering around their own homes with nothing to do, there a lesson here for Netflix, Sky, Virgin, BT and every other streaming service you can think of. Buying a subscription to one of these services might have seemed like treating yourself a month ago but will now look like an essential. Similarly, lawyers are busy. People who have never thought about making a will before are now wondering what to leave to whom. And putting in place power of attorney documentation in place.

The interesting question is, what sort of advertising works best in a recession? After Lehmann went down in 2008, digital advertising went up 14% in the USA, while spend in traditional media went down. Same story in the UK, where a number of brands started flirting with digital for the first time. They were surprised and delighted to find it delivered relatively rapid ROI. Most of the money they spent has never returned to traditional media and in early 2020 more than half of all ad-spend was set to go on digital inventory. My bet is that this is about to go way beyond the 52% forecast. More people are spending more money on more digital campaigns. And for digital campaigns read short-term, promotion-linked advertising rather than brand-led campaigns designed to build loyalty.

As in the last crisis, what we can expect to see is an increase in short-term planning. Back then, Asda increased its spend by 40% but concentrated on price promotions. And, indeed, that triggered a price war. We can expect more of the same now. Digital is going to be looking even more attractive to marketers because it delivers tremendous efficiencies. It allows them to talk about lower cost per customer acquisition and sound responsible. The right message to the right people at the right time is a story of minimizing waste. And, talking of minimizing waste, digital allows you to take your telly commercials and even the shots from your print ads and re-purpose them for digital. You can slash production costs and make your creative assets go further, generally spend less money in the process. All good stuff, except for one thing. Effectiveness takes a hit.

Concentrating on efficiency has had a damaging effect on the long-term health of most brands. That the argument Peter Field and Les Binet have been making. Authors of the IPA books The Long and the Short of It and an Effectiveness in Context, they argue that there needs to be a balance between emotional, brand-centric communications and transactional, rational messaging. Depending on the market, they say the rough split should be 60/40. And that where sustained sales growth is to be found. It a message many marketers may agree with but when you have a CFO with a scowl, its not an easy one to make in the boardroom. Adidas gave the Field/Binet theory some legitimacy. In October 2019, CMO Simon Peel admitted that the brand split had been 27/77. Not much brand advertising but lashings of performance-driven digital ads in pursuit of e-commerce. He told an IPA conference that it had come as a shock to discover that 65% of sales had come from brand comms, despite the under-investment. So, the story here isn’t that its important to find equilibrium between efficiency and effectiveness, its that it is especially important now. The brands that come out of the chaos of Covid-19 smelling of roses will be those that not only upped their spend but which resisted the temptation to invest it all in doing deals with their customers.

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