Don’t Put Your Money or Media Under the Mattress
By Taji Zaminasli, Co-Founder + Managing Partner
As the saying goes, “when times are good, you should advertise, when times are bad, you must advertise.” Unfortunately, fear strikes the hearts of CFOs and rash decisions are made when there is news of a looming recession, resulting in (often unnecessary) balance sheet slashing, with advertising taking the biggest hit. It may seem counter-intuitive, but uncertainty in the marketplace is actually the best time for said CFOs to pivot their thinking and look for the opportunities that advertising provides from a brand awareness and customer loyalty perspective. So put those red markers away and keep the wallets open if you really want to come out of these tough times ahead.
Investing in advertising for the long term is similar to investing in the stock market, as both require an informed understanding of historical trends and market volatility. Despite the fact that the stock market has delivered good returns over the long term, it is subject to short-term fluctuations and volatility, and the same goes for your advertising investment. Just because your business is down, doesn’t mean that your advertising isn’t working or doing its job.
Brands and marketers can take note from financial strategy planning when it comes to advertising. Consider these five tips when faced with a downturn in the economy:
- Focus on Diversification. Have a slew of strategies and tactics across various audiences. Don’t pull back on some audiences, but rather develop an audience architecture that allows your brand to find the right opportunity for the market, ultimately mitigating your risk of market volatility across targets.
- Update Your Messaging. Match your current messaging to the market. Look at how consumers are feeling – are they confident? What new realities are they adjusting to? Showing you know and care about your consumers will go a long way in maintaining their business.
- Prioritize Innovation. Developing a test-and-learn roadmap is essential, as is investing in new ways of performance. Don’t fall into the addiction of low-funnel “performance only” investment schemes during times like these.
- Take Advantage of Competition. Or lack-there-of! In the current market, with fewer brands competing and softening prices, now is the time for brands to invest in themselves and their customers. When the economy is down, many of your competitors will take drastic measures to lower their spend – it will ultimately result in lowered profits, but if you stay top of mind to consumers, you can win your category and come out ahead.
- Be Patient. This is most important. So many brands will pull back in the marketplace, but you’re smarter than that. Resist the temptation to make short-term, reactive decisions in response to volatility. Focus on long-term investment goals and strategies and don’t make decisions solely on the here and now
Many brands have heeded this advice and come out on top during some of the worst economic times in our history. During the Great Depression, Kellogg’s doubled its advertising budget, which helped it become the category leader during those times. During the 1990-1991 recession, Pizza Hut and Taco Bell increased their sales by 61% and 40%, respectively, while McDonald’s sales declined by 28%, due to their decision to cut ad budgets. During the 2008 recession, Del Monte Foods increased its ad spend, resulting in a profit of $58.6 million, up from a loss of $10.1 million
in just one year. Similarly, Hyundai’s decision to invest in a customer-focused ad campaign during the 2009 auto industry crisis increased its market share and sales, while its competitors experienced significant sales declines.
The tumultuousness we are all experiencing is only the “new normal” for now. Just as we know it was a bad idea to hide money under your mattress in the 1920s, it’s also a bad idea to hide your media dollars behind fear. After all, “out of sight” is out of mind and consumers will remember the brands who were there for them through it all.
In the current market, with fewer brands competing and softening prices, now is the time for brands to invest in themselves and their customers. Every recession ends, and brands that have a long-term advertising strategy in place will be best positioned to come out stronger on the other end. As Wal-Mart founder Sam Walton once said, “I thought about [the recession] and decided not to participate.” Similarly, brands that have a long-term advertising strategy in place will be best positioned to navigate the current market volatility and come out on top.