March 24, 2020
Michelle Lynn is the Global Head of Data and Insights for Bloomberg Media.
The era we are all now living through together is unprecedented. Maximum uncertainty is challenging everyone — personally, professionally, organizationally. While it’s hard to know what will happen next, those of us who have worked in advertising and marketing through the tough times of 2001 and 2008 can help offer some guidance for those who may be facing important business decisions.
In that spirit, I wanted to share my own perspective, based on two decades of work generating insight for marketers. I believe there are three main principles brands can benefit from observing the global economy is in a slump.
1. Increase Share of Voice
During an economic downturn, or recession, it is important for businesses to maintain their share of voice (SOV). A brand’s SOV should be greater than or equal to its share of market (SOM). SOV represents the portion of marketing, and conversations about brands/marketing, that a brand can claim as its own. A straightforward way to calculate SOV is brand advertising (in dollars or total number of ads), divided by total market advertising (in dollars or total number of ads).
Although the natural instinct during uncertain times may be to cut back on expenses, including marketing, studies going back at least to the 1920s have consistently found that brands which maintain or increase advertising during a recession see increased sales, while companies that cut back on advertising lose both sales and profit margin. Study data supporting the strategy, as well as multiple experts touting increased SOV, have provided robust evidence that this is a best practice.
The idea of only looking at the short-term results when making business decisions is known as short-termism. Data through 2016 has shown that this is increasing, while the effectiveness of ad campaigns has been falling. While short-termism has been found to increase near-term return on marketing investment, it does not increase profit growth.
I like to say that these days campaigns feel like they were born to die because we are too short term and performance-focused. In times like these, there’s an urgent need to let campaigns live and to stop equating success with metrics like CTR.
Cutting back on marketing causes brands to lose “share of mind” with consumers, which can have both an immediate and long-term impact on business. If consumers find new brands during lean times, they may stick with them when the economy improves. For B2B brands whose business depends on relationships, being present and projecting strength builds assurance among clients and prospects.
Although there may be short-term pain associated with maintaining, or even growing, marketing spend in tough economic times, substantial medium and long-term growth will often outweigh any short-term losses. One reason to maintain advertising during a recession is because as competitors lessen their spending, there is less noise that consumers need to wade through. Additionally, if competitors lessen their advertising, companies can increase SOV simply by staying the course, as they will automatically gain a higher share of the marketing in their industry.
As brands gain a larger SOV, this results in increased consumer preference, which then often leads to increased sales. The results of a study that examined the best spending strategies for businesses during an economic downturn found that for marketing, the winning strategy (the one that resulted in increased sales and/or profits) was to increase spending. No surprise there.
2. Focus on Core Products/Brands
While continuing to advertise during a recession is important, it is just as important to focus that advertising on the right brands and products. This should be the core brands of a company, those that are most likely to survive the recession. This is a best practice recommended by Millward Brown (now Kantar), a global expert on advertising effectiveness, and is supported by additional research.
By focusing on only the core products, companies avoid spreading themselves too thin with the limited resources available. Companies should review their brand portfolio and make determinations as to which products have a positive image, the potential for increased sales, and other factors that would make them more likely to be successful during an economic downturn. Since consumers often already have strong associations with successful brands, focusing there can increase the likelihood of success during a difficult economy.
Lowering prices should not be part of the strategy unless it is already part of the company’s positioning. When premium brands lower prices to weather a storm, it is very difficult to regain the premium price when the economy improves. However, this is one area that may not mirror past downturns. Given the extreme market volatility we are currently seeing, this may change – especially as it applies to B2B.
One way to improve the effectiveness of an advertising budget is to increase creativity. During a recession, more than ever, it is important that messages grab attention and are memorable. Most if not all brands are now thinking about how to evolve their narrative, messaging and tone to be more sensitive and to not appear opportunistic. Looking at how core products and services can help people weather this period points the way.
The focus on core should also be extended to include core customers. Since it is five times more expensive to acquire new customers as it is to retain existing ones, during lean times it makes sense to focus on existing customers. By giving them an extraordinary experience, they are more likely to spread the word about the brand, which may result in new customers as well.
A good example comes from a report Bain published analyzing companies’ recession strategies. The report outlines how Samsung divested and streamlined their non-core brands and released the first Galaxy phone in 2009. As part of this strategy, they also rebranded themselves as an innovative company. As a result of this focus on their core business, Samsung recently was ranked number 6 in brand value on Interbrand’s global list — a significant jump from its rank of 21 at the beginning of the last recession in 2008.
3. Establish your brand as an authentic, trusted partner for the long-term
During uncertainty, people are looking for answers as to what’s ahead from anyone who can craft a careful, tuned-in message – one that isn’t focused on selling. Times will inevitably look different after we get through the state of pandemic, and it’s hard to say what that will look like. But what we do know is that there will be an after, and brands that appropriately respond will enjoy deeper connections and brand love.
Today’s audiences believe that brands need to take a stand–and if they aren’t helping, they’re part of the problem. On the flipside, brands that are contributing are already getting a significant amount of positive press, such as LVMH, who is producing free hand sanitizer for healthcare workers in France. By orienting efforts around a strong purpose, brands feel authentic and build deeper relationships with their audiences for the long-run.
Additionally, brands that pivot in ways that seamlessly fit into the world’s new way of living may find themselves an integral part of society beyond the crisis. For example, brands that are offering free, live workouts on Instagram (e.g., Rumble) or video conferencing tools (e.g., Zoom) may see ongoing loyalty as the world shifts towards new habits developed during an era of social distancing.
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