Why your advertising should not be on lockdown – even if the world is still on lockdown

June 22, 2020
SCMP Insights

The global Covid-19 pandemic does not discriminate. According to the Interactive Advertising Bureau (IAB), 70 per cent of media buyers have already adjusted or paused their planned ad spend since the end of March. 

The global lockdown caused by the spread of the coronavirus disease has put supply chains, offices and consumer spending on hold, affecting both large and small companies. 

Both the low-margin aviation industry and the glamorous high-margin world of the luxury goods industry have not been spared. 

China, the world’s largest luxury consumer market, was still experiencing a 15.8 per cent year-on-year decline in retail spending in March according to the Dentsu Aegis Network China’s report, “From infection to inflexion – China’s response, recovery and return”.

As this pandemic is forcing companies to switch from growth to saving strategies, marketing and advertising budgets will continue to be debated in boardrooms. 

These budgets continue to be seen as expendable – a misguided view that’s fueled by the same misconceptions that have influenced how business leaders react to a recession. 

Marketers and those in the advertising profession should challenge these false assumptions with the following counter-arguments:

Two of the best reasons why now is a good time to advertise for great results:

  1. Lower advertising costs may be equal to lower costs of acquisitions

The cost of advertising drops during recessions. Brands that plan their campaigns efficiently will be able to gain market share during a recession and do it at a lower cost to themselves than when times were good. 

The Wall Street Journal’s CMO Today reported that the cost of social media ads such as Facebook and Instagram dropped by as much as 50 per cent between February and March this year.

  1. Take advantage of lower noise levels, increase share of voice and your share of market

Overall spending on digital ads for March and April was down 38 per cent while traditional media was down by 39 per cent, according to the IAB

Noise levels for many brands across categories have dropped considerably during the past few months as their competitors have cut back on their ad spend. This allows advertisers to re-position or introduce a new product with much less effort as category leaders lose their top-of-mind positioning. 

Businesses that have dominant market share also have a higher marginal cost of acquisition for new customers and they are likely to pull back spending during recessions. Businesses with lower market share or lower marginal costs to acquire customers should then use recessions as an opportunity to invest more in advertising. 

Cutting back on marketing investments will not save your brand during a recession

Many people believe this, but very few boldly act on it because cost-cutting is not the way to growth. CNBC reports a good example of this involving the 2015 Kraft Heinz merger. 

Experts believe that cutting back on its advertising by almost 40 per cent has significantly contributed to long-term negative effects on the brand. Its share price now is less than half of it was when the merger was announced. 

If the company still believed cost cutting on advertising was a good idea, it would not have hired Miguel Patricio – former CMO of Anheuser-Busch InBev and one of the most-awarded brand owners at Cannes Lions 2018, as its new CEO in 2019.

At a time when all brands have access to the same technology platforms, which can be designed to solve the same user or category needs – and especially during economic downturns when consumers become more price sensitive – brand loyalty becomes even more of a problem. 

Studies have shown that brands that “go dark” (completely stopping all advertising) during a recession should expect to see metrics such as brand use, brand image and brand awareness decline significantly. 

Because consumers are not loyal by virtue, the need to advertise and communicate a brand’s unique selling proposition becomes even more crucial during a recession as it offers brands an opportunity to distinguish themselves from their competitors.