With a Recession Looming, Brands Must Keep Advertising

Mar 20, 2023
With a Recession Looming, Brands Must Keep Advertising

A popular adage during times of recession rings true today: “When times are good you should advertise, when times are bad you MUST advertise.”

This year, 2023 is shaping up to nest itself in place with past years of economic distress, saddled with the likes of 2008. As McKinsey and Company put it, “Bubbles pop…” but, that’s not all they said, they finished that sentence with, “and downturns stop.”

Looking at past recessions

The world has faced several recessions in the past, and during these times, many businesses tend to reduce or cease their advertising efforts. It’s natural to want to pull back all spend in order to survive. But, for consumer brands, history shows us that survival is not about saving at all costs.

A study conducted by McGraw Hill looked at 600 companies from 16 different industries, some of which maintained or increased their advertising spend, and others who cut or reduced it during “Reagan’s recession” in 1980 to 1985.

Their findings were astounding. They noted that companies who continued to advertise during the two-year recession saw 256% higher sales than those that did not when the economy returned to growth. Those who did not advertise during the economic downturn saw 0% market share increase, and an increase in sales of only 18% (compared to the 256%) once the economy recovered.

According to Neilsen, “The solution isn’t to slash the budget, but to optimize media mix and invest in channels that are performing well. Finding the right balance ensures that spending is properly allocated for reach, efficiency and frequency.”

Advertising is the single most important action consumer brands can take during an economic downturn.

But, before we circle back to advertising, let’s look at consumers for a moment.

Recession impact on consumers

That same study (August 2022) by Boston Consulting Group, found that though consumers were becoming increasingly concerned, they were not stopping their spending altogether. In fact, given the current economic position, many households were actually spending more.

As consumers are increasingly concerned with their job security, cost saving and their lack of savings, brands will be left to pick up the change.

What does that mean? Consumer brands are up against more than just brand recognition.

Remember that statistic from McGraw Hill? (Companies who continued to advertise during the two-year recession saw 256% higher sales than those that did not when the economy returned to growth…) This is where the rubber meets the road for brands.

As consumer trends continue to favor value, it’s more important than ever for consumer brands to be in front of those consumers themselves. Competing with discount, wholesale, and superstores puts digital first brands (and retailers) into the spotlight. History shows us that this is the most defining time for these brands.

The brands that survive are those that look into the face of the downturn and continue to press forward.

As Sam Walton, the founder of Wal-Mart said when asked, “What do you think about a recession?”: “I thought about it and decided not to participate.”

Advertising during a recession

Advertising will continue to play a vital role in establishing and reinforcing a brand’s reputation during an impending recession. As we’ve established, when the economy is struggling, consumers become more cost-conscious. That often leads to making purchasing decisions based on brand recognition and reputation. By continuing to advertise, brands can differentiate themselves from competitors who may have reduced or ceased their advertising efforts, reach cost-conscious consumers, and prepare for post-recession growth.

And if you still aren’t convinced, let’s look at a few other reasons to continue advertising during uncertain economic times:

  1. Maintains brand awareness: Recessions can lead to a decrease in consumer spending, but advertising during these times helps maintain brand awareness and keeps the brand top-of-mind for consumers.
  2. Differentiates from competition: By continuing to advertise, brands can differentiate themselves from competitors who may have reduced or ceased their advertising efforts during a recession.
  3. Reaches cost-conscious consumers: During a recession, consumers become more cost-conscious and are more likely to make purchasing decisions based on brand recognition and reputation. Advertising helps establish and reinforce these factors.
  4. Prepares for post-recession growth: By continuing to advertise during a recession, brands are better positioned to take advantage of post-recession growth opportunities.
  5. Cost-effective: With reduced competition, advertising during a recession can be more cost-effective, allowing brands to reach their target audience at a lower cost.

The role of attribution

During a recession, the role of marketing attribution is to evaluate the effectiveness of marketing campaigns and allocate budget accordingly to maximize return on investment. By identifying the most successful channels and strategies, companies can prioritize their resources and drive sales, even in tough economic conditions.

We’ve already established that brands MUST continue to advertise, so how can we make that advertising as efficient as possible? Attribution and measurement.

It is more critical than ever before for consumer brands to understand which channels are driving the highest return on their investment, and beyond that, to be able to measure and monitor as consumer trends and spending shift.

Simply understanding what has worked for your brand in the past will not be enough during an economic downturn. You must also tap into the ongoing evolution of your consumers’ habits.

The best brands will lean into a diversified approach to measurement and attribution. Understanding that optimizing performance is their key lever to combating competitors and reaching consumers while they’re making purchasing decisions.

But, that’s not all. Investing in attribution during a recession can lead to:

  1. Better allocation of marketing budget
  2. Increased ROI on marketing spend
  3. Improved understanding of customer behavior and buying journey
  4. Ability to pivot strategies and allocate resources to high-performing channels
  5. Increased transparency and accountability in marketing investments
  6. Ability to identify and address inefficiencies in marketing efforts
  7. Increased ability to measure the impact of marketing on revenue
  8. Improved data-driven decision making
  9. Ability to prioritize and optimize campaigns to maximize impact
  10. Better understanding of the relative impact of different marketing tactics and channels on sales.

While it may be tempting to reduce or eliminate advertising (and attribution) during a recession, doing so is a missed opportunity for consumer brands. By maintaining brand awareness, differentiating from the competition, reaching (and optimizing reach of) cost-conscious consumers, preparing for post-recession growth, being cost-effective, and measuring and attributing as you invest, advertising during a recession can be a catalyst for future brand growth.

At DirectAvenue we work closely with our partners to ensure our clients get the best opportunities for their marketing campaigns. This article was written by Ashley McAlpin with Rockerbox, visit their site here.

Ashley McAlpin is the Head of marketing at Rockerbox and marketing executive with a background in traditional and digital marketing and communications. She also has more than a decade of experience in building and scaling marketing teams, campaigns and strategies. Ashley is passionate about bringing products to market in a way that is efficient, effective, and scalable.