COVID-19 & ADVERTISING IN A DOWN ECONOMY
Spotting Opportunity found in the environment of massive pessimism
We quickly forget that swings in the economy are to be expected and yet the first thing businesses and consumers do in a down economy is contract!
This is a natural response found in our basic survival instincts triggered by fear and scarcity. Understandable of course, but it’s important to shine light on the fact that we have the ability to rise above basic instincts to seek out opportunity rather than dwell in the static of fear.
Now is not the time to get stuck in your primal mind. While inaction is the riskiest response to the uncertainties of an economic crisis. Rash or scattershot actions can be nearly as damaging. Rising anxiety around questions like, “How much worse are things likely to get? How long is this going to last?” and the growing pressure to do something often produces a variety of uncoordinated moves that target the wrong problem or overshoot the right one. A disorganized response can also generate a sense of panic in an organization, and that will distract people from seeing something crucially important: the hidden but significant opportunities nestled among the bad economic news.
I aim to empower you to rise above your fears to move through the next few months proactively, finding comfort in knowing that you can still find massive opportunities during a time of fear, chaos, and pessimism. Perhaps even more now than during a booming economy where competition is at an all-time high.
PAST IS PRELUDE
During tough economic times, brands tend to view marketing as a discretionary cost and forgo advertising as a result of reduced revenue. However, studies have shown that eliminating advertising also leads to a decrease in sales, limited visibility and lost opportunity.
Before we move into the HOW, let’s review patterns in a down economy to better understand the potential in our current landscape.
The Roaring 20’s
In the 1920’s Post was the leader in ready- to- eat cereal. However, during the recession, Post CUT ad spend while competitors like Kellogg’s DOUBLED their ad spend; investing heavily in advertising resulting in a long-standing overtake of market share. As of 2019, Kellogg’s ranked number one in their niche with 30.01% of market share while competitor Post ranked 3rd with only 18.92% of market share.
American Business Press analyzed 143 companies during the economic downturn back in 1974 and 1975. They found that companies that advertised in those years saw the highest growth in sales and net income during the recession and the two years that followed.
Energy Crisis of ’73
Toyota ranked second to Honda Civic in fuel efficiency for 17 months from 1973-1975. As sales were strong, Toyota resisted the urge to contract despite economic concerns. Opting to move towards a long term strategy that resulted in Toyota surpassing Volkswagen as the top import car in the US by 1976.
In a study conducted by McGraw-Hill of U.S. recessions from 1980-1985, out of the 600 companies analyzed, the ones who continued to advertise during the 1981-1982 recession hit a 256% growth by 1985 over their competitors that eliminated or decreased ad spending.
Pizza, Tacos & Big Macs
In the early 90’s, Pizza Hut and Taco Bell took advantage of McDonald’s drop in ad spend resulting in a 61% increase in Pizza Huts sales along with Taco Bell’s increase by 40% while McDonald’s sales decreased 28%.
The Oligarchy of Amazon
“They experienced a 28% Growth from 2008-2009 alone!”
Amazon, now ubiquitous and inescapable in consumer culture. During the Great Recession in 2008, US ad spend dropped by 13% and global spending was down 9%. However, Amazon continued to innovate during the downturns. Rolling out new products like the Kindle, targeting the cautious spender by offering lower-cost alternatives. By 2009, ebooks had outperformed books, resulting in Amazon’s 28% growth from 2008-2009. Fast forward to today, Amazon ranks as the #1 eCom retailer by a huge margin, with forecasted sales to rise 17.2% to $260.86 billion—4% higher than the expected overall growth rate for US eCommerce sales.
“Almost 60% of Fortune 500 companies began business in a bear market.”
Now I don’t know about you, but understanding these KPI patterns is massively empowering and indicative of what’s to come if we choose to shift into proactivity, clarity, and intention. While many companies fail to see the opportunities hidden in economic downturns, we now know to regard advertising in such times not as a financial hindrance but as a contributor to profit and success. The brands that maintained or increased ad spend increased market share and sales during and long after the recession.
FIRST, do a thorough but rapid assessment of your own vulnerabilities as well as those within your business and then move decisively to minimize them. Stabilize your business, in an effort to protect it from downside risk.
THEN move to identify ways to capitalize on the downturn in the longer term, partly by exploiting the mistakes of less savvy rivals. This will position you to seize future sources of competitive advantage, whether from bold investments in product development or transformative acquisitions. The name of the game is not speed or efficiency, it’s taking the right action.
Trim the extra fat and lower your recurring overhead but maintain ad spend with a sharper eye. Know who your customer is! Leverage data to assess and further understand the needs and pain points of your audience and address them – Don’t be tone deaf! The key is to craft messages that reflect the times and describe how your product or service benefits the consumer.
HERE'S WHY YOU SHOULD ADVERTISE!
Your Competitors Pullback
Most small businesses have a limited advertising budget and a heightened concern for resources which leads to rash or scattershot actions. Most will assume that by holding back on advertising they will safeguard their business. However, looking at our past examples it’s fair to note this not only affects you in the short but well into the long term.
Brands who’ve spent years building presence through well-spent ad dollars will pull back, opening the marketplace for the company’s most savvy competition -YOU.
Level playing field
When the economy is booming, people are spending money without discernment. While you may believe that is a good thing, this hurts smaller businesses who find difficulty in paid channels as a result of higher ad costs, leaving larger brands able to easily dominate advertising space, casting prospecting nets to every conceivable target audience. During a recession however, consumers pull back hard on their spending by being more careful about how they put their money to work, resulting in lower ad space as brands pull back. Here is your opportunity to talk to those who never would have heard you before.
Use this time to build new customers, while nurturing existing ones. Knowing your customers want to be as cost-effective as possible, promote offers that address that pain point. The reduced cost of paid media offers you room to offer greater value, as we saw with Amazon in 2008.
You can also up-sell with value offers to help support customers. A great example is Mud Wtr, a California-based brand that offers healthy coffee alternatives that I enjoy often. I recently attempted to downsize my subscription. However, rather than canceling, I opted for the higher quantity that offered a lower cost per serving.
Like Mud Wtr, this is your chance to talk openly about costs, and how you can help. Once the recession is over, you’ll have gained a whole new customer base that won’t go back to the competition.
LONG-TERM POSITION FOR YOUR BUSINESS
“When times are good you should advertise, When times are bad you MUST advertise.”
Make sure that you are leveraging your brand’s owned attention as well as utilizing paid media opportunities. This is a great time to double down on your “WHY” and leverage your social channels to listen to the needs of your customers.
Consumers may not be spending as much but they are still spending. If you’re not the company they think of when they do spend, you certainly won’t be the company they go to when they’re ready and sales will decrease. Remember that, money isn’t “gone,” it simply reallocates. Now is your chance to be the company consumers trust through the hard times and you’ll be remembered while gaining their future business as you continue to advertise in good times and bad.
“Companies that injudiciously slash marketing spending often
find that they later must spend far more than they saved in order to recover.”
In summary, by looking at past patterns and understanding current facts, by lifting above fear and moving forward with the right action, you can stand to grow during such a time as this.
No matter how small your brand, or if you’re just starting out, a recession is an opportunity to RESET to shift business from the unprepared to the prepared. This is where the true game of business comes to play; many won’t make it simply out of fear and lack of clarity. By rapid assessment, listening and maintaining or increasing your ad space, you can stand to gain more in this down economy than you ever did in a booming one.
Brands that are adapting will not only be better prepared to weather the storm but also ready to seize the opportunities and increase market share overtime when the dark days are over.
If you are running ads or would like to explore how you can leverage such opportunities we’d be happy to be connected.