The great lockdown is forcing the economy to slow down and the temptation for many in the business world will be to cut marketing and advertising costs to the minimum. However recent studies* prove that it pays for brands to hold their nerve throughout the crisis and – if necessary - adjust rather than reduce their advertising. We look at three critical insights from collected research.
Insight 1: Winning brands maintain or increase advertising spend throughout recessions
In their publication Die Zukunft der Marke (2014), Peter Haller and Wolfgang Twardawa analysed 959 FMCG brands over 9 years during recession and growth phases, identifying the “winners” and “losers”. The researchers found that during the recession following the global financial crash in 2008, 57% winning brands kept their advertising spending stable or increased it, while only 41% losing brands did the same. As a result, on average the market share of the losing brands fell from 20.2 to 17 percent, while the market share of the winning brands rose from 13.5 to 19 percent.
The study also found that more winning brands than losing brands invested in new products during the recession (approximately half of all winning brands compared with only around a quarter of losing brands).
Conclusion: Now is not the time to reduce advertising spend or stop investing in new products because the strongest market share gains and losses occur during crises. Winning brands advertise anti-cyclically and increase their advertising investments in times of crisis. Market shares that are lost in short periods of crisis are not made up for in long periods of growth.
Insight 2: In life-changing times customers more likely to switch brands
Important life events mean that that people are more likely to fundamentally change their consumption habits and willingness to buy new or different brands increases. In 2018 behavioural scientist and author of The Choice Factory, Richard Shotton recruited 3.500 participants and asked them two questions. First, which life-changing events they had undergone in the last 12 months. Second, they were asked to state, for a variety of categories, whether they had tried any new brands in the last year. They found that in every category, people were more likely to have tried new brands if they had undergone an important life event. Among those who hadn’t had a life change, 8% had switched brands. Among those whose lives had recently changed, 21% had switched brands.
Conclusion: Life changing events pose both a threat and an opportunity to brands. These are times where it is necessary for advertisers to both defend their existing customer base and there is an opportunity to acquire new customers. Both strategies require effective advertising.
Insight 3: In times of crisis, advertisers might rethink campaign tonality
Many advertisers are expressing uncertainty about the public’s mood and whether their ads will connect well in this crisis. Global marketing research company System1 tested 100 B2C TV ads from UK / USA in January / February 2020 and again on 21-22 March (when lockdown was just starting) to see if they were connecting with the audience. In his article Are people responding any differently to ads today?, Orlando Wood, Chief Innovation Officer at System1 offers insights for creative based on these test results:
What holds up well:
- Familiar and established brand characters or settings that convey consistency
- Ads that reference the past, that have a clearly defined sense of time and place
- Ads that celebrate human ‘betweenness’ — particularly in the household and small groups
- Ads that have a strong connection with our immediate surroundings – with place and community
What doesn’t hold up well:
- The direct ‘hard sell’ ad, focused on price or promotion
- Ads focusing on things over people
- Ads that pander to vanity or self-image
- Ads reliant on words and rhythm
- Aggressive, competitive or performance-focused ads
Conclusion: If necessary, advertisers might need to reconsider the tone of their campaigns to connect better with people during the present time. Companies that advertise in times of crisis strengthen their brand, thus securing market share and sales in the short and long term and significantly increase their chances of success in the crisis. TV advertising is also – and especially – well received by consumers in crisis situations. It reflects normality and shows that life goes on.
*Relevant studies are presented in the recent Research Flash from SevenOne Media: Werben in der Krise - Fakten aus vergangenen Krisen, die Marketingverantwortliche kennen sollten (Advertising in a crisis – facts from past crises that marketing managers should know)