Advertising needs its own Resilience Road in recession

Like Suncorp’s brilliant disaster proof house, that deservedly won the Innovation Grand Prix Lion in Cannes, advertising needs to build on that idea to ready our own Resilience Road amidst the perfect storm of geo-political and socio-economic shockers that will undoubtedly pile pressure on marketing budgets.

The key is striking a fair balance between the boom of only investing in future brand growth, or the bust of shifting solely into performance marketing. (The fiscal equivalent of ‘save what you can’ – with short term gain, not mitigating long-term pain.)

While the UK Govt. is all over the place in lots of ways at the moment, they have added to their omnishambles with an an upcoming campaign calling on businesses to divert marketing spend into cutting prices. This is perhaps the most near-sighted view of marketing or advertising investment as it completely ignores its role as a growth lever for business value and, by extension of course, economic recovery.

With increased cost of goods, supply chain issues and the RBA handing out interest rate rises like Boris Johnson issuing apologies, it would be fair to say many CFOs are looking to control variable spend with an eagle eye on defending margin and EBIT. Conscious of this context, we have to offer better counsel than tone-deaf tropes of ‘spend your way out of recession’, or worse remaining silent in the face of ‘a head in the sand strategy’ for 2022. (If you come up smiling in 2023/24 bravo, but the chances are competitor spend has ripped the roof off your brand house.)

With the rare combination of ‘stagflation’ looming on the horizon, any marketer or agency worth their salt should be preparing their version of Resilience Road for the recessionary pressures that will challenge us over the next 12-24 months. While no perfect equation exists for growth in the extremely dynamic environment we face, it remains smart to fall back on evidence-based approaches of marketing science based on decades of proven success. Here’s 3 top tips for readying your business or brand:

Build on strong foundations

– Balancing brand building and sales activation to focus on both your long and short game is key to maximising effectiveness over time. While it seems sensible to double down on performance marketing for tangible response, The IPA’s ‘Effectiveness in Context’ study shows that investing in short term sales activation at the cost of all brand building communications can lead to a a 56% loss of effectiveness.

– As demand falls, advertising and marketing rates tend to drop creating a ‘buyer’s market’ for reach media. As competitors pull back on ad spend it might become cheaper to lean into brand building and according to Forbes, brands building share during and post a crisis grew by 30 to 60%.

– As Byron Sharp from the Ehrenberg-Bass Institute has proven, to grow your brand you have to reach both buyers and non-buyers. As times get trickier, how strongly a brand competes in memory will become more important, as consumers’ face greater challenges. In this context, retaining the balance of brand is vital to sustain ‘mental availability’ and be first to the surface in buying occasions.

Be strategic about what you prioritise

– Often perceived as a variable cost versus a value growth lever, it’s not surprising that brand advertising can be one of the first line items caught in tightening purse strings. Ironically, cutting back can prove costly as ‘saving’ on advertising to prioritise performance marketing essentially undermines future demand, and can cause market share to fall, with the cost of subsequently regaining lost market share being 4-5 times higher.

– Harvard’s Professor John Phillip Jones work supports this finding, with his work proving that investing in excess share of voice, (ESOV), relative to your share of market can gear your brand for growth over 12 months and helps create a specific budget rationale for understandably cautious CFOs.

Adapt to prevailing headwinds

– Apart from the economic argument for balancing brand and performance marketing, we need to also consider the category specific context of certain brands and businesses. As discretionary spending tightens, it could be smarter for luxury goods to focus on brand and longer-term demand creation as your goods or service might prove cost-prohibitive shorter term.

– The polar opposite to the above are categories that benefit from ‘The Lipstick Effect’. The Lipstick Effect is an economic theory that spending on small indulgences, (such as premium lipstick), increases during a recession. This means that health and beauty, fast fashion, Take-away food and alcohol can actually increase in a downturn. Strategic flexes on positioning are also savvy here as audiences prioritise goods and services which align with their ‘social-emotional’ goals. Small indulgences, ‘because you deserve it’, offer a mental mini-break in the context of holding off on big ticket items like cars or holidays.

– Last, but by no means least, think about audience targeting. Not all audience cohorts are equally affected by interest rate rises and while mortgage saddled families confidence has fallen in double digits in recent times, renters seem to be feeling comparatively optimistic.

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In times of uncertainty, people don’t stop looking to brands and media. If anything, they look at trusted voices and channels more – for hope, guidance, and the safe harbour of familiar brand value and values.

Our road to resilience starts with sowing long-term growth, in balance with short-term revenue reaping.

Proactive agency partners should help you balance effectiveness and efficiency today, to weather the dynamic environment we face tomorrow.

Daniel Machen, head of strategy at Lionize.