Taking The Long View: Lessons from history about marketing investment in troubled times
Many people are familiar with the thesis of Keynesian economics in which governments increase spend and promote policies designed to grow employment and ultimately drive demand. The broad principles of Keynes’ thinking have been employed by governments with varied success over the last century, most notably during the great depression of the 1930s and, to a lesser extent, during the credit crunch in 2008 and the recession that followed. But do principles used in macro-economic contexts apply to how brands might navigate contracting markets or global recession?
Commentators broadly agree that as of April 2020 most major world economies are in recession. How deep and long the recession caused by the COVID19 crisis will be is anyone’s guess. But for the purpose of this analysis let’s assume an optimistic scenario that the recession will be painful, maybe deep but hopefully short lived, giving way to a strong and robust recovery. In such a V-shaped scenario how should brands behave and what are the right investments to make in marketing?
What clues does the past provide? According to Forbes, “In the aftermath of the last recession in 2008, ad spending in the U.S. dropped by 13%. Broken out by medium, newspaper ad spending dropped the most at 27%, radio spending dropped by 22%, followed by magazines with a decline of 18%, out-of-home by 11%, television by 5% and online by 2%.”
This demonstrates that there is clearly a temptation for business and marketing leaders to knee jerk, act reactively and pull up the drawbridge in terms of marketing spend. Where focusing on operational necessity becomes paramount – and for certain industries today such as retail, travel or perhaps oil and gas battling multiple existential forces including an oil price war along with COVID19 – this could be seen as an entirely understandable reaction. But is it the right approach?
There is a body of research and analysis produced by greater minds than I (Millward Brown, WARC, Forbes, Les Binet & Peter Field, Harvard Business Review etc.) suggesting that increasing marketing spend during times of recession can produce long-term gains in market share and that a larger share of the market generally leads to higher return on investment.
According to Millward Brown (Nigel Hollis May 2008), “The explanation of this phenomenon lies in the relationship between share of voice (SOV) and share of market (SOM). When a brand’s share of voice is greater than its share of market, it is likely to grow its market share in the coming year. Therefore, companies that increase their marketing investment when most others are cutting back have an opportunity to substantially improve the standing of their brands.”
Anecdotally we have seen a move towards this approach taken by certain Transmission clients in recent weeks. It takes guts from the C-suite down to put this into effect, as well as sound judgement on where and how to invest spend. In principle the aim and objective is to come out of a recessionary period with stronger market share and profitability at a point when competitors will have been weakened (in some sectors perhaps fatally).
Empirical evidence to prove this school of thought is limited but there is some interesting analysis by Mark Ritson in Marketing Week here. The article (https://www.marketingweek.com/mark-ritson-marketing-spend-recession-coronavirus/) considers data coming out of Harvard after the great depression, and more latterly by King and Biel in 2003, which supports the view that growth in ad spend during a recession drives significant measurable growth in market share.
So, if we accept the view that being proactive with marketing investment in a recession can increase share of voice to grow market share, what are some of the areas of focus for brands as we move into a global recession? It seems sensible to look at the following:
- How are your competitors behaving and what does that tell you about how you could react? Any reduced spend by competitors in your sector can provide significant opportunity.
- Focus on your brand and core value proposition. For many brands it is probably best to resist COVID19 knee jerk pivots to your core proposition and messaging.
- Review your audience segmentation and account prioritisation. Who are the winners and losers in this crisis and how will you ensure you are targeting the right segments/accounts with the right message?
- Be data driven. There has never been more data available to marketers than there is today. Use it to take some of the guess work out of where to invest limited resource in a dynamic and changing macro environment.
- Consider share of voice – we have seen above how it can drive market share and ultimately ROI.
- Focus on both the long- and short-term and where possible avoid short-termism.
- At a more tactical level there also many things you can focus on, Transmission published a paper on this recently here https://transmissionagency.com/insight/how-b2b-marketers-can-adapt-during-the-coronavirus-crisis/
Returning to my original theme then, perhaps looking at Keynes in the context of marketing is a bit of a tenuous premise, but the broad principle of Keynesian thinking in spending to increase demand does have relevance. These are the strangest of times and it would take a crystal ball to know exactly what will happen next. But if we accept my optimistic view of a short deep V-shaped recession as being the most likely outcome then hopefully some of the focus areas outlined above can help us navigate our way through the rest of what is almost certainly going to be a choppy 2020. The opposing view of course is that we are in the midst of a long war against an invisible enemy and nothing will ever be the same again. In this scenario what happens next is anyone’s guess!