TheCOVID-19 global pandemic has had an unprecedented impact on every aspect of our lives. Well over 100 countries are operating under a full or partial lockdown, which has inevitably had significant consequences for businesses – many of which have either temporarily closed or face dramatically reduced demand for their products and services.

We are already seeing a rapid contraction of the global economy, and businesses are bracing themselves for the “Coronavirus Recession.” CMOs around the world are now debating whether their brands should continue to advertise during this uncertain time. And if they should, what do they need to change to remain relevant in the current situation?

Leveraging MetrixLab research alongside trusted external sources, let’s dive into these key questions:

  • Does advertising protect brands during a recession?
  • Will consumers accept advertising from brands at this time?
  • How can I ensure advertising content resonates with how people are feeling?

Most brands are taking a cautious approach

In a challenging environment, the first instinct for many businesses has been to identify opportunities for immediate cost saving. Marketing budgets have been some of the earliest casualties as businesses aim to boost short-term profits.Marketing Week’s latest survey of 849 UK brand marketers suggests that around 90% of marketing budgets have been delayed or are under review.

One notable example was Coca-Cola, who announced in March that they would be suspending all marketing activity across multiple markets for Q2, with Q3 also under review.

More recently, alcoholic drinks giant Diageo confirmed that it would be “stopping advertising and promotional spend that will not be effective in the current environment.”

The precise impact on overall advertising spend is impossible to predict. But analysts at Macquarie Research
have estimated that the global hit will be a decline of around 18% – doubling the impact seen during the last great financial crisis when global ad spend fell by 9%.

Now is not the time to be going dark

Whilemany brands decide to reduce or completely suspend marketing activity during a recession, there is a wealth of historical evidence to suggest that this is not the best strategy – both for protecting profits in the short term and for helping the brand to recover in the long term. As the world was emerging from the last recession in 2009, Tellis and Tellis published an extensive review of empirical research into the impact of advertising during a recession.

Their analysis consistently demonstrated the following:

  • There is strong evidence that cutting back on advertising can hurt sales during and after a recession, without generating any substantial increase in profits. Such cutbacks can actually result in a loss in capitalization.
  • On the other hand, not cutting back on advertising during a recession could increase sales during and after the recession.
  • Firms that increased advertising during a recession experienced higher sales, market share, or earnings during or after the recession.

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