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Marketing During Times of Uncertainty

In times of uncertainty, economic, health or otherwise, many companies reduce or eliminate “discretionary expenses”.  It’s very easy to say now is not the time to think about Marketing, put brand plans on hold and freeze all spending – cut research & development, cut new product introductions, and cut advertising spend.  Are these prudent moves to keep a company operating profitably?

As the world is in the grip of this Coronavirus pandemic and many of us are hunkering down at home, taking care of our families, trying to occupy the kids and trying to stay calm; C-suite executives from all over the world are struggling with this very question.  For many of them marketing is the last thing on their mind.

Unfortunately, we’ve seen this before; this isn’t the first or the last time that we’ll face a crisis like this.  There’s a lot of precedent to lean on and we as marketers and market researchers have had the opportunity to reflect and study the events of the past and learn from them.

This is just a small sampling of recent “challenging” times:YearTypeName2019HealthWuhan coronavirus outbreak2018NaturalCamp Fire2017NaturalHurricane Maria2016HealthMERS2015HealthZika virus outbreak2014HealthEbola virus epidemic in West Africa2013HealthH7N9 (Avian flu)2012NaturalHurricane Sandy2011HealthTōhoku earthquake and tsunami2010HealthHaiti earthquake2009Natural2009 Samoa earthquake and tsunami2009HealthN1H1 (Influenza)2009HealthPandemic H1N1/09 Influenza2007EconomicSubprime Mortgage Crisis2005NaturalHurricane Katrina2004NaturalIndian Ocean earthquake and tsunami2004NaturalHurricane Ivan2004NaturalHurricane Frances2004NaturalHurricane Charley2004HealthAvian influenza (H5N1), sometimes avian flu, and commonly bird flu2003HealthSevere acute respiratory syndrome (SARS)2002EconomicDotcom Bubble2002HealthSARS2001Terror9/112001HealthAnthrax attacks in the United States, also known as Amerithrax1996HealthBovine spongiform encephalopathy (BSE), commonly known as mad-cow disease1995NaturalChicago heat wave of 19951994NaturalNorthridge earthquake1993NaturalStorm of the Century1992NaturalHurricane Andrew1987EconomicBlack Monday (Stock Market Crash)1981HealthHIV/AIDs epedemic

Having studied these events, research shows that scaling back, not only has significant downside but, in many cases, represents enormous missed opportunity.

History has repeatedly demonstrated that now is not the time to scale back. Companies that have the most success during challenging times such as these, are the ones that are able to maintain their presence among consumers and continue to build their brands regardless of temporary conditions.

The current Coronavirus crisis is a health crisis that is morphing into a full-blown economic crisis that is exacerbated by the fact that it has come on the heels of and effectively ended one of the longest running bull markets in history.  That said, it is a temporary condition that will pass.  Unfortunately, it will likely get worse before it gets better, but rest assured it will pass.  What we have seen during past crises is that companies that step up are rewarded after the recovery.

A common assumption is that, customers will be spending less; and therefore, money spent on advertising will be wasted. The fact is families will continue to seek food, entertainment, prescriptions, autos and other goods and services.  And even if they do scale backing spending somewhat, they will then exhibit pent up demand during the recovery period.

During the 2007-2008 economic crisis that was kicked off by the Subprime Mortgage Crisis the Commerce Department reported that consumer spending rose 0.4 percent in January, 2008. This continued throughout the first quarter of 2008 as retail sales in the United States increased 0.4 percent for the week ended March 15. On a year-over-year basis, sales grew 1.6 percent (The International Council of Shopping Centers-USB).

Most research on the topic suggests advertising in difficult economic times can actually provide significant opportunity to capture market share.

In a study of U.S. recessions, analyzing 600 companies from 1980 to 1985, the results showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn’t keep up their advertising. (McGraw-Hill Research)

Businesses that aggressively increased media advertising expenditures during the last recession (just 25% of all businesses) increased their market share 2 1/2 times the average for all businesses in the post-recession period (CARR Report, Aug 13 2001).

Another study documented a 1.5 point increase in market share among businesses increasing ad spending during recessionary periods. By contrast, during expansion periods, 80 percent of businesses increased advertising budgets with no improvement in market share, since most competitors did the same thing (Cahners and SPI, 2002).

Of course, not all brands have the option to increase their ad spending during times of uncertainty. However, by maintaining ad spending and spending more intelligently, while competitors are cutting back, you will increase your voice and ultimately pick up business in doing so.

One thing to note about this current crisis, which is a combination of health and economic, is that the economic side is acting differently than in previous recession conditions.  In a recent conversation, a colleague of ours, Frank Findley, Director of MASB made an interesting observation and Frank knows our data well – he used to work for us.

During true recessions, the behavior we’ve seen has primarily been about price and buying down.  People choosing to conserve; spending and buying less.  In this situation we are seeing distribution disruptions.  Empty shelves, stores closed, people afraid to go to the stores.  People aren’t able to find their favorite brands in some categories on the shelf because they are sold out and/or people are hoarding.  This is forcing switching behavior.  Forcing them to buy (and thus try) other brands.  This is a very dangerous situation for brands – it looks like sales are through the roof – but with different customers than they had before the crisis and as people try the other competitors they might not switch back.  Add to this that when it does end there is a possibility of a stock-up phenomenon where people won’t continue to buy but use up what they’ve hoarded.  This will create a hiatus after which people may be more open to trial.

Brands really need to think about what comes next and take actions to shore up brand preference and brand loyalty.  And at the same time, one thing that is especially critical for brands to do is, fill the distribution channels as quickly as possible even if that increases operational expenses.  Make sure that customers can find their preferred brand to ward off forced switching/forced trial.

How can you maintain advertising and come out ahead?

Regardless of the economic times, responsible advertisers should work to get the most out of their advertising investments by applying proven methods to increase the ROI of their ad expenditures. During difficult economic times, it is even more critical for advertisers to avoid the trap of making decisions that have proven to have adverse impact on sales; such as not refreshing creative, wasting money by flighting versus continuous spending, and running away from the reach benefits of TV.

Since the reality is that despite strong objections by marketers, corporate marketing spending is not going to increase (and is likely going to be cut at some level during a recession), the key question is “If I have to cut back or maintain ad spending, how do I ensure my expenditures are effective and put my brand ahead in the marketplace?”

Here’s what you should be doing immediately:

1.  Quickly reevaluate your messaging.  Don’t just blindly plow forward with your pre crisis messaging.  Make sure campaigns and messaging don’t look insensitive, opportunistic, completely inappropriate or in bad taste given the climate of the crisis.  For example, if you were Coors Light you probably wouldn’t want to run the “Official Beer of” March Madness campaign you had planned in light of the cancellation of virtually all sports in the country.

2.  Test new messaging to make sure it is appropriate given the climate of the crisis.  Again, making sure new messaging isn’t seen as insensitive, opportunistic, inappropriate or in bad taste.

3.  Track progress of new messaging and the recovery.  New messaging that’s particularly timely and related to or focused on the crisis can wear out faster than typical messaging or along the same curve as the recovery so you’ll need to be ready with a recovery message.

4.  Track for the environment.  Your current tracker might not be designed to capture the nuances of the current environment.  Make sure the cadence is right and that you’re capturing:

•  Saliency

• Relevance

• Perceptions

• Preference

• Purchasing

Most importantly make sure that your tracker is built with the MSW Trigger System without it, brands are flying blind.

What you should do next; 4 steps to understanding how to make what you have work to maximum capacity.

1.  Aggressively utilize 15-second ads – but make sure they are “good” ones:

•  15-second ads are just over half the price of 30-second ads, but on average three-quarters the strength (so, you might want to use multiple 15-second ads to maintain on-air strength).

•  Over 25% of the time, 15-second ads are as strong or stronger than their 30-second counterpart (when you know you have this opportunity, you win).

•  Use “cut-down” versions from 30-second ads to reduce production costs in multiple execution plans while simultaneously boosting GRPs – but when cutting down the ads, clearly understand the drivers of success and don’t cut them.

•  Use original 15-second ads to replace 30-second ads in single execution plans (build your 15second ads “from scratch” with the end in mind that they will be 15-second ads).

•  15-second ads are best used when there are clear-cut benefits/messages and when the goal is to maintain brand awareness and loyalty.

2.  Understand the persuasive life of an ad and manage the wear-out of your advertising:

•  As money is spent behind an ad, its selling power decreases in a predictable fashion – leading to diminishing sales returns. If you know the starting strength of the ads in your campaign, you can plan to maximize delivery of selling power and ad refreshment without wasting money.

•  A very slight difference can result in a “new” ad; therefore, ad poolouts are a very cost effective way to replace ads without producing totally new ads.

•  In contrast, ads are frequently replaced prematurely, when there is plenty of power remaining. If you know the starting strength of your ads, you can avoid wasting money on replacing ads too soon.

•  Know your end point business objectives. If you know the strength of your ads, you can marry spending patterns to project likelihood of hitting your goals via simulation technology.

3.  Take advantage of emerging touchpoints and synergies

•  While TV is often the strongest single-reach element of a multi-media plan, other touchpoints can be just as effective at motivating consumers and are often less expensive (e.g., print and web).

•  Take advantage of synergies between executions by placing media spend behind those combinations yielding the greatest total impact.

•  Avoid negative interactions (often the result of unexpected executional issues).

•  Both single and multiple message campaigns can be effective:

ο  Single message when a straightforward brand-differentiating message which appeals to a broad consumer segment has been identified.

ο Multiple messages when brand differentiation cannot be communicated with a single straightforward message.

4.  Flighting vs. continuous airing? Don’t go black!

•  In an attempt to optimize media spending, advertisers sometimes spend advertising in waves figuring that periodic spending in bursts is the key to driving sales. This is not the case.

•  If reducing media spend, avoid flighting, continuous spending even at lower levels is more effective.

Advertise Smarter

To improve the odds of success in this environment, marketers must understand how to make what they’ve got work to maximum capacity.  Doing this will involve expenditures for consumer measurement and technology, but if chosen wisely, the returns are well worth it in understanding what to do once you’ve been asked to maintain or cut your budget.

The end result is simple: when the these times of health and economic uncertainty end, your return on marketing spend will be multiplied.  While your competitors cut back their ad spending, and you maintain yours while making smarter decisions, you increase your voice among them. By knowing this, you are already ahead.

Lastly, for the good of the country and your fellow citizens you should continue marketing to stimulate the economy and keep the economic engine of our country and the global economy running so we all have food on our tables.

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