Although a pandemic affects businesses and the economy in different ways than a traditional financial crisis, the nature of this crisis does not change the fundamental principles of marketing and consumer behavior; a company’s sales, revenue and profitability are directly correlated to the long-established relationship between share of voice (SOV) and share of market (SOM). The brands that emerge as leaders on the other side of this economic downturn will be the ones that embrace the following well-researched, well-tested principles.
Maintaining your share of voice now will cost you less in the long term
Historical evidence demonstrates that going dark or significantly cutting your advertising spend during an economic downturn will not only result in more pronounced short-term losses, but it’ll also be a more expensive recovery for your brand post-recession. Relevant examples span back to the 1920s, when companies that decreased their advertising spend saw sales decline both during the recession and then for the following three years. This was the first in a series of proof points over the last 100 years to show the ability of advertising to drive outcomes both during and after a recession.
Advertising during a recession is for the recovery afterwards
An economic downturn offers savvy marketers an opportunity to maintain their share of voice to avoid a prolonged and expensive recovery. Furthermore, brands that achieve an excess share of voice (ESOV) relative to their competitors will be able to drive even greater sales, especially as the recovery unfolds.
In the early 1990s, professor John Philip Jones analyzed the relationship between SOV and SOM and found there’s a clear correlation between the two. This is also substantiated by Millward Brown tracking data, which indicates a brand is most likely to gain market share when its SOV increases and is higher than its current share of market. In other words, brands that take the opportunity in an economic downturn to outspend their competitors and increase SOV will quickly see that excess share of voice translates to higher market share.
Thinking competitively will help protect your market share
Perhaps marketing and branding consultant Mark Ritson said it best: “The gangster move in a recession is not just to maintain the budget but actually increase ad spend. That sounds like a lunatic move until you understand ESOV and the dynamics of long-term brand building.”
Achieving ESOV and translating it to increased market share requires a brand to stay vigilant and keep a watchful eye on its competitors to determine the investment needed to maintain or grow share of voice. Also, keep in mind that maintaining SOV does not necessarily mean maintaining your current budget. Many advertisers cut their budgets during a recession, presenting the opportunity to preserve your position for a lower overall investment (although Ritson might declare this to be a less “gangster” approach than increasing spend). The key is to actively monitor your competitors’ strategies and expenditures.
Recessions can be an opportunity for expansion and growth
If your competitors pull back spending and the market becomes less saturated with competing messages, advertisers can seize the opportunity to distinguish their brands in the minds of consumers. In fact, it’s from these economic downturns that new brand category leaders emerge.
During the Great Recession of 2007-2009, marketers across categories that focused on brand-building efforts through increased TV investment saw positive business outcomes and sales as a result. Amazon launched its first TV campaign in the middle of the recession in 2008 and saw a compound annual growth rate of 34 percent between 2008 and 2012. Walmart significantly increased its TV investment in both 2008 and 2009 and saw high single-digit sales increases in each year, with continued growth after the recession. Likewise, T-Mobile made a moderate increase in its TV investment in both 2008 and 2009 and saw a compound annual growth rate of 21 percent between 2008 and 2011.
Messaging should evolve to be right for the time
Of course, maintained or increased ad spend during a recession needs to be reflective of the larger economic climate. A recent VAB study found that consumer perceptions of companies are positively affected when they choose to share COVID-19-related advertising messages. In addition, companies that show an authentic commitment to community during this time will likely increase purchase intent.
Creative should align with evolving customer needs and current consumer sentiments through more compassionate brand-building efforts rather than strictly incentive-based promotional activity. Mastercard CMO Raja Rajamannar got it right when he noted, “The brand has to be visible. We cannot go dark. But the time is not to sell, this is a time to serve. This is a time to enable and not be opportunistic.”
Nearly 100 years of evidence demonstrates that brands that guide their marketing decisions according to the above principles in the coming months will be rewarded with increased market share on the other side of the current economic crisis—and perhaps sooner than they think. According to a recent report from Goldman Sachs, bear markets recover quicker after an adverse event than cyclical ones or those caused by underlying structural issues in the economy. Globally, the International Monetary Fund currently expects a rather swift recovery after COVID-19 contraction. With these expectations in mind, the real question becomes this: Will your brand be well-positioned to reap the long-term rewards of the rebound?