You don’t cut ad spend in a crisis

When financial pressures hit or a brand’s net profit needs boosting, advertising spend is often one of the first budgets to be cut

2 min to read
Written by: Karla Sedak-Benčić

Source: MarketingWeek

The World Economic Forum calculated that total investment in advertising decreased by 10% in the USA, and a whopping 12% in the UK during the first half of 2020. The Interactive Advertising Bureau reported that almost a quarter (24%) of brands had paused all advertising by Q2 and gone completely dark.

Advertising investments are directly linked to revenues

Big companies, facing the same fork in the road at the start of 2020 zagged backwards instead of continuing to zig forwards. Coca-Cola, for example, “paused” its global advertising efforts during the worst of the pandemic months. Advertising investment was cut by 35% and £2bn was wiped from the company’s communications budget that year. Meanwhile, arch-rival PepsiCo seized a significant upper hand and reported net revenue growth of 5% for 2020. Contrast that with Coca-Cola’s disappointing full-year reduction in net revenues of 11% for 2020.

How a CFO became a marketing star

Procter & Gamble decided to go different road. After cast a longer corporate shadow during those deadly days of 2020, P&G woke up. After review of the current impact that Covid-19 was having on P&G’s workers, operations and associated communities, they decided to commit to its full advertising 2020 budget and even increase it. “The best response to what we are challenged with today,” CFO Jon Moeller told analysts, “is to push forward, not to pull back.” As for results, revenue growth of 4% for 2020 was the strongest share growth they’ve seen in many years.

 

In a play as old as recessions, the story is always the same. Brands cut back from advertising because they and their target consumers are facing a difficult period. One brand, however, maintains its marketing investments and reaps all the rewards as a result. Not because of the company or the customers it targets, but because of the competitors and their silence. As they cut back or go completely dark, the same ad budget suddenly delivers a significantly better share of voice. So, think carefully about how you will respond to the crisis next time, coming out stronger and better.

 

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