When the economy nosedives you can rely on at least one brave marketing director making the case for maintaining or even increasing investment in marketing rather than cutting back.
Is this just the Mandy Rice-Davies defence - “well, he would say that wouldn’t he” - or is there something in it?
There are plenty of examples of brands launching, maintaining or increasing their spend during recessionary periods - First Direct, Gillette Sensor, Levi’s, BMW, Gold Blend – and seeing the right kind of return on investment.
But as with all success stories you need to be careful in drawing the right conclusions. Some of these examples illustrate the competitive advantage that can be gained from innovation, creativity, improved customer service or consistency of messaging as much as they prove the case for increased advertising activity per se. Arguably we need to compare similar brands across a wide range of markets, over a long period of time.
Which is exactly what Professor Gerard J. Tellis of California’s Marshall School of Business has done. In a recent paper he surveyed a century’s worth of recessions. His conclusions are worth studying yourself but perhaps the most telling was that firms “that increased advertising during a recession experienced higher sales, market share or earnings during or after the recession”.
And he concluded that the converse was also true – namely firms that cut-back during recession impacted negatively on sales during and after recession, without necessarily impacting positively on profits.
Tellis’s study is not the only one to reach the conclusion that brands can lose share by cutting back in recessions. But for the average small or medium-sized business it takes nerve to maintain expenditure in the face of declining revenues, especially if cash is tight and there is shareholder pressure to bring costs into line.
So what’s a business to do, short of closing its eyes, crossing its fingers and hoping that boldness in the face of adversity will reap dividends over time?
Fortunately, investment in marketing is not a yes or no question. It could be that there are areas of your marketing mix which you can or should seek economies in the short-term. Whereas there may be others that would benefit from greater expenditure.
How do you tell the difference? You start to measure. When you invest in marketing, you need to make a corresponding investment in intelligence gathering. If you fail to gather data and insights – about your market, your brand, your customers, the performance of your communications – then your financial planning will have the precision of pinning a tail on a donkey.
If you can measure, over time, the performance of your marketing (both quantitative and qualitative measures) then self-evidently your decisions should be better informed.
And if your business is new and lacks historic metrics, then there’s plenty of data out there if you know where to look and who to ask (the various marketing industry bodies are a good place to start).
Zigging when others zag is not only about increasing share of voice when others go curiously silent with their advertising. It’s also about being more interesting, more relevant and more engaging than your competitors. This is a plea for investing in high standards of creative thinking and execution. But also engaging all of your colleagues in product and customer innovation.
This article originally appeared in The Telegraph's Business Club section.