As the world now faces a global pandemic, brands ranging from big to small are all faced with the same struggle - people are staying home, businesses are closing down, and sales have plummeted like never before. For many, the first thought might be to cut their brand's spending as a means to make up for the loss of money created by the pandemic. In the heat of the lock-down moment, you might feel like this is the right way to go, but here's why you're probably wrong.
Learning from history, we can see that companies that have cut marketing and advertising, especially at a time like now when the global economy is in sharp decline, have dug an economic hole for themselves. As the Covid-19 pandemic convulses across the globe, there have already been an overwhelming number of businesses and brand names suffering irreparable losses. Evidence published by Marketing Week in March of 2020, discussed the results of a survey that looked at the effects of the crisis on marketing. It showed that that 60% of respondents are already delaying and reviewing ad spends for the rest of the year. Ebiquity's client data suggests that brands and companies have already reduced their spending by 20%, which is more than what they would have planned from the start of the year. But why? Why have brands and companies become so quick to undertake this mentality that ‘cutting spending equals long-term survival / success’.
Are You Driving Your Brand into a Ravine?
It's simple right? - You’re saving money. But here's why doing this may be steering your brand into a ravine. If brands were to cut their spending, the GDP would shrink. Research has shown that brands that cut their spending will end up shrinking 0.7% after the recession is over. While you're here cutting spending, there are other competing brands that are taking advantage of this opportunity by finding new ways to reach out to their customers. Brands and companies that are able to increase, or at the most maintain their marketing and advertising spending will do better long-term once the recession is over. Those who choose to increase their spending will have their brand increase by 16% in market share, as well as increase their Share of Voice (SOV).
Brands that cut spending will see their assets start to erode, which can lead to a less effective impact once the brand decides to start advertising again. Did you know that it can take brands up to five years to recover from an economic downfall?
Cutting advertising and marketing investments in the immediate, might be irresistible and might save some cash in the short-term. But that's just it - it's a short-term fix. Brands that are aiming for that long-term success need to decide on what types of goals and success they are striving for in order to make a decision on whether or not cutting, increasing, or maintaining spending is the right strategy for the business.
The Marketing Advantages of Lockdown
Should you indeed decide to sustain or increase spending, you need to be able to find ways to take advantage of the situation. Considering that everyone is indoors right now, the use of media has heavily increased, which means that using online and social media platforms are the best and easiest way to reach out to potential customers. Ads on social media platforms such as Instagram and Facebook have drastically increased, every single scroll reveals ads after more ads and that's because a considerable handful of brands and companies are taking advantage of the situation and they are highly benefiting from it. If there's one thing that you take away from this article it's that whether you're cutting, holding or increasing your spend, ultimately, your actions have a direct effect on your brand’s post-pandemic position in the market and the gap between those brands in each of those boats will become much greater over time.