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Do we pull back on ad spend?

‘Those who do not learn history are doomed to repeat it.’

This quote is most often attributed to writer and philosopher George Santayana, and in its original form read, “Those who cannot remember the past are condemned to repeat it.” Santayana was known for aphorisms, and for being a professor of philosophy at Harvard. As evidenced by the statement, according to Santayana’s philosophy, history repeats. If true (and based on my observation of human nature) I think it is, then this saying ought to be a guide for everyone, in good times and bad. Not only in our personal lives, but also in business.

Today, worries surrounding the economy and talk of a possible recession raise many of the same questions that advertisers asked themselves more than two years ago during the emerging pandemic: Do we pull back on ad spend? How can we make our efforts more efficient and effective? How can I prove the value of my campaigns at a time when cost optimization is front and center?

In times of economic uncertainty, advertising strategies, naturally, adapt to different sets of market dynamics. But rather than pull back on ad spend, it’s important that brands maintain a share of voice and drive short- and long-term outcomes across platforms and screens. Notice I said “a share of voice” not “the same share of voice”. Inevitably, some competitors will go silent. By default, this means a brand’s spending level does not have to remain at its current level to gain a share of voice increase.

In the early stages of the pandemic, some brands froze advertising efforts across linear TV, connected TV (CTV), and digital video as they braced for the unknown. But going silent during times of crisis is not an effective strategy for brand awareness. Abandoning a brand’s share of voice can be a difficult thing to come back from. It seals off the top of the purchase funnel, a major driver of business outcomes, which can directly affect the bottom line.

In the report “The Halo Effect: TV Drives Digital,” Comcast Effectv and TVSquared analyzed the long- and short-term impact of staying on air (TV) versus going off air for advertisers in 2020. It found that staying on air helped to maintain a brand presence and triggered a “memory effect” with consumers. Among the 500 advertisers analyzed, those that remained on air experienced 23 percent more site engagement in subsequent weeks. Those that went off air saw visits drop by an average of 20 percent.

Importantly, this was not a new phenomenon only related to the COVID-19 environment. 

After the 2008 recession, Harvard Business Review did an analysis of brands that managed to not only remain strong during those uncertain times but even drove significant growth. According to the report, they all had three things in common:

  • They built a strong brand: Rather than decreasing spend on channels like TV during the recession, brands like Colgate-Palmolive and Johnson & Johnson made sure to build on the momentum of their previous brand-building campaigns. After all, according to the report, “Brands that are out of sight on the television screen will sooner or later be out of mind for a large percentage of consumers.”
  • Maintain Ad Spend: The Harvard Business Review found in their analysis that firms who should be “pushing their advantage” if they can during a recession, and maintain their advertising spending captured market share by capitalizing on lower costs. On average, brands that increase their marketing spend during a recession ultimately boost their financial performance in the year following that recession. 

This has also been true during other times of economic uncertainty. 

In a study of the recession in the 1980s by McGraw Hill, they found companies who continued to advertise during the two-year recession saw 256% higher sales than their competitors post-recession.

  • Optimize Towards ROI: Of course, it can sometimes be easier said than done to justify maintaining spend when marketing budgets are often the first thing to go when times are tough. By optimizing towards ROI, marketers can better justify their ad budgets. And since TV has historically been a great channel for brand building but less easy to track, brands have sometimes made the error of cutting it from their lineup. Fortunately, the rise of performance-driven channels like Connected TV and OTT has changed that, making it easier than ever for brands to track the returns on TV campaigns and justify those costs. 

Measurement can provide cross-platform analytics that reveal insights advertisers need for making agile and strategic decisions about reaching and engaging audiences no matter how, when, or where they “watch TV.”

Measurement is about gaining an understanding of how every TV ad dollar is working for a brand and then continuously adjusting. Of course, what those adjustments will be is entirely dependent on the brand — as you would expect, what works for one won’t necessarily work for another. That’s why testing and learning are critical, especially in times of economic downturn. Marketers must see how new buys, timeslots, linear TV and CTV mixes, and publishers, among other factors, directly affect the business and make all findings actionable for ongoing improvements. Optimizing each advertising dollar requires a measure, analyze, optimize, repeat mentality.

Brands that maintain their ad spend in order to build their brand efforts will have stronger returns post-recession, and as the old adage goes, “In good times you should advertise… in bad times you must advertise.”