A recent article in the Guardian said the $850 billion global advertising market could be facing a “car crash” year in 2023. With inflation-hit consumers cutting household spending, brands are expected to rein in their marketing budgets. But rather than accept the advertising slowdown as inevitable, publishers should be pointing out the benefits of maintaining ad spending through a recession.
Takeaways
- The advertising industry has seen consistent growth over the last 12 months and is optimistic that international events like this winter’s football World Cup will deliver 8% growth for 2022. But there are mounting concerns that the global economy is heading for recession.
- A senior media executive recently told the Guardian that consumers are being squeezed harder than at any time since the 1970s. They said:
Many things will become secondary to essential spending, all of which creates a nasty cocktail for the ad industry.
- Ad budgets are often first in the firing line when companies are looking for costs to cut. Earlier this month, the beleaguered takeaway delivery company Deliveroo cut its marketing budget ‘given the more challenging environment for consumers’. Richard Broughton, director at Ampere Analysis told the Guardian:
Marketing is an easy cost to cut and it tends to have an instant and immediate impact.
Fighting the slowdown
- During the advertising slowdown in 2009, Sir Martin Sorrell encouraged brands to maintain their marketing spend. His belief was that companies that continued to invest through the downturn would win market share from their non-spending competitors.
- More than 10 years on, US agency exec Steven Knapp has made a similar argument in Media Post. He makes the point that now is good time to bolster brand awareness and customer loyalty through investments in ‘highly creative’ brand building advertising campaigns.
- Knapp accepts that times are different; unemployment is at historic lows and consumer spending remains relatively strong. And, of course, 2022 is not like the recession in 20008 – 2009 when US ad spending fell by 17.5% compared with this year’s projected growth of 8%. But he notes that ‘history has proven that stopping advertising is a bad idea, especially in times of recession’.
By the numbers
The agency exec cites a legacy Ehrenberg Bass study reconducted in 2021 that found stopping advertising had a ‘devastating effect’ on sales, with sales down increasingly over time:
-16% after one year
-58% after five years
-71% after nine years
A WARC study analyzing over 600 brands across a range of industries found those that maintained or increased advertising spending during times of recession saw market share gains up to four times higher than those that decreased ad spending.
More recently, during the pandemic, Procter & Gamble reported its brands increased advertising spend by 10%, to deliver 4.8% growth in 2020 and another 7% in 2021.
Reality check
Knapp knows the commercial reality is that, despite the data, brands dealing with business declines in a tough economy don’t always maintain their advertising spend. He said:
That’s why it’s important to remind ourselves and our CEOs that the new recession playbook states brands that maintain media spend… will have an even greater share of voice and ultimately deliver greater growth.
