In times of economic downturn and Brexit uncertainty the first thought of many brand-owner companies is to cut their marketing budgets, freeze their ad spend and restrict all marketing activities. Of course, reducing overall company expenditure may be necessary if sales and profitability are falling, but very often, and unfairly, the marketing budget becomes the immediate and automatic first casualty in such circumstances because company management still views marketing spend as a necessary evil, regarding it as a cost rather than an investment.
Even those companies which do appreciate the contribution successful brands make to their business fortunes may assume that it does no harm to chop marketing spend in difficult and unpredictable economic circumstances. But there is considerable evidence to refute this assumption and, moreover, to show that it is vital to at least maintain, if not increase, advertising and marketing activities in tough times.
If all brands in a category were to cut their marketing budgets by the same proportion, then there would be little impact on individual brands. But the experience of previous downturns shows that some brands maintain or increase their marketing spend, while others cut theirs. And there is evidence to show that those who do cut their spend suffer in the longer term, in terms of market share and profitability. It is calculated that the cost of a brand’s eventual recovery is three or four times greater than any savings made by knee-jerk budget cuts.
Research shows that there is a strong correlation between the level of consumer bonding with the brand and its market share. Marketing budget cuts result in reduced consumer bonding, weakened brand image, lower usage and market share decline. And there is a strong relationship between market share decline and the key marketing expenditure metric, i.e., ‘share of voice’ minus ‘share of market’. Share of voice is defined as a brand’s share of total category marketing communications expenditure.
In order to gain competitive advantage a brand’s share of voice should exceed its share of market, and successful brand managers realise this. Even in recessionary times when budgets are under extra pressure a brand must at least maintain its share of voice in order to retain existing brand preference and emerge a healthy business when recovery comes. The benefits of doing so will have proven even greater if, in the meantime, the competition have cut their own spend.
If the brand fails to maintain spend, its market share will decline and the company’s fortunes will suffer in the longer term, as those competitors who have maintained or increased their activities will have leapt ahead. Alarmingly, in the short term the consequence of not maintaining spend may not be apparent, and not for some considerable time, possibly up to four years, due to the time-lag effect of advertising payback.
And while marketing spend can deliver share of voice in terms of volume, creative content of all activities also has an important part to play in ensuring the voice is listened to – making the brand’s communications more arresting, and engaging and than that of its competitors. In creative terms, brand voice should reflect core values, and all brand communications should be well orchestrated to ensure consistency of message – they should all be singing off the same hymn sheet …
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