Exposed: Long-term damage of short-term budget cuts

The dangers of cutting marketing spend in a recession and the opportunities for bold marketers who maintain or increase budgets have been exposed in a new analysis of brands’ performance from the most recent downturn.

Analytic Partners’ has data on more than 750 brands in 45 countries, and hundreds of billions of pounds in marketing spend. Its ROI Genome Intelligence Report, “How to Maintain Advertising Effectiveness in Challenging Times”, reveals that 60% of brands that increased their media investment during the last recession saw ROI improvements.

Brands that increased paid advertising also saw a 17% rise in incremental sales, while those who slashed spend risked losing 15% of their business to competitors who boosted theirs.

Data shows that organisations that cut spend are likely to lose ground to rivals during and after a recession, while those who maintain or even increase spend stand to boost their ROI, becoming even more efficient at a time when efficiency is all the more important.

This challenges the consensus that the first move during a recession should be to cut paid ad spend and marketing headcount to preserve margins. However, this actually undermines margins and is counter to what most businesses should be doing to drive success and shareholder value, the report maintains.

The study also reveals strategies for brands to recession-proof their marketing, including the finding that using multiple marketing channels can increase advertising impact by 35%.

Meanwhile, half of brands that increased marketing investment during the last recession saw ROI growth in back-to-back years and brand messaging outperforms performance messaging 80% of the time, so refocusing exclusively on performance messaging will lead to losses.

Finally, two-thirds of the opportunities to improve video advertising performance lie in improving the quality of creative.

Overall, Analytic Partners identified five main factors in advertising success, which are, in order of impact: amount of investment, creative quality, halo (the power of advertising for one product to boost another product), mix of media and channel optimisation.

Analytic Partners senior vice-president Mike Menkes said: “The best way to get through a possible recession and prosper on the other side of it is to think long term by investing in your brand and your relationships with customers.

“Short-term thinking might make some shareholders happy at the next earnings report, but it undermines growth and therefore margins and true shareholder value over both the short and long term. A strong advertising strategy will lead to continued brand success that is stable and here to stay.”