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The case for maintaining marketing investments in times of crisis

Every crisis brings with it its own set of questions. Maintaining (or not) your marketing investments remains a crucial question. However, research shows the very positive impact of staying in the market.

During crises, some brands and advertisers decide to put everything on hold. Others remain very present. And others find the right balance between being too defensive or too offensive.

It is generally considered to take a defensive approach when marketing budgets are cut substantially, based on a variety of rationales:

  • Protection of cash flow;
  • Reduction of demand generation in order to compensate for the lack of production or distribution capacity (in the case of a health crisis for example);
  • Desire to avoid soliciting the market, customers and consumers for a product that is inappropriate in the context of the crisis (perception management);
  • Managing uncertainty, taking a step back before making final decisions;
  • Difficulty in producing marketing elements;
  • Etc.

On the other hand, an offensive posture aims to take advantage of the current crisis context by being very present in order to benefit from an absence of competition in the usual marketing channels (if they have taken a defensive posture, for example).

The key lies in the right balance between the two attitudes.

As we see at Toast, in the context of crises with our clients, these questions are asked systematically with regard to their presence on the social networks, the implementation of a new lead management system, etc.

Several studies have shown that finding the right balance, and remaining present in the market, is one of the keys to a successful exit from the crisis.

We present 3 of these studies.

What Harvard Business Review says

The Harvard Business Review analyzed the recession of the 1980s, as well as the slowdown of the 1990s (1990 to 1991) and the debacle of 2000 (2000 to 2002). In December 2008, the organization embarked on a one-year project, studying 4,700 public companies over three periods: the three years preceding a recession, the three years following it, and the recessionary periods themselves.

Of the sample, only 9% prospered after a downturn, outperforming their rivals by at least 10% in terms of sales and earnings growth. The study found that these high-performing companies mastered “the delicate balance between cutting costs to survive today and investing to grow tomorrow”. This combination of defensive and offensive measures has allowed them to focus on greater operational efficiency while investing “relatively fully” in the future by spending on marketing, research and development and new assets.

According to the study, “these companies have also sensibly increased their R&D and marketing spending, which may produce only modest profits during the recession, but significantly increases sales and profits thereafter”.

What Bain & Company says

A Bain & Company study of nearly 3,900 companies around the world during the last recession (2008) found that winners diverged from losers, with winners posting a 17% compound annual growth rate during the recession, compared to 0% for losers.

Among other tactics, the winners went on the offensive by selectively reinvesting for business growth – including maintaining marketing while competitors downsized. As an example, the report cites Samsung, which maintained its marketing investments and worked to reposition itself as an innovative company during the Great Recession. At the beginning of the recession, Samsung was ranked 21st in brand value on Interbrand’s global list, and by May 2019 (the date of the report), the company was ranked 6th.

What the Journal of Advertising Research says

A study in the Journal of Advertising Research mentions that most companies tend to cut back on advertising during a recession. This behaviour reduces noise and increases the effectiveness of any company’s advertising. Thus, a company that increases its advertising in this environment can benefit from increased sales and market share.

When the economy is expanding, all businesses tend to increase their advertising. At that time, no one company benefits much from that increase. However, the gains of businesses that have maintained or increased advertising during a recession persist.

This theory is also the most reasonable explanation of all the empirical effects of GDP on advertising and advertising spending. Translated with www.DeepL.com/Translator (free version)