During times of economic uncertainty or even when a brand’s net profit needs boosting, one of the first budgets to be reduced is marketing. The Covid-19 pandemic has been no exception, with many companies removing ads and slashing spending for months.
But pausing marketing spend is a terrible business decision, and here’s why…
Covid causes every brand to question itself. Since companies and their target consumers are going through a difficult time, brands tend to lean towards cutting back on advertising spend.
However, as one brand pulls its marketing spend, competing brands who continue investing reap all the benefits due to the rivals’ silence within the market. In this situation, the same ad spend suddenly provides substantially greater visibility for the resilient company.
As a result, pauses in advertising indicate significant revenue and market share reductions. Since greater business visibility leads to substantial monetary and business growth in the short and long run.
After all, the number of potential consumers will always remain relativity stagnant. But a company’s visibility can quickly fluctuate without sustained marketing efforts.
Businesses must grasp this idea to navigate through risky discussions about marketing strategy and expenditures. Non-marketers must realise that reducing advertising spending in uncertain times means sacrificing future revenues.
But this information coming from a digital marketing agency might seem biased, so let’s look at some tangible and peer-reviewed evidence.
Case Study: The Effect of Coca-Cola’s Halt to Ad Spend When Covid Hit
Faced with the uncertainty of the Covid-19 pandemic, numerous major corporations opted to decrease – and in many cases eliminate – their advertising spends for 2020.
According to the World Economic Forum, overall advertising investment fell 10% in the United States and 9% in Europe in the first half of 2020. According to the Interactive Advertising Bureau in Australia, 24% of Aussie businesses had halted all advertising and gone totally dark by the second quarter.
Among these statistics is Coca-Cola, who “paused” their global advertising efforts when the pandemic hit initially. Advertising spending was slashed by 35%, while the company’s communications budget was cut by almost $4 billion that year.
As a result, Coca-Cola faced the consequences.
Coke’s arch-rival PepsiCo – who maintained their ad spend through 2020 – gained a substantial advantage, reporting a 5% increase in net sales for 2020. Compared to the dismal 11% drop in net sales for Coca-Cola’s whole 2020.
Analytical Research: Demonstrates the Detrimental Impact of Pauses on Advertising
Of course, advertising spend is not the only factor that impacts revenue growth and reduction. However, new research from the Ehrenberg-Bass Institute shows how beneficial maintaining ad spend is for Australian businesses through economic troubles.
According to the Institute’s research, on average, business sales drop by 16 per cent after one year without advertising compared to the last advertised year. Then 25 per cent after two years, and each year just gets worse…
Conducted in 2018, the study used available data to monitor the media expenditure and volume sales of 70 Australian consumer goods businesses during a two-decade period. There are 57 examples of companies that stopped advertising for a year or more, with some companies not advertising for up to a decade.
Most significantly, the study found that business size matters!
There is considerable fluctuation around this average, as not all companies saw rapid sale decreases. In fact, after a year or two of no advertising, larger companies are likely to continue to expand or stabilise. But small businesses suffer more significant declines, with swift trajectory reverses and sales rapidly falling below base level.
While it may be tempting to cut advertising expenditure to increase profits, the research shows that doing so might lead to a business’s ultimate decline. As a result of advertising silent periods, your target market is prodded by rival advertising, and your crucial memory-based brand connections may fade.
And, because light brand purchasers make up the majority of any brand’s customer base and are the most essential segment for brand growth, the time spent off-air is costly, especially for smaller businesses.
So, Which Avenues Should Businesses Invest Their Advertising Capital in During Lockdowns?
Even though most of Australia is in lockdown due to the highly infectious Delta strain, digital marketers anticipate a big rush of demand for business products and services when we hit the 70-80% vaccination rates. So, to be prepared, businesses must begin taking steps now to ensure they are ready to launch during peak seasons.
We believe all Australian businesses – no matter the size – should focus on the following digital marketing services during lockdowns.
As all consumers have no choice but to do their shopping online, it is essential to capitalise on SEO Services! Search Engine Optimisation (SEO) strategies ensure whenever an individual searches on the web for specific keywords that relate to your business; your business website will appear as the first option. Holding the top spots on search engines will go a long way to securing valuable visibility online and a steady flow of FREE or unpaid enquiries to your business.
On the other hand, if you feel your business is experiencing a quiet period, capitalise on this with Website Upgrades! A business’s website is the primary source of information for stakeholders and potential customers. So, if you have been meaning to update your website, now is the time as when we come into the busy Christmas periods, your brand-new website will already be launched and ready to keep up with demand.
How Can RGC Help?
Currently, businesses are doing it tough with limited output and covid restrictions. Even though people can’t access products and services as quickly with shops physically closed, we see a constant flow of consumer searches online.
So RGC clients must continue to invest in digital marketing to meet the consumers where they are, ONLINE! Digital marketing ensures businesses still have enquiries coming through the door even in times of economic stresses.
It’s a harsh reality, but only the strongest will survive through this period. But Australians are finally seeing the light at the end of the tunnel, with Sydney having the fastest rates of vaccinations in the world at the moment!
To learn more about the Digital Marketing Services we provide, please call our expert team on 1300 770 985 today and get ranking! RGC Advertising is a Digital Marketing Agency in Sydney that offers creative services, web design services, SEO services, digital marketing services, programmatic advertising, and many more services to improve our clients’ digital presence online.