Advertising in a recession: What to do?

As many firms try to deal with the impact of COVID-19, one decision most marketing teams face is to decrease, maintain or increase their advertising budget. Dialing down ad spend is a relatively easy way to save cash, but is that really a good idea?

With this question in mind marketing professor Gerry Tellis and his son Kethan Tellis reviewed 10 academic studies on the effects of ad budget changes during recessions spanning the better part of the 20th century. Tellis and son draw a remarkable conclusion. Firms that increase spending during a recession reap the benefits not only during the recession but also some years after the recession.

Why? The rationale is simple, most firms cut back on ad spending during a recession whereby reducing the competitive noise and clearing the path for other firms. In Byron Sharp’s paradigm, it is easier to boost the mental availability of a brand when the competitive clutter is absent. In some of the studies the positive effect on market share and sales even lasted well after the recession had passed. Once the recession subsides and most firms return their ad spend to “normal” levels, the noise increases and the relative gain from ad-spend diminishes. An anti-cyclical ad spending strategy thus may have a positive impact on the short and long term.

Ad spending in the last months is already down an estimated 30-40% on digital and traditional channels. So opportunities are developing for firms with deep pockets and a willingness to swim against the current. Those that do might come out of this recession stronger than they started.

References

Tellis, Gerard J. and Kethan Tellis (2009), “Research on Advertising in a Recession: A Critical Review and Synthesis,” Journal of Advertising Research, 49, 3, 304–27, doi:10.2501/S0021849909090400.http://www.journalofadvertisingresearch.com/content/49/3/304

Download the paper on the homepage of prof Tellis: http://gtellis.net/publications

Prof. Mark Ritson wrote a similar piece: https://www.marketingweek.com/mark-ritson-marketing-spend-recession-coronavirus/

Prof. Koen Pauwels has a more nuanced and data driven view: https://analyticdashboards.wordpress.com/2020/04/10/myths-on-marketing-in-recession/