While brands are advised to maintain or even increase their marketing spend during an economic downturn, how they spend that money is as important as the mere fact of having it.
That’s according to Boston Consulting Group, which quantifies how key business performance metrics suffer if spending is cut, and adds that “reducing brand investments also leaves companies no more profitable in the short run”.
Why it matters
The case for maintaining marketing budgets during a period of economic uncertainty has been made before in terms of the impact of extra share of voice. BCG adds a business angle and suggests marketers can “radically enhance” how they spend their budget.
Key stats
BCG’s research demonstrates that cutting brand spending in a downturn leads to declines relative to those brands that maintain or increase spending, including:
a six percentage point lower shareholder return
13 percentage point lower sales growth
a 0.8 percentage point decline in market share
an 18 percentage point decline in likelihood to recommend.
Towards more effective spending
Maintaining a budget and spending it in the usual way may be better than cutting spending but it’s not the most effective approach. BCG advocates what it calls “precision branding” as a way to overcome the limitations of typical brand-marketing strategies. This examines demand spaces and has three components:
Precision Targeting: decide which are the most important customers to keep and look at where new customers may be available as competitors capitulate.
Precision Activation: reach consumers in places where messages will resonate most strongly (digital channels will typically do this better).
Precision Measurement: complement long-term KPIs with short-term metrics that correlate with long-term results, such as sales and market share, and monitor them regularly.
