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Why SMBs and start-ups can NOT afford to go dark in a recession
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Book a free demoThe current recession is not a time when SMBs and start-ups should cut back on marketing. Actually, those companies that can afford to do so should make use of the opportunity to increase their Share of Voice and with that their Share of Market.
A natural knee-jerk response of companies of any size, including SMBs and start-ups, to the current market conditions, might be to try to protect profitability as much as possible by cutting their marketing spend. Some might even consider an approach that many companies took during the 2008-9 recession, which is to spend less on brand-building but more on demand activation.
Of course, as far as demand activation is concerned the problem is that for some product categories there is either not enough supply to cater to the growing demand or demand has dropped because the buyers simply have no use for the product or can not buy it.
If buyers can not or have no reason to buy your product or service, doubling down on demand activation is not the path you should take. Is this a time to try to sell catering services to companies where the staff is working from home? Or is this the moment to sell supply chain management solutions to car plants that are idle. No.
Does any of this mean that companies should also cut back on brand-building? The answer from Les Binet and Peter Field on that question is a clear negative one.
The perils of a lower Share of Voice
Binet and Field are famous for the data analysis they conducted on the British IPA Effectiveness Awards entries. In 2013 the results of that work were published in The Long and The Short of It. Binet and Field took a look at the campaigns that ran during the 2008-9 recession period. Some brands had cut their Share of Voice (SOV) while others had raised theirs. SOV is strongly correlated to Share of Market (SOM). As a result, it could be expected that a strategy to cut SOV would prove to be very risky.
What was expected ended up happening. The brands that took advantage of lower SOV costs (once brands start spending less, advertising costs go down so keeping up with the others comes at a lower cost) achieved impressive business gains. The companies that invested the most and acquired the highest Excess Share of Voice (ESOV) saw 5 times as many large business effects (profit, pricing, penetration, etc.) and 4.5 times the annual market share growth.
Put differently, and this is from data from Kantor, 60 percent of brands that fail to resist the temptation to ‘go dark’ during a recession decline on at least one key brand metric. SMBs and start-ups do well to not be part of that group.
Brand-building in order to maintain brand salience
Binet and Field recommend that a normal brand-building/demand activation spend resemble a 60:40 spread. In 2008-9 companies reshuffled some of their budgets to arrive at something that came closer to 50:50, a decision that Binet and Field considered sensible given the circumstances. But as I said, the financial crisis was a very different crisis than the current one where you will achieve limited results by working on demand. For many SMBs and start-up companies, it will now make more sense to focus on brand-building first and foremost.
Continuing brand-building efforts will keep brand salience at a high enough level so that when the economy picks up steam again and pent up demand is finally released, the brand can be reassured to have a place in the consideration set of the buyer. [The initial findings from Binet and Field applied to B2C campaigns – however, their subsequent research made clear that the same principles remain applicable in a B2B context.]
What should these brand-building efforts now look like? Global Web Index asked an international audience of more than 12,000 internet users what they expect brands to undertake during the pandemic crisis. Only 37 percent thought that brands should carry on advertising as normal. 83 percent wanted flexible payment terms, 81 percent wanted free services, 79 percent expected brands to close non-essential stores to help prevent the spread and 67 percent wanted them to suspend their normal factory production to help produce essential supplies.
Looking back at the campaigns that were most successful in 2008-9, Binet sees most potential in emotional feel good campaigns that are rooted in the reality of what the brands do for customers. SMBs and start-ups will have to identify the values that both matter to their customers and pertain to their value proposition. Together with topical opportunities to build goodwill through acts of humanity and generosity, as hinted by consumers through the survey mentioned above, we now have two important tracks of brand-building that B2B and B2C SMBs can get to work with.
Binet and Field focused on paid advertising campaigns. Of course, the day to day promotional effort entails more than just advertising campaigns. Owned and earned media (I am counting organic social media as ‘earned’ here) will continue to form an important part of the mix for any brand-building effort and – even in the current difficult market conditions, and this applies especially to B2B firms with their long sales cycles – a minimum of demand generation efforts where they are warranted.
This contribution has been adapted from this article on marketing during the COVID-19 crisis that originally appeared on the website of Detavernier Strategic Communication.