April 7, 2020

Insight Into Managing Marketing Budgets in Uncertain Times

As a brand, ultimately one of the most important ongoing decisions to make during a difficult economic period is figuring out how to allocate and spend money. 

It’s simply not realistic to assume your company can go without pretty substantial adjustments to its financials during a time such as the one we are facing and will continue to face with COVID-19.

With all of that being said, for whatever reason, many times it’s a brand’s marketing budget that takes the biggest hit in a recession or recession-like phase for the market. 

Take the housing crisis and “Great Recession” of 2008 for example. Companies were desperate to cut costs after the collapse of the market and decrease in consumer spending. 

That led to the following:

  • Overall ad spending in the U.S. dropped by 13% 
    • newspaper dropped 27%
    • radio dropped 22% 
    • magazine dropped 18%
    • out-of-home dropped 11%, 
    • television dropped 5%  
    • online dropped 2%

However, what many leading experts are saying is that, though it seems tempting to decrease one’s ad spend, times like these are actually the time to do the same or more advertising.

A common advertising phrase is, “When times are good, you should advertise. When times are bad, you must advertise.” Sure, it might be anecdotal, but it’s true.

So, why is it that advertising during a time where the market is unsettled could benefit one’s company?

Advertising right now matters. Here’s why:

  1. Your product or service is likely to stand out as others limit ad spend 
  2. When things return back to normal, your brand will be top of mind
  3. Brands can increase market share and drive sales because of these two aforementioned points
  4. In the case of the COVID-19 lockdown, digital advertising in particular is well-tailored to handle an economy now driven almost exclusively by online traffic.

You may have noticed that in those 2008 numbers for decreased ad spend, online advertising decreased the least. Mind you, this was 12 years ago. The capabilities and scope of digital advertising has increased immensely since then.

That means even when e-commerce was a bit less proven and advanced, brands didn’t want to lessen the range of their online advertising strategies back then. The same should ring true today, but it goes even further.

Because of the particular (very strange) lockdown element to today’s situation, online advertising has garnered even more importance than before, starting back in early March when the self-quarantine period began.

In 2008, people could still leave their homes. This 2020 situation, they cannot. Which is causing us all to lean on online shopping even harder.

Here are a few more reasons to advertise right now:

  • The “noise level” element that was mentioned above comes into play here. Because competitors might not be able to allocate money towards advertising right now, you’ll be in a position to attract more eyes and ears than usual, standing out and doing things like presenting a new product to a wider audience.
  • Brands can appear more stable to consumers in a challenging time. 
  • The cost of advertising drops during recessions. The lower rates create a “buyer’s market” for brands. Studies have shown that direct mail advertising, which can provide greater short-term sales growth, increases during a recession.
  • When marketers cut back on their ad spending, the brand loses its “share of mind” with consumers, with the potential of losing current – and possibly future – sales. An increase in “share of voice” typically leads to an increase in “share of market.” An increase in market share results, with an increase in profits.

As far as the affiliate channel, since it operates on a cost-per-action (CPA) basis, there’s also no need to overspend on advertising right now if you’re looking to start or further implement an affiliate program.

Without tooting our own horn, working with clients right now is actually not as chaotic as one might imagine. Of course, the circumstances have changed, but the way we operate and the strategies we suggest really have not.

New and current clients are seeing sizable return on their ad spend (ROAS), but even businesses who’ve been more affected than others aren’t forced to spend some large predetermined chunk of change because of a contract they signed.

In the affiliate channel, that ad spend number fluctuates depending on how successful the spend is in bringing conversions – and eventual sales. 

We hope to talk more with you about this soon, if you are interested. Feel free to reach out at [email protected] Thank you!

Are you getting started in affiliate marketing or looking to improve your current program?

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