The Brand Owners' Dilemma: How to Spend Ad Dollars in a Downturn

As marketers and brand owners, we face the coming weeks with a high degree of uncertainty.

In North America it feels like we’re at the back of a long roller coaster as we approach the first big drop. We’ve seen China, Italy and the rest of Europe experience the free fall, and we can see the track ahead dipping away quickly, but we still don’t know when the ride will stop, or what the world will be like when it does.

With this much uncertainty, advertisers might be thinking about taking their chips off the table until more stability materializes, significantly reducing their ad spend or stopping all together.

For a number of reasons, born out by history and current campaign data, this is the wrong approach. Now is not the time to stop your marketing spend, but it is time to take a deep look at your allocation and strategy to make sure your efforts are ruthlessly optimized, fully aligned, and focused on performance.

Here are four insights, backed by history and actual campaign data, to help you spend your ad dollars smartly during the next few months.

Buy the dip, increase your mindshare

The efficacy and accuracy of social marketing has only increased, but so too has the competition, creating highly contested categories with multiple brands fighting for share of voice. During periods like now, some of these competitors will invariably cut back on their ad spend, creating opportunity for those who don’t back down to reposition their brand or introduce a new product.

Times like these don’t come very often. With the increase in time people are spending on their devices and on social media platforms, we’re seeing a significant dip in the cost of traffic as supply undoubtedly rises. Now is the time to capitalize on this less expensive ad inventory as you build your audience and your list for better times.

When this crisis ends (and it will end), those who’ve taken advantage of this time of reduced “noise” in their category to increase their mind-share with their audience will benefit as discretionary purchasing resumes and exceeds its previous levels.

Over the years, research studies have confirmed that the best strategy in terms of long-term ROI is to increase marketing expenditure during an economic slowdown.

An example of this can be seen in this 2008 analysis of the Profit Impact of Marketing Strategies (PIMS) database. This analysis compared the results achieved by companies that increased, maintained, and reduced marketing spend during recession. Metrics used were Return on Capital Employed (ROCA) during the recession, ROCA during the first two years of recovery, and market share change during the same period of recovery.

While companies that cut marketing spend enjoyed superior ROCA during the recession, they achieved inferior results after the recession ended. During the recovery, the “spenders” achieved significantly higher return on capital employed and gained an additional 1.3 percentage points of market share.

Focus on what you can measure

While the COVID-19 Pandemic is new territory, we can gain some insights on best approaches to marketing in a downturn by looking to the aftermath of the 2008 financial collapse, which resulted in market chaos, low consumer confidence, as well as a recession.

In the aftermath of the last recession in 2008, ad spending in the U.S. dropped by 13%. This is a significant number, but sorting by medium reveals good news for direct to consumer, digitally native brands as well anyone who buys ads online.

Newspaper ad spending dropped the most at 27%, radio spending dropped by 22%, followed by magazines with a decline of 18%, out-of-home by 11%, television by 5% but online advertising dropped by only 2%.

Of these mediums, online advertising is the only one to have significantly evolved since 2008 making it more available, effective and more measurable. This makes online advertising the last budget you should be looking to cut.

Performance Trumps All

Most direct to consumer (DTC) ecommerce companies understand the value of performance marketing, which is defined by a measured goal of producing a purchase that delivers a healthy return on ad spend (ROAS).

If you’re a legacy company or large enterprise with budgets across multiple channels and goals, it might be time to re-evaluate your marketing mix to focus exclusively on performance marketing. Brand lift and share of voice are important things to monitor, but in times like this, it makes more sense to make every dollar count by shifting budget into performance marketing to focus exclusively on the channels and media that produce the highest measurable return on ad spend.

There’s an Angle for Everything

Early indications from our campaigns as well as others is that traffic inventory on every platform is increasing in scale and decreasing in cost, as the world stays home, glued to their devices for information about and distraction from the current slow motion global crisis.

As performance marketers know, impressions and even clicks are mostly meaningless if they’re not followed up by measurable purchases. This has never been truer than at this moment.

At the time of writing this article, we are seeing a few key trends. First, we’re seeing an increase in available traffic, as well as corresponding drop in traffic costs. Ad engagement (click through rate), and customers adding products to cart are well within the normal ranges. Where we’re seeing customers drop off is at the conversion point. This is presumably because of the lack of consumer confidence at this present moment.

The key insight for a moment is not to throw your hands up and accept that poor performance is the new norm. Instead, you need to start testing new angles for your ads.

A wise man once said “There’s an angle for anything” and this is definitely true in situations like this. Angles are the lifeblood of any successful online campaign. Combined with creative and copy, angles are the single biggest lever that any media buyer can employ to drive successful ads. Maybe the angles that worked three weeks ago don’t work now, but that doesn’t mean they aren’t out there.

To generate angles, our team would usually get in a room and start brainstorming, but now this is happening minute by minute on our Team Slack as we work from home. We structure our campaigns to rapidly test angles. When we find one that works, we drill down on it further to find sub-angles within the headlines and ad copy that tease out different aspects of the products’ benefits. For every client we’re working with, we’re testing dozens of angles to find the ones that resonate enough to bridge the gap between add to cart and conversion.

That’s why our number one tip for anyone buying media, whether it’s for their own brand, or their clients’ brands, is to put in place a structured system for generating, testing, and expanding multiple angles to find ones that resonate and drive users to complete checkouts.

If you’re using the same angles you did three weeks ago, it’s time to gather your team, or your agency and start doing the work of unearthing new angles to test, refine, and continue to scale your campaigns.

Some advertisers’ products will invariably perform better than others during this period, no matter the angle, but some examples might surprise you. Pet luxury items are flying off the shelf for us, showing that even though discretionary spending might be down, people are spending more time with their furry friends and are willing to buy if it means keeping Fido entertained.

As you might imagine, the angles that are working best across all brands currently are ones that focus on security, comfort, and making the most of quality family time. But again, the key isn’t finding just one killer angle, but having systems in place for finding new quality angles that speak to specific audiences to seal the deal again and again.

The next few months are hard to predict, but based on our own experience, and experience from chaotic, world changing events in the past, it doesn’t make sense to turtle until things clear up. With a strong strategy and the right partners willing to exhaust every angle until you find one that clicks, your brand can survive and come out thriving on the other end when the world returns to normal.