Should you Cut Back on Advertising Costs Amidst the COVID-19 Crisis?

In today’s discussion, we will be discussing advertising costs. Given the current economic struggle the country is facing at the moment, many business owners are questioning whether or not they should cut down on advertising. 

A lot of marketers, myself included, have been suggesting that now is the perfect time to continue to maintain your existing advertising strategies or even potentially scale up your advertising. However, pushbacks are common, and the reason for that is because most people believe that no one is spending money right now. Given the crisis, we are all facing (and realistically, in a lot of cases—recession and all), that is an accurate statement. But, I want to give you more context and talk maybe about a couple of different industries that now which to make the decision that makes the most sense for you, and your business at this particular time. 

The main reason why many people suggest that now is a great time to advertise, is because ad costs across all the different platforms have declined. We've seen declines anywhere between 20-40%. 

If you were investing thousand dollars a month in ad spend, let's say $1,000 a month in Facebook ads, and you are getting 20 leads a month, either one of two things is going to happen. 

• Get more leads for that amount of money
• Get the same amount of leads or fewer, with lesser expenditure

So you might be able to spend $700 or $600 and still get those leads – but, that one word “lead” is the area of contention at this very moment in time. 

What I want you to do is to remove your need from the situation where you are desperately in need of customers, and you're counting on any of the advertising and marketing that you're going to do to continue to drive the same amount of leads, if not more than it ever has been. 

In most industries, that is not going to happen for the next month or two. Now, again, it's a little bit counter-intuitive, because I'm telling you that ad costs are declining, mainly because there's a lot less competition. It's supply and demand. 

Let’s have an example: If you're a landscaper, and there were 10 people that were advertising for your neighborhood, city, or town, and half of them said, “Things are crazy around here. We're not going to advertise. We're going to put things on pause for right now”. Then you're now able to buy that same amount of advertising now. Landscaping is an interesting one because it has been an industry that we really have not seen that has gotten hit—in most locations, it's still deemed an essential industry.

Now with that said, if you look at other industries, like restaurants and if your takeout game is strong, you're probably doing well. But if you largely were a sit-down restaurant and most of your business was walk-in, you are getting absolutely hammered. So, therein lies the question again of should you ramp up your ad spend, should you pause it, should you scale it back, etc. If I were in that situation where I owned a restaurant that had a lot of walk-in business, the reason that I would try and maintain the course would be, If I was competing against a fair amount of other restaurants. Largely because what happens when things start to contract is that fewer businesses start advertising or they cut back their budgets. 

However, there are some companies that break the mold and they end up outshining and out marketing that particular business. It was interesting because I started looking at all different kinds of industries and niches. And I was looking way back even to the 20s, and was looking at all these different examples of completely different types of industries, largely bigger businesses, which provides more data compared to small businesses. 

Let’s use quick-serve or fast-food chains as our examples. So in the early 1990s, McDonald's dropped its advertising and promotion budget during that recession. But then you had Pizza Hut and Taco Bell—both of which they took advantage of the opportunity. Pizza Hut ended up increasing their sales by 61% and Taco Bell grew 40%. McDonald's, on the other hand, saw declining sales of 28%. All three businesses that are comparable, two of them, continued marketing – one did not. 

Another industry that got hammered was the cereal industry in the 1920s. Yes, this is way back during the Great Depression, when they substantially cut back their advertising budget. Kellogg's did the opposite—they doubled their advertising spend, putting it largely on radio. They even ended up introducing the new cereal called Rice Krispies, featured in this whole snap, crackle, and pop. Kellogg's profits grew by 30%, they became a category leader, and they've maintained that position for decades. 

So this is one of those instances where you can weather the storm. I do not suggest scaling back your advertising budgets. I want you to pivot your messaging. But I really don't want to see you just drastically cut your budgets because someone else either has saved more money, or they're going to throw it on a credit card. They're going to keep investing even if you've been investing $250 a month and you say, “Well, that $250 I need it right now, so we're not going to do any more Facebook ads”. 

I guarantee you, that there's going to be a restaurant that either continues their budget and/or increases it, and they will end up grabbing more market share than you. 

So the question of should you pause, start, and stop advertising? This is a good time to maintain the course, pivot your branding, and grab that market share when most other businesses are contracting. 

Now, the only exception to this would be, if it literally is illegal to advertise. For example, some non-essential businesses are closed and that includes yours. You might say, “why would you be advertising you are closed”? Thing is, you can advertise and still gain market share through other means. Why couldn't you advertise some of the goodwill you're doing in the community? Why couldn't you advertise that you just bought 100 bottles of hand sanitizer and donated them to frontline workers? Why couldn't you advertise some testimonials? Do a short little video from the owner of the company talking about you looking forward to being back soon. You can continue to maintain your brand presence, even though you're closed. 

Now is not the time to start making cuts and scaling back. Now is the time to dig in. Work harder and grab that market share. 

Get out there, make a change, and take some action.