Laura Davies, Joint Head of Planning at DDB, offers her insightful perspective on navigating the challenges of marketing during economic downturns and what opportunities can present for businesses as they weather the storm.
What opportunities are presented for brands when there is an economic downturn? How can businesses leverage these opportunities?
We tend to look at recessions like they are really scary and detrimental to brands and require sacrifice. I think they are a unique opportunity to break habits. So much of what we do is try to break established habits, in terms of what people are buying and the brands that they have preferences for and how they buy. And very rarely are you given the opportunity to intercept those habits or prompt people into a new brand. But within a recessionary context, or when there’s a downturn, people tend to shift their behaviour. They still buy stuff, but they just shop differently. So they tend to look for compromises: how do I maintain my lifestyle but with cheaper products? Or how do I buy the same things less frequently, or different things from the same store or retailer, or from a different retailer but the same products.
Within that, there are a whole lot of opportunities for them to be introduced to new brands, or new ways of purchasing.
What role does advertising play in recession-proofing a brand?
A lot. Brand is a brilliant insulation against market forces. Stronger brands with more equity tend to have greater commercial growth and less price elasticity, so you’re kind of protected against people shopping away from you. But also, categories that are less price-driven tend to survive better through a recession. So if you are in a category that tends to reinforce functional messaging and functional proof points around price, you tend to be a lot more vulnerable to recession environments in terms of people shifting away from you, or you being unable to maintain margin when people choose to buy down. It can be really tough. But also within a recessionary context, advertising always plays a role in kind of rationalising price.
Advertising plays a massive role in determining pricing power, so whether you are able to justify a higher price point or justifying the price, if you are shifting up in price point, which we’ve seen quite a lot off the back of the scarcity issues during Covid. A lot of brands have had to increase price and advertising, because it’s the one thing that’s building emotional value into your brand. Looking at that rationally, we can define and reinforce the emotional value of the product.
What benefits can advertising bring to a brand during times of turbulence?
It’s a bit predictable for an advertiser to say ‘keep spending’, but I think we know that the reality is that a lot of brands, or marketing departments, will have to cut spend. The important thing is where you cut it. If you do have to go back to basics, figure out what was working beforehand in terms of storytelling, in terms of media. Don’t just choose efficiency, look at effectiveness, which channels tend to have the biggest impact, and make sure that you are cutting in places where the wastage already was, rather than just chasing efficiency.
In terms of cutting spending altogether, the data is there and it would suggest, history recommends holding the line. It can be incredibly detrimental long term to cut spend during a recession. The Institute of Practitioners in Advertising paper on recession is readily available online. It’s free, and the data it includes would suggest that if you go dark for a year, then it will take you five years to recover in terms of market share.
And within the same formula, it takes three years to recover from one year at half spend. So if we talk about the long-term costs, really it is up to marketers to have an influence on how long that recession lasts on the brand, how long you are suffering from the impact of that. If you can hold the line, if you can protect your budget in the right places, then you are setting yourselves up for success, or just at least you are holding your share until you’re able to invest more in it.
What are some examples of brands that successfully prioritised a long-term approach to marketing during a downturn?
We work with Tourism New Zealand and they’re really seeing the payoff for holding their spend through Covid. They obviously had a dramatic downturn. No one could come in when the borders were closed, but they justified continuing to spend because they knew that if they lost that share of mind, it would just take that much longer to recover. Now the borders are open and their campaigns are working bloody hard, because they had a base to build off rather than going dark for all those years.
How do you see the advertising landscape evolving in New Zealand and globally, considering the recent economic turbulence and changes in consumer behaviour?
For a long time post Covid, New Zealand brands were going for the strategy of togetherness. That unity we saw at the beginning of Covid – we really saw that playback in brand narratives for quite a few years. But this economic downturn is really the latest in a permacrisis for consumers. They’ve had Covid, they’ve had scarcity, they’ve had inflation, cyclones. Now the recession’s just been announced and it’s really not come as a surprise to anyone.
We’re also being bombarded with all these negative messages pre-election about how the country’s falling apart because that’s what you get in an election year. But I think what it means is that consumers are really fed up. They’re pretty rightfully angry and exhausted by the whole thing. And there is, because of that, a massive power imbalance between brands and consumers. My hope is that it kind of kills the togetherness narrative, because I don’t think anyone out there is believing that brands will save them. I don’t think anyone believes that brands are in the trenches with them, and I think you can help in the way that consumers need your help. But brands being the be all and end all, the saviour brand, I think will die because I just don’t think people buy it.
What advice would you give to brands that are hesitant about investing in marketing during uncertain times? How can they overcome their concerns and embrace a long-term approach to marketing?
I think consumers have confidence in brands that act confidently. In times of uncertainty, when people are feeling anxious or have kind of heightened anxiety, heightened risk, they gravitate towards big brands, they gravitate towards the ones that reinforce reliability and reassurance and comfort. They don’t look for brands that reinforce that anxiety, that aren’t demonstrating that they’re as desperate as you are by selling stuff for half price on the side of the road. Be conscious of the signals you’re sending to clients. Because if you are acting confidently, then consumers can have confidence in you. So how much you spend, where you spend it and what you say in that spending. So not undercutting and devaluing all of your products and your services pays off, in terms of the confidence that consumers pay back to you.