The Case For Marketing in Uncertain Economic Times
On April 2, the Trump Administration announced a package of tariffs on nearly every trading partner in the world, including 145% tariffs on most goods imported from China—one of America’s largest trading partners. In the days following, the stock markets dropped nearly 20% and most economists increased their probability that the country was headed for a recession. After a week of turmoil—and negotiations with some of those trading partners—the administration paused most of the reciprocal tariffs for 90 days (except for China, Mexico, and Canada) and kept a blanket 10% tariff for all imports. This calmed the markets some, but the remaining uncertainty hasn’t quelled lingering concerns about a recession.
No business likes uncertainty, and most look for ways to hedge their bottom lines in a downturn. Unfortunately, one of the most common financial hedges is the marketing budget. Most companies view marketing as an expense—not an investment—so they view it as an easy place to cut to quickly improve their balance sheet. However, over a century of research has shown that companies who invest in marketing during recessionary times are rewarded. It has even led to a popular adage: “When times are good you should advertise. When times are bad you must advertise.” Let’s look at some of the research that supports that theory, and the underlying reasons why it is true.
Winners and Losers
Anecdotally, there are examples of brands that have either stayed the course or increased their marketing during tough times, while their competition backed off and paid the price. During the Great Depression of the 1920s, cereal maker Kellogg’s doubled their advertising budget while the market leader Post cut theirs. Kellogg’s profits grew by 30% and they became the leading brand. More recently, during the 1990-91 recession, McDonald’s cut their advertising and promotional budgets while Taco Bell and Pizza Hut increased their investment. As a result, Pizza Hut sales increased 61% and Taco Bell grew 40%, while McDonald’s sales dropped 28%.
Consultants Bain and McKinsey & Company studied companies that not only survived, but thrived, during the “great recession” of 2008-2009. Bain’s study called them “winners” and McKinsey & Company called them “resilients,” but they both shared one common trait: they invested in their business when the economy was down and saw greater results than companies that didn’t. While both organizations looked beyond just marketing investment, the lesson holds that investing when your competitors are cutting delivers results. Conversely, research by the Ehrenberg-Bass Institute for Marketing Science found that brands who stopped advertising suffered. On average, their sales declined 16% in the first year they paused advertising and more than 58% over five years.
Share of Voice Matters
So, why do brands who invest in marketing during economic downturns succeed more than those who don’t? The simple answer is share of voice leads to share of market. Multiple studies over the past few decades have shown consistently that if a company maintains a share of voice higher than its existing share of market (an “excess” share of voice or ESOV), they will grow their market share. It stands to reason that if your competition is trimming marketing investment during a downturn, a company can gain share of voice just by maintaining their investment. And history has shown that most companies will cut back on advertising during a recession: advertising spend fell 13% in the 2008-2009 recession. Maintaining or increasing advertising when the competition is stopping or pulling back is a growth strategy: reminding and reinforcing current customers while conquesting new customers from dormant competitors.
Share of Voice is Less Expensive
If gaining excess share of voice is the key to growth, an economic downturn provides the opportunity to deliver it efficiently. As noted previously, if the competition is spending less than your company, you can gain SOV just by maintaining current budgets since it represents a larger portion of the shrinking pie. But there is another hidden benefit of economic uncertainty—as advertisers pull back from advertising, the reduced demand creates a softer marketplace. We saw this most recently during the pandemic and post-pandemic slump: a market of declining CPMs and opportunistic “fire-sale” pricing. Share of voice increases even more when those advertising investments can buy more—and better quality—media inventory.
Stability Builds Brand Trust
The final argument for continued advertising in a recession is that it positions your company and brand as a stable force in uncertain times. If a company skittishly pulls advertising in tough times, consumers can interpret that as a sign that perhaps they won’t be around for the long haul. And for products with a longer lifecycle, that can factor into purchase decisions. Hard times may also call for tweaks to creative messaging: focus on price and value, avoiding conspicuous consumption, and dialing up the empathy.
Stay the Course and Win the Race
No one is rooting for a recession, and the economic outlook is still uncertain enough that we hope this advice isn’t necessary. But if it does cool down, research overwhelmingly supports that maintaining—or even growing—your marketing investment during economic uncertainty is a winning strategy. Bain suggested the perfect analogy is to approach marketing in a recession like a race car driver approaches a sharp turn on the track: the best drivers brake hard before the curve to maintain control and then accelerate sharply once the curve is clear.
This article is featured in Media Impact Report No. 64. View the full report here.