The Value of Advertising During a Recession
Coming off a historic Black Friday and Cyber Monday performance, with sales at $9.12 billion and $11.3 billion respectively, according to Adobe Analytics, U.S. retailers can breathe a small sigh of relief. However, looking beyond the busy holiday shopping season is critical. With many economists predicting the country will enter a recession in 2023 and face a multiyear downturn, it’s a make-or-break period for retailers.
When Sam Walton, founder of Walmart was asked about a recession, he responded, “I thought about it and decided not to participate.” Should retailers take inspiration from Walton’s words? Let’s take a closer look at how businesses can respond when faced with a recession.
Determining the Best Path
There are three logical routes that retailers can take with their marketing when economic hardships emerge: cut, maintain or increase spend. For some brands, survival will be top of mind and they may have to make the difficult decision to reduce head counts and budgets.
If possible, however, brands should take a long-term view and use a recession as a time to prepare for the economy’s rebound. While the pool of current customers does shrink during a downturn, buyers will eventually return. Brands that "go dark" — switching off marketing in a crisis — take time to light up again when the recovery comes. While they’re reintroducing themselves to shoppers, retailers that have stayed the course have an opportunity to race ahead.
In some cases, maintaining investment on share of voice is enough to set a retailer up for success, especially if competitors pull back when times get tough. Other retailers may use a recession as an opportunity to increase marketing investment to capture higher share of voice. If an organization achieves excess share of voice (i.e., its share of voice is larger than its share of market) it can eventually increase its total market share.
Maximizing the Investment in Advertising
There are considerations for making the most of marketing dollars. These are 1.) the quality of the creative; and 2.) the media platforms where the campaigns are featured.
Long-term, consistent communications are the most effective kind for brand growth in the recovery period. Retailers ideally will dial down sales activation efforts during a recession. Fewer customers can make purchases at this time, especially if these items fall into the “want” category rather than the “need” category. Instead, brand-building advertising is a priority. According to Orlando Wood’s "Lemon and Look Out" books, this type of advertising leverages unique features to enhance engagement and lodge a brand in the audience’s memory. This is key, as the brands that are remembered get chosen when it’s time to make a purchase.
These elements, which appeal more to the right hemisphere of the brain, include a clear sense of place, one scene unfolding with progression, characters, dialogue, distinctive assets, references to the past or cultural works, music with melody, and more. Entertaining audiences helps to elicit a positive emotional response, which in turn supports brand building. Meanwhile, left-brain advertising is more abstract and flatter, often featuring a voiceover, rhythmic music, freeze-frame effects, and no discernible sense of time or place. It's more likely to drive an immediate reaction, like a purchase, than build a loyal customer.
In addition to focusing on the creative effectiveness of ads, retailers need to carefully consider where they’ll be featured, as different advertising channels offer different attention metrics. Research from professor Karen Nelson-Field shows that it takes more than 2.5 seconds of attention to have a lasting impact on memory, and every second over three adds three days to how long a brand can last in a viewer’s memory. Meanwhile, attention paid to TV ads is more active and consistent compared to digital platforms. While digital platforms may offer lower costs, if nobody pays attention to the message the investment is wasted.
With the right recession mindset and plan in place, businesses move beyond a wait-and-see approach and take an active role in their future success when the economy returns to growth.
Jon Evans is Chief Customer Officer at System1, a marketing decision-making platform. System1 helps predict and improve the commercial impact of ads and innovation.
Jon Evans is chief customer officer at System1, the world's leading marketing decision-making platform. System1 helps predict and improve the commercial impact of ads and innovation. Learn more at system1group.com.
Jon is our Chief Customer Officer, and before that our CMO. So it’s no surprise that with his leadership and unparalleled energy and drive, System1 is expanding at an exponential rate. Jon always reaches for the stars…. and catches them.
In 2022 Jon stepped up into our Chief Customer Officer role where he’s accountable for all our products, marketing and sales. Jon used to be a System1 customer, so his superpower is a practical understanding of our customers’ needs and challenges, with genuine empathy.
Jon is an experienced commercial leader with a track record of delivering substantial growth across a large number of brands. His previous experience includes a short stint as CMO for Brewdog, Marketing Director at Suntory leading some of the UK's most iconic brands, on the Board of Purity Soft Drinks, a private equity-backed soft drink business, and working for Britvic Soft Drinks running a 'Seed Brand Unit' in conjunction with Pepsi.
Jon also hosts the ‘Uncensored CMO’ podcast, a mix of work and pleasure and a great way to meet potential clients. It’s at number 1 in Apple’s marketing category for 4 countries.
Outside of work, Jon enjoys the freedom of road cycling, “it energises me and I love the social aspect. All my best ideas happen when I am riding my bike”. Jon cycles for fun and fitness, with the occasional competition. He aimed high for his first-ever Time Trial – the Duo Normand – where, thrillingly, he got to compete against pro cyclists. He blended in seamlessly (he hopes) save for the fact he had no team car (!) and has never been so proud to come 257th!