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.