In 2007, as the banking crisis began to reveal its ugly teeth, I was asked by my then boss at Ogilvy & Mather to write a paper on why clients should continue to spend during an economic downturn. Together with my colleague Haruna McWilliams, we set about creating something that hopefully was more than just self-serving twaddle, and would actually be of use to our clients and colleagues. I seem to remember it being surprising well received, although whether anyone actually did anything differently as a result is debatable.
The pandemic over the past two years caused a sharper slowdown than the banking crisis, but it felt different. It was forced upon us by external factors, rather than created by systemic flaws of our own making. Sadly, as we’re all now discovering, a stronger than expected bounce back has brought its own inflation driven problems that may well create longer term economic harm. So as we nervously peer forwards to a deepening cost of living squeeze and the concomitant downturn that will almost inevitably accompany it, I looked back at the article Haruna and I wrote 14 years ago to see if anything was still valid for the road ahead.
In period since we wrote our paper, the IPA has published reams of compelling data on communications effectiveness, principally through the stellar work of Peter Field and Les Binet. The Long and the Short of It, first seen in 2013, is in my view the single most important work on communications planning for our times. Thankfully, it didn’t make our own conclusions from a few years earlier look totally foolish. We argued that share of voice is more important than absolute levels of spend, and that in a downturn, it becomes significantly cheaper to buy. Field & Binet’s concept of excess share of voice takes this a stage further, with share gains becoming significantly more affordable during lower periods of activity overall.
The criticism of the IPA’s work, and this argument in general, is that we would say that wouldn’t we. Perhaps, the argument goes, in times of hardship brands could be more helpful to their customers by reducing their prices instead, particularly against a backdrop of rampant inflation. Yet 5 year data from the banking crisis showed that brands which relied heavily on price promotions to drive volume often destroyed long term value. Similarly, those that cut marcomms only enjoyed short term term gains in profitability, with losses in market share regularly becoming evident less than 12 months later.
No-one would argue that price is not a factor in a downturn. Particularly the one likely headed our way. One constant however is that people generally don’t want to feel cheap. Consumers feeling the pinch will likely study your brand’s value equation more closely, and look to maximise it to their advantage, but successful brands tend to help people get more out rather than ask them to put less in.
Further, consumer spend data from the last three downturns shows that consumer spending patterns in different categories varied wildly. Some high ticket sectors saw deferrals rather than downtrading, while others such as chocolate even saw uplifts as consumers tried to find ways of injecting small luxuries into their routines. Brands that were able to maintain volumes without resorting to massive discounting tended to be those that enjoyed high levels of emotional ‘bonding’ of the kind generated through consistent brand building activity. Another Field & Binet conclusion.
Our final conclusion back in 2008 was the need for increased levels of agility and imagination. The pandemic taught many brands how to repurpose their products, services and assets while their core operations were disrupted, and while the majority suffered while their main businesses were shut down, that willingness to explore new markets and opportunities while embracing significant social and cultural changes has benefitted many in the long term. For example, the staycation phenomena looks like it’s here to stay for a while yet with many brands seeing this a new avenue for growth.
Marketing and communications is, understandably, obsessed with the new. An unhelpful by-product of that is a reluctance to learn from the past. “This time it’s different’ is an oft heard mantra. Yet most of what Haruna and I wrote back in 2008 seems as valid now as it was then, even if the backdrop is somewhat depressingly familiar.