When sales slow down and costs are going up, the advertising budget is usually the first thing anybody looks at, and you can see why. It’s a big number, cutting it doesn’t mean letting anybody go, and nothing terrible happens the next morning. The trouble is what happens over the following year or two, so it’s worth knowing what the evidence says before you decide. Advertising is how we earn our living, so we’re not neutral on any of this, and we’ve tried to be fair here about where that evidence is weaker than our trade likes to admit.
Why cutting feels safe
If you stop advertising today, your phone will probably keep ringing next week, because people who already know you will carry on buying from you for a while. If you build loft conversions, say, most of your customers will have spent months thinking it over before they get in touch, so the people who ring in the first few weeks after you stop made up their minds about who to call some time ago. The enquiries hold up, the saving shows in the accounts straight away, and it looks as though the advertising wasn’t doing much.
What’s really happening is that you’re living off the advertising you did before. The Profit Ability 2 study, which looked at £1.8 billion of UK advertising spend, found that 58% of the profit advertising brings in arrives more than thirteen weeks after the money was spent. It was commissioned by Thinkbox, the marketing body for commercial TV, which has an obvious interest in the answer, although that particular figure covers every kind of advertising in the study and not television alone. So the benefit of what you spent last spring is still coming in now, while the cost of stopping doesn’t show up until later, and nobody’s accounts have a line for the customers who would have rung next year.
What happened to businesses that kept going
The most famous example is getting on for a hundred years old. At the end of the 1920s the American market for breakfast cereal was shared between Kellogg and Post, and when the Depression arrived they made opposite decisions. Post cut its costs, advertising included, as most businesses would, while Kellogg doubled its advertising budget, moved into radio and put its weight behind a new cereal called Rice Krispies. As James Surowiecki told the story in The New Yorker, Kellogg’s profits had risen by almost thirty per cent by 1933, and it had become the leading name in cereal, which it remained for decades afterwards.
One company’s experience doesn’t prove a great deal, but the question has been studied for nearly as long. The same article goes back to 1927, when an economist called Roland Vaile found that firms which had kept up their advertising through the recession of the early 1920s saw their sales hold up better than those which hadn’t, and later studies have tended to agree. In this country the Institute of Practitioners in Advertising, the trade body for UK advertising agencies, has studied it over several recessions. In 2020, the researcher Peter Field went back through around 50 of its case studies from the 2008 to 2009 recession, and his conclusion was that the brands which “held their nerve” were the ones that bounced back strongly when the recovery came.
The thinking behind it is that when your competitors go quiet and you don’t, you take up a bigger share of what people see and hear in your market without spending any more than you did before, and that tends to turn into a bigger share of the customers once people start spending again.
How much weight the evidence will bear
If you’re the one who has to sign off the budget, you may already have spotted the weakness in that, and it’s a fair one. A business that can afford to keep advertising through a recession was probably in better shape to begin with, so some of its later success would have come anyway. Case studies also tend to be written about the campaigns that worked, by the agencies that ran them, and nobody publishes one about the firm that kept spending and went under.
It’s also true that cutting does what it’s meant to do in the short term. Surowiecki’s article cites a major study by the Strategic Planning Institute, which found that companies reducing their advertising during recessions did improve their return on capital, and then grew more slowly in the years that followed than the competitors who had kept spending. So a finance director who says the cut will improve this year’s figures is right. What the research adds is that the saving and the cost land in different years, and only one of them is easy to see. How you weigh the one against the other depends on how strong your position is, which is a judgement no study can make for you.
It can also be cheaper
One part of the argument doesn’t depend on case studies at all, because it comes from the way airtime is priced. The price of TV airtime depends on how many advertisers want it, so when a lot of them pull back at once there’s less competition for the same breaks, and prices can come down. We’ve explained how that works in why TV airtime prices change. It means the same budget can sometimes go further in a quiet market than it would in a busy one, so ask a media buyer what prices are doing in your region before you decide how deep any cut needs to go.
Ways to spend less without disappearing
None of this means you should carry on as though nothing has changed. If you need to bring the budget down, there are ways of doing it that keep you in front of the people who matter most to you.
The most obvious is to narrow the area. If you’ve been advertising across a whole region and most of your sales come from the towns around your branches, you can pull back to those, or advertise only to the households you really want to reach, which you can do with AdSmart from Sky.
Another is to keep the advert you’ve got. A good advert can run for a long time, and you’ll get tired of it long before your customers do, because you’ve lived with it since the storyboard and they’ve only caught it a few times. If the message does have to change, that doesn’t always mean filming again. During lockdown we couldn’t film anything new for South Tyneside College, so we made their campaign from stock footage, with new graphics and a new message, which goes to show that a campaign doesn’t always need a shoot. A shorter version of your advert is another possibility, because it costs less each time it’s shown, although whether one can be cut from what was filmed depends on how the advert was put together.
You can also choose your moments, by advertising in the weeks that matter most to your business and resting in between, which is better than stopping altogether. People don’t forget an advert the day it comes off air, so if you come back before the memory has faded you’re building on what’s already there. It’s better, too, than keeping the same plan and simply putting less money into it, because a campaign spread too thinly can drop below the level at which anybody notices it. We’ve described the different patterns in how to schedule a TV campaign, and there are more ideas in our guide to the cheapest way to advertise on TV.
When cutting is the right call
We’d be doing you no favours if we pretended advertising should always come first. If the choice is between advertising and paying your staff or your suppliers, that isn’t a difficult decision, and since so much of what advertising earns arrives months later, it’s no answer to a shortage of cash this month. The same goes if you couldn’t cope with more orders even if they came, because there’s no sense in paying to attract customers you can’t serve.
The research is about businesses that can afford to keep going and are deciding whether they should. If that’s where you are, the evidence says the ones who stay visible usually come out ahead, although your own figures are a better guide than anybody’s case studies. If you kept a record of what happened to your enquiries and sales while you were on air, you already have some idea of what you’d be giving up, and if you didn’t, our guide to measuring a TV campaign explains how to start.
We’re happy to talk through what a smaller campaign could look like, so get in touch and we’ll give you an honest view, which includes telling you if we don’t think TV is the right move for you at the moment.
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