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The case for brand-building during a downturn

The case for brand-building during a downturn

With the world united in turmoil, the value of marketing and brand building has been questioned as budgets have suddenly tightened and businesses work hard to survive. Here, David Buttle, global commercial marketing director for the Financial Times, argues that companies must continue to invest in their brand and look to the future while also dealing with the immediate present.

Working in partnership with the IPA, the Financial Times recently published The Board-Brand Rift, a study into the organisational forces driving the shift in marketing expenditure from long-term brand-building activity (roughly 60% of spend in 2000) to short-term activation campaigns today (over 50% today). The findings of this study provide some guidance on how marketers can make the case for brand investment during the purse-tightening that many businesses are undertaking as the economic fallout from the coronavirus is felt.

A view of the world today through the lens of customer-behaviour should tell marketers that this is the time to invest in their brands. The outbreak of coronavirus and the government measures taken to try and contain it are forcibly changing consumer habits. Relationships between consumers and businesses in multiple categories are being disrupted, with new ones created, or potentially created. Amongst this dislocation, there are opportunities. Insurgents can accelerate their growth whilst incumbents can cement their position or pivot off their brand equity to reshape themselves for tomorrow.

The dynamics of the advertising market add weight to the case to invest. Demand for brand-building media (indeed, all media) has dropped dramatically as campaigns are paused; prices have fallen commensurately. Take TV, arguably still the ultimate brand-building platform; the latest IAB survey reported that marketers plan to reduce their spend by 41% in March and April. The picture is the same across digital, print, radio and online video.

While advertiser demand has fallen, audiences have increased substantially for almost all media. TV viewership was up 29% over Easter, both radio and podcast producers are reporting double-digit audience growth and news media consumption is reaching record levels; the FT has seen an uplift in traffic of around 250% on the same time last year. This combination of lower prices and greater reach means the value on offer right now is astounding. Brands that maintain existing spend levels are likely to see a significant increase in share-of-voice whilst those that can increase brand investment will benefit from a Share of Voice (SoV)-multiplying effect. The evidence suggests a reliable correlation between advertising SoV and market share and whilst a growing share of a shrinking market may not seem to justify the additional cost, when demand recovers (an eventual certainty) it will pay dividends.

But most businesses aren’t investing in their brand at this time. The data tell us that.

Our study with the IPA sought to understand what was driving the structural shift in marketing expenditure from long-term brand-building to short-term activation. To us this was a puzzling question when there’s no evidence to suggest that there has been a change in the commercially optimal balance between these categories of activity (Binet and Field’s 60-40) or reason to believe that the brand model which, refined over many decades and harnessing some fundamental facets of human behaviour and how we all make choices, is no longer valid.

The findings of our research suggest that beneath this growing short-termism sits a deficiency of reliable brand-to-revenue metrics (when compared with performance channels), a prevailing focus – from investors and consequently management – on short-term commercial performance (not helped by quarterly financial reporting cycles in the US) and a lack of confidence in brand-building capabilities and skills; a perception shared by marketing leadership and across the boardroom.

Despite the reasons for brand investment, these structural forces will have been strengthened and added to in the current crisis, as businesses react to the dramatic fall in consumer spending we’ve seen. It’s in the DNA of most businesses to slash variable costs when revenues fall to get as close to hitting that year’s short-term, bottom-line target as possible.

So how can we make the case for brand investment in this environment? Here are three tips from our study.

Our research tells us that business leaders see brands primarily as a tool of expansion, rather than a device to deploy when on the defensive in a downturn. This is patently false. Dispelling this myth should help to make the case for investment in brand; use the research that’s been done on business performance during, and after, previous downturns.

Assess the brand metrics your business is using, and where possible, link these to measures of commercial contribution. Brands deliver against a range of direct commercial performance indicators, from reducing price sensitivity, improving margins, to acting as a guarantor of future sales through customer loyalty. Too often though, brands are discussed only in terms of narrow (and from the perspective of the chief financial officer, ‘woolly’) marketing metrics such as awareness, salience or consideration. Change that.

Finally, bring brands into the board-level discussions around investment trade-offs, and express confidence in your ability and the ability of your team to deliver brand growth and the commensurate commercial benefits that come with doing so. That confidence isn’t there right now; we can build it and, our research tells us, that should help.

For most organisations the current crisis is financial in nature; it relates principally to cold, hard cash. Our research tells us that marketing – and particularly brand-building – is perceived to exist in a non-financial realm. If we can correct that misconception, and bridge that gap, we’ll be able to make a more effective case for marketing, and particularly brand, investment and our organisations will come out of this crisis stronger.

The Drum has partnered with the FT for The Investment in Brand prize, which aims to recognise and reward some of the companies who, through long-term marketing efforts, as well as having adapted quickly in recent months to aid the efforts to combat the pandemic, have strengthened customer relations long-term. Nominees for the award include Burberry, Guinness, LVMH and DHL.

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