Panic, evolutionarily, serves a vital purpose. It is part of the answer to the question of fleeing or fighting. If you are in imminent danger, hormones that respond to stress are activated and rational thinking is disabled as your body produces an adrenaline rush to deal with or escape danger. This instinct was invaluable when our ancestors escaped the saber tigers, but in the modern world it can do more harm than help.
COVID-19 is spreading panic in our society and economic system. Just two words illustrate the depth and breadth of this panic: toilet paper. The virus is insidious, invisible and deadly, and it prolongs the period of panic, and makes people respond impulsively and sometimes illogically. Toilet paper will not save you if you are exposed to the virus. Even if you imagine a world of “crazy Max” caused by a virus, logic tells you to create supplies of canned food, cuts, energy chocolates and beans – not toilet paper.
While panic is normal in a person’s response to stress, prolonged panic prevents you from seeing the bigger picture. This is especially true of marketing and advertising, as these are the strategies and tactics you implement today to achieve positive results in the short or long term.
COVID-19 is a unique phenomenon in modern history. Yet, even when it is not a global pandemic, companies are focusing too much on short-term results. This is evident when companies insist on quarterly results, which harms the long-term health of their brands and business. Analytic Partners’ ROI Genome Intelligence shows that too much sales promotion is detrimental to long-term profitability and brand equity. As a result, we support a balanced approach and advocate for brand equity building, maintaining remarkable value propositions and achieving both short-term and long-term results.
We see a lot of short-lived, responsive behavior in response to the virus. We see companies sending their marketing teams on hold. Some brands give up advertising. We see corporations pulling entire business lines and taking a wait-and-see attitude.
Many budgets have been scrapped in previous financial crises, and some companies still do. But is it wise to cut costs now? Research shows that companies that protect their marketing budgets during the recession will find it much easier to recover. It’s easy to find examples of companies investing and holding on during crashes, those examples include Toyota, Staples and Target.
But what broader insights can we gain from previous experiences?
Analytic Partners’ ROI Genome intelligence, comprised of hundreds of billions of dollars in marketing spend from more than 700 brands in over 45 countries, offers us some insights:
- A recession or a fall does not mean a smaller return on investment. In over 100 cases, more than half of brands have seen an improvement in the return on investment during the last recession.
- Media spending contributes to short-term growth and long-term brand building, even during a recession. On average, brands that have increased media investment have roughly estimated a 17% increase in sales, and more than half of them have made subsequent improvements to their return on investment, year after year after a two-year recession.
- Removing the media guarantees losses during a recession. On average, brands that have discontinued media investments have suffered an 18% loss in sales.
Ending media investment increases losses for struggling brands. Two-thirds of sales losses during the past recession are caused by lower investment, while one-third are caused by lower consumer demand.
When brands allow short-term thinking to dominate, this reflects on brand equity, which affects the long-term success of the company. In one great example, a well-known household brand stopped advertising for a full nine months during the last recession. At that time brand equity was severely impaired, there were losses in the area of brand ownership characteristics, a decline in the attribute association, and a decline in key overall equity measures. In fact, the brand did not retain ownership of any key attributes – a position that took years of investment to build. The brand noted a significant decline in customer usage and loyalty.
Smart companies apply data access to address strategic and tactical needs that have short- and long-term goals. Yes, we must respond to short-term stimuli, and we must work to achieve short-term goals. But we need to strike a balance of short-term needs with the long-term health of the brand and company. That is why it is important to monitor these activities continuously as consumer behavior can change. Brands that have an impact on data tracking and the measurement framework will be able to adapt and make better and more efficient decisions.
In uncertain times, it is natural to respond to short-term stimuli with short-term thinking. It’s a panic reaction at work. One way to deal with an instinctive response is to rely on data. During times of crisis, the most important thing is to make data-based decisions. For example, Analytic Partners make decisions focused on the data they associate with the Commercial Mix Modeling platform. Data is delivered through the GPS Enterprise platform, which enables future decision-making through scenario planning, optimization, and risk and opportunity assessment. Tactics and investments should change in times of mass change, and data and analytics will help you make the right tactical and strategic changes. By looking through the short and long term lenses, across a range of possible outcomes, brands can find key opportunities.
Best Tip for Hard Times? Don’t panic – don’t stack toilet paper – keep in mind long-term results. Finally, a quote often attributed to Darwin says, “Not the strongest or the smartest survive. Those who best adapt to change survive. ”
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