Marketing in a slowdown: the 2008 handbooks come out again

29 March 2020

Market insights

NBR article by Dita De Boni featuring our own Godfather of effectiveness Richard Bourke

Marketing in a slowdown: the 2008 handbooks come out again

The 'godfathers of effectiveness' say keep emotive brand-building throughout.

DDB NZ chief strategy officer Rupert Price

Just over 10 years ago, after the stock market crash of 2008, the advertising and marketing sector across countries and continents took an enormous tumble.

In the US, the overall ad market declined 13%, with newspapers declining 27%. In the UK, drops were less precipitous, of about 7%; globally the figure tended toward 9%. The New Zealand market took its own hit of about 11% – in all cases, newspapers suffering the lion’s share of losses.

Just over 10 years later and the world once more seems to be edging towards a slowdown – even if everyone is hyper-aware of being too prescriptive in describing it that way for fear of causing recessionary behaviour – and hastening that very outcome.

But with advertising and marketing often the first thing to be cut when budgets tighten, it’s understandable that the country’s agencies are hyper-attuned to soft consumer sentiment. 

For the moment, New Zealand ad agencies are not in absolute danger territory. AdNews reports that country’s advertising media billings fell 3.4% in October, which is certainly not a positive, but that figure followed five months of consecutive growth, in
part fuelled by events like the Rugby World Cup and the starring role of the little orange man at local body election time.

Australia, however, is teetering dangerously close to code red territory, with 14 months of negative growth and a fall of 8.5% in October, with car, supermarkets, travel and home appliance advertisers contracting their budgets.

Rupert Price, chief strategy officer at the country’s largest agency, DDB, says its clients are not reducing their expenditure yet and have not signaled they will be doing so next year either at this point – but there is a softening around the edges in terms of a slowing housing market, flat sales of new cars and a slump in business confidence in play.

The agency has gone back to the future to examine strategies laid out by some of its most senior people in a series of landmark industry papers produced in the wake of the stock market crash of 2008 – papers that aimed to prove, with empirical data, that constricting advertising and marketing budgets during a recession had a very damaging effect on a business’ ability to survive the
tough times.

It’s put to Price that he would say that, wouldn’t he? He concedes the point: “Sure. But what people have to accept is that even in a recession people still go out and buy goods and services, they continue to buy products and choose brands – it’s just that the brands that hold their nerve and continue to invest in building their brand profiles are the ones that benefit exponentially from doing so.”

David McIndoe, head of strategy at Saatchi & Saatchi NZ, views any possible recession in the same way for his clients, despite not seeing any softening in demand just yet.

“[In previous downturns] we’ve seen consumers delay big-ticket spending and shift toward lower-cost items – but while the shape of spending changes, the need to compete in your part of the market with your usual competition, who are equally affected, doesn’t change.”

“Caution may help the bottom line but what is the opportunity cost? What are the gains you could make while others pull back?”

Saatchi & Saatchi head of strategy David McIndoe says economic downturns present opportunity 

The proof is empirical

Les Binet and Peter Field are advertising industry icons, sometimes described as the “godfathers of effectiveness,” who have written a slew of very influential marketing papers together and separately in the past two decades.  

Binet started making his mark in advertising as an econometrician (someone who applies statistical and mathematical modelling to predict economic modelling) at DDB in London. He is now head of effectiveness at adam&eve DDB, and runs DDB Matrix, the network’s econometrics consultancy. 

Field is a marketing consultant after many years as a strategic planner in advertising and since the mid-1990s has worked to develop and analyse the IPA (the UK’s Institute of Practitioners in Advertising) Databank of effectiveness case study data.

Binet and Field collaborated on Marketing in the Era of Accountability in 2007, which looked at 880 marketing case studies, and followed it up with perhaps their most famous publication, 2013’s The Long and The Short of It, which became a guidebook for the industry in how to balance short- and long-term marketing strategies.

Both men are still held in very high regard across the ad marketing sector globally and DDB’s 200+ staff in New Zealand adhere closely to the general precepts found in the works, in combination with a paper called Advertising in a Downturn, published in 2008.

The papers get a particularly good dusting off when economies are contracting, says Price, in the quest to prove marketing is as important a hard cost as any other key business function.

“The papers, however, show an irrefutable case for those brands that have continued to invest in marketing during hard times – so where it is not a variable cost or something easily cut but a hard cost like any other capital investment, these businesses have managed to not only survive but thrive in tough times."

The data has been extracted from a new discipline that has grown up the past 10 years, marketing sciences, looking at how brands, markets and consumers behave, Price says. The overarching message that the likes of DDB have taken from them are that in a recessionary environment, businesses should keep investing in their brands, “maybe not in advertising per se but brand experience, profile, innovation and so forth,” even as belts tighten.

And the reach of brand building is also important. “We are learning from marketing science that people’s individual behaviour is random and unpredictable, so to reach a large number of people campaigns aimed at mass audiences are still incredibly important.”

Wherefore digital?

Richard Bourke is the founder of One Picture, formerly Big Picture, an 18-year-old marketing and insights consultancy with offices in Auckland, Sydney and London. He says brand-building is becoming a “misplaced art – there has been a move from the longer term to the almost instant.” 

He says the trend to ward wanting ever faster results from marketing investment has been happening over a few decades, with management seeking to cut marketing budgets and plough the money into sales or short-term activations, which is all about moving product, if they don’t see results quickly enough.  That trend intensifies in a flagging economy.

But he says it’s a misstep that uses up a brand’s goodwill. “Essentially, companies are spending brand equity to get through less buoyant times – they are using equity and goodwill up by not spending on brand building and often lowering the costs of the product and service to get sales.”

A tough trading environment is partly to blame – but the coming of age of digital technologies and the sheer comms bandwidth marketing now has to cover is another factor.

“So many channels, platforms and mediums, so little money. Almost every client business we are working on is going through a digital transformation and marketing is front and centre of this.”

Digital advertising spend is certainly trouncing total advertising spend, according to the figures. The third quarter of 2019 saw the eighth successive quarter of double-digit growth in online advertising, while in 2018 online advertising reached $1 billion for the first time and grew around 15%, compared with 2.8% for the industry overall.

IAB (Interactive Advertising Bureau) New Zealand chief executive Gill Stewart concurs that in an economic slowdown, measurement becomes more important to chief executives and boards than ever, which is where digital stands out.  

But she says, as consumers’ expectations rise and technology becomes more seamless, data is not only an important driver but also more relevant and central to building brands.

“Digital advertising has an established role to play in brand building through formats including display, video, native and sponsorship - companies that are making the most of the efficiencies presented by data and technology and delivering strong customer experience, are going to thrive.”

Digital drawbacks

DDB’s Price agrees precision marketing enabled by technology is more effective and efficient and allow a marketer to predict shopping behaviours and track those behaviours.

“But most people want ease and convenience more than anything else – and the most convenient thing so to go along with the biggest, most famous brands in the category – those that are maintaining their profile.”

“In a recession that goes double – there’s a flight to big, predictable companies and brands where clients have the reassurance of knowing others will do that too.”

Another statistic he points out is that the old 80:20 rule (80% of your custom comes from 20% of your clients) is untrue.

“Advice to focus on your existing customers is a misnomer,” Price says.

“Even with brands like Apple and Harley Davidson, with supposedly famously loyal customers, the empirical data shows even Apple customers are half as likely to buy Apple again as they are to buy another brand. Light buyers of a brand actually make up more buyers, in any category.”

Emotion is what it is all about 

In Marketing in an Era of Accountability, Binet and Field define “emotional” advertising campaigns as distinct from “rational” campaigns. Emotional campaigns generate emotional engagement with a campaign and aim to build empathy and, by doing so, influence choice.

Rational campaigns work differently: They can either be driven by “fame” (getting the brand talked about as a ‘happening thing’), information, or persuasion, which seeks to challenge the existing knowledge or beliefs about a brand.

The paper shows using the almost 900 marketing case studies that emotional advertising campaigns beat all other forms of advertising: “The broad conclusion from the data is that communications models that use emotional appeal are more likely to yield strong business results than rationally based models.

“Emotionally based campaigns are not only more likely to produce very large business effects but also produce more of them, outperforming rationally based campaigns on every single business measure.”

One Picture founder Richard Bourke says brands need to 'stay their course'

Price says memories are created through emotions and emotional associations “so if a brand can resonate at an emotional level, it is creating memories that will stay with a customer for a long time – and buying sales into the future, whereas rational stuff is disposable.”

Of course, this is easier said than done, and One Picture’s Richard Bourke says a certain type of consistency is important – especially when companies are reaching out to millennials or “new” New Zealanders.

“Some companies/brands try to connect with this audience by changing what they are about to be more immigrant-centric or millennial-centric for instance – no one wants to be the dad at the disco,” he says.

“But they should be doing the opposite. Brands need to know who they are. Stay your course. Yes, you need a brand to be open and empathetic and progressive but immigrants have moved here because they have bought into New Zealand and New Zealand values.

“Millennials will like you if you stand for something eternal, sustainable and essentially good. You don’t want to be changing what you stand for – you want to be doubling down but, at the same time, inviting everyone to come along for the ride.”     

Tags: Marketing Effectiveness, Insights