In tight economic times, the pressures are always on to cut advertising. Can a company do this? Can it get away with it? What will be the effect on the company a bit further down the track? These are the questions that start to be asked when the recessionary animal starts to bite.
If the company stops advertising and sales stay at the same level, the cessation of ad spending generates an immediate improvement in the bottom line. Hence the strong temptation to cut advertising in tough times and make the company's profit performance look good. What are the consequences? What do we know about stopping advertising?
We do not know a lot about what happens when advertising stops but what we do know is enough to warrant caution. Most companies don't know what happens when advertising stops because they only look at the immediate sales figures. If sales don't go down, they breathe a sigh of relief. But it is critical to look at what is going on underneath, at the brand image and 'brand value' level. Here is where the early warning signs of erosion in brand value are likely to be seen first.
For example, let's look at what happened when one US food manufacturer was forced to cut its advertising budget in half. Before the cut, ratings of the brand in taste testing studies differed greatly if the brand name was on the pack when tasted. While the brand was supported by advertising at adequate levels, the brand name provided a lift of 24 per cent over blind taste tests (24 per cent higher than respondents who tasted the exact same product, but without the brand name). Four years of greatly reduced advertising saw this differential erode so that there was only a 10 per cent lift over blind taste tests! The brand name lost more than half of its power. Consumers were less impressed with it as a brand and it lost much of its ability to influence people's impressions of quality and taste.