by Tony Fannin, president, BE Branded
There has been a recent study that has just been released. It studied the effect of going dark (cutting back on marketing to where it’s practically non-existent) had on brands and revenue. It was conducted by ThinkVine, an analytics firm based in Cincinnati. They wanted to see how much real harm would be done if companies cut advertising and marketing spend drastically for one year and then fully funded their marketing budgets the next. Their findings are very interesting:
• For the first 16 weeks, sales volume stayed the same. There wasn’t much of a drastic effect on the brand.
• By the end of the year, sales volume was down 20%
• When marketing was resumed the next year, the declining sales trend was reversed and the brand began gaining it’s brand power back. But it never closed the gap in sales results that the company would have realized if they hadn’t cut back advertising for the year.
• The cost of regaining brand power and sales ended up being a lengthy and expensive climb. The cost of regaining what they lost became more costly than the savings from the cut advertising budget.
• A brand that is already on the downward trajectory risked becoming irrelevant and becoming a shell of what they used to be.
• A brand that is flat or rising sales growth could weather the cut marketing budget better, but still ended up costing more than the savings.
Now, there are some businesses and industries that aren’t as effected, but the majority of businesses and corporations will feel the difference. I know too many companies that, when times get tight, marketing and advertising is the first thing they cut. Unfortunately, that’s the worst tactic you can do. Marketing and advertising is the life blood of almost all enterprise. Their critical role is to support the sales function. Sales without marketing support will find it a grind and very slow going. You lose momentum. Speaking of momentum, the funny thing about it is that when you quit, it quits. It’s not self perpetuating as you would like to believe. Marketing and advertising lets prospects know you exist, what you stand for, and how you can make their lives better. Sales is a one-on-one activity. It’s the process of turning warm prospects into clients and customers. Without marketing, eventually you will run out of prospects and then you become invisible to the market place.
A case in point is Hardees. Once the main up-and-comer who was the main challenger to McDonald’s. They dominated breakfast and was shoring up their lunch and dinner menus to take on the giant. Hardees had momentum on it’s side. For some reason, their C-level executives decided to drastically cut back on advertising thinking that their domination in breakfast would spread to the lunch and dinner crowd. As we all know, in a matter of 2-3 years, Hardees was struggling just to stay in business. They are still trying to regain the position they lost to Burger King and Wendy’s. Many wonder if they ever will.
So, if you’re contemplating on cutting advertising and marketing budgets just to “save” money, please think about the ThinkVine research and don’t become a Hardees.