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Keeping up your advertising budget in time of crisis: be aware of the shaky evidence

In the last couple of weeks, the blogosphere has exploded with brands and self-acclaimed experts giving advice how to deal with the corona crisis. One of the most recurring pieces of advice is that despite these challenging times, it is wise to maintain or even increase your advertising budget. The claim is backed up with data: there are various studies that consistently show that brands that keep their advertising budget show better financial performance post-recession than companies that don’t. I am convinced keeping your advertising budgets in times like this will benefit your brand. I am also convinced, however, that most of the presented evidence regarding this claim is flawed.

Typically, studies that try to estimate the effect of advertising during a recession are set up like this:

  • A collection of brands is divided into groups that differ in their advertising spend (e.g. decrease, stay the same and increase).
  • The groups are compared on their financial performance after the recession

The studies consistently find a positive relationship and assume one causes the other. As we all have heard once or twice, correlation does not imply causality. The problem with most studies that compare companies is that the researchers compare apples and oranges, because the groups in these studies are different before the study even starts. Brands that increase advertising during a recession, are more likely to be financially healthy. These are the apples. Likewise, brands that decrease advertising during a recession, are less likely to be financially healthy. These are the oranges. We can’t compare them. That means we should be careful interpreting the numbers coming from these studies.

The problem with comparing apples and oranges is that you can’t know for sure whether it was advertising spend and/or something else that leads to variation in financial performance. For example, it is not a far-fetched idea that companies that the apples (financially healthy companies) are also able to invest in other things besides advertising, while the oranges don’t. Like innovation, like hiring the best people, like making your stuff easier to buy, like whatever you do in marketing to deliver value. The problem is we don’t know, because the recession studies only focus on one potential driver of financial performance and ignore others.

So, is it wise to keep your advertising budget during the recession that is about to come? Yes, I dare to say that is a wise thing to do. From decades of marketing science, we know that it pays to work on mental and physical availability on the longer and shorter term. And advertising builds and maintains mental availability, so there you go. Be aware, however, that the effect of advertising during a recession is likely to be less dramatic than the numbers presented suggest. Marketing is more than advertising. I assume that is one thing we can all agree on.

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