Ehrenberg-Bass reveals the negative effect an advertising hiatus has on brand growth
When financial pressures hit or a brand’s net profit needs boosting, advertising spend is often one of the first budgets to be cut. The Covid-19 pandemic has been no different, with numerous marketers pulling advertising and cutting spend for months or longer.
However, research by the Ehrenberg-Bass Institute proves that an advertising hiatus not only leads to notable sales declines, but cannot easily be recovered from.
Conducted in 2018 by Professor Byron Sharp, Professor Rachel Kennedy, Dr Virginia Beal, Dr Nicole Hartnett and Adam Gelzinis, the study uses existing data tracking the media spend and volume sales of 70 Australian consumer goods brands for more than two decades.
There are 57 cases in which a brand cut all mass media spending for a year or longer, with some not advertising for up to a decade.
The Institute finds that on average brands saw their sales fall 16% after one year without advertising compared to the last advertised year, and by 25% after two years. By three years the drop reaches 36%, though as the years continue the steady decline eventually tapers off.
However, according to the report there is “wide variation” around this average, as not all brands experienced immediate sales drops. In fact, bigger brands tend to continue to grow or remain stable after advertising stops for a year or two, whereas small, growing brands see their trajectory quickly reverse and suffer greater declines.
In the sample used within the study, all big and medium-sized brands that were growing prior to their advertising hiatus continued to grow for one to two years. In contrast, all previously growing small brands stopped accelerating and declined to below their base-level sales.
According to the report, this “size advantage” for bigger brands coincides with the Institute’s research into the effect of the greater mental and physical availability of bigger brands.
“Stopping advertising means brands cannot build or refresh mental networks through mass communication, but other nudges come from buying or using the brand, seeing other people buy or use the brand, or seeing in-store displays and activations (which typically also favour bigger brands),” the report says.
“The upshot is that bigger brands’ greater mental and physical availability will likely better insulate sales from decline after stopping advertising compared to smaller brands.”
Meanwhile, brands that were previously stable prior to cutting advertising largely managed to remain somewhat stable within the next two years, though they did begin to experience “substantial” decline if they continued to go without advertising after that point.
Read the full article in Marketing Week.
