But did you know that numerous studies have found that advertisers who maintained or increased their ad spend actually grew sales and market share during the recession? Furthermore, the spillover effects of the ad campaigns helped them maintain this growth in the aftermath of the recession. These studies point to the massive benefits of advertising during an economic slowdown. As consumer spending drops during recessions, you might wonder how this is possible. First of all, as major brands cut their marketing budgets, there is less competition in the ad auctions which causes ad costs to deflate. Secondly, when a brand cuts back on their marketing budgets, the brand loses its "share of mind" with the consumers, which may lead to massive losses in sales. This creates an opportunity for competing brands to grab that portion of the market share and acquire new and loyal customers.
For example, in the 1920s, Post was the market leader in the ready-to-eat cereal market, but during the great depression in 1929, Post significantly dropped their marketing budget. While competitor Kellogg's doubled its advertising spend and people slowly started to neglect Post, Kellogg's managed to grow its profits by 30% and become the market leader, a position it has maintained for decades since.
On top of that, here are some decisive stats for you:
- Reports imply that online shopping is on the rise
- Larger brands are cutting their advertising spend, leading to less competition in the auction
- CPM on Facebook has fallen by more than 30% across our ad campaigns
- Facebook user activity is up by 70% and messaging by 50%
in countries hit hardest by the virus
The chart by the Economist below shows how internet usage has surged since the initial days of the outbreak in the western world.