Consumer packaged goods is a growing ad category for radio as major brand marketers like General Mills, Procter and Gamble and Coca Cola have made radio part of their media mix.
But what are the risks of stopping or cutting back on advertising during what is now the worst recession on record? It’s a question posed by Kerry Corke, Global Media Director of Kantar’s Worldpanel Division in a report posted on the research firm’s “Inspiration” blog.
Based on media effectiveness studies conducted around the world, Kantar says that stopping or significantly reducing advertising could have impacts that take years to recover from.
The average short-term effect from advertising is an incremental 4.5% sales increase, the blog post says, and that usually occurs in the month after a typical eight-week campaign.
“This is what you need to defend just to stand still, and what you stand to lose if you choose not to advertise,” Corke writes. Expanded out to a full year, she figures that a brand that generates $10 million worth of sales in a six-month period stands to lose an average $900,000 in revenue if they postpone or cancel the two ad campaigns during that timeframe when they would ordinarily run.
When considering the impact of an advertising hiatus, it’s imperative to take into account the consumer penetration of the brand, Kantar says. Almost nine in 10 (86%) of the brands that grew globally in 2019 did so by increasing their penetration. A brand must replace 50% of its buyers each year just to defend its current position, Kantar’s Worldpanel studies show. “It’s crucial to keep gaining new shoppers in order to secure the long-term health of the brand and build its potential for growth,” Corke argues. Typically, in the short term, growth driven by penetration gains accounts for two thirds of the post campaign sales uplift. And because advertising also reminds and retains existing shoppers, it can take years to recover from the loss of heavy buyers.
If a brand loses share, it’s 70% likely that its share will still be lower five years later, a study of 3,800 brads conducted by BG20 found. And brand share winners have a two-thirds probability of still having a higher share after five years.
For CPG brands, recessions typically lead to price wars driven by retailers. It’s a scenario where only the strongest brands survive. “Boosting the impact advertising has on sales has a huge part to play in sustaining brand strength,” Corke suggests.
And for brands that succeed by offering more than the lowest price, it’s essential to keep reminding their customers why they should pay more than for low-priced equivalents.
“This means brands need to sustain their commitment to advertising, continue to offer great value for money, adapt their media deployment to align with changed viewing habits, and understand the new needs that have arisen as a result of the pandemic – especially those that can drive new users and premium price,” Corke concludes.