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WARC: Advertisers Need To Maintain Investment In Their Brands.

Add highly regarded global market research firm WARC to the chorus of advertising experts urging marketers not to cut back on advertising during an economic downturn.

The one-two punch of sharp inflation and the threat of recession, sometimes referred to as “stagflation,” makes this period of instability especially challenging for marketers, since rising prices amplify the effects of a downturn on consumer spending.

Economic downturns often see brands scale back their advertising spend and put a focus on so-called performance channels, where its impact is more immediately measurable.

“But marketers need to maintain investment in their brands as they seek to justify price increases and defend themselves from trading down or private-label rivals, WARC says in a new report, entitled “Navigating inflation & the threat of recession.”

“Consistent and effective advertising increases a brand's pricing power, no matter the economic situation,” the report says.

Speaking to WARC at the annual Cannes Lions advertising festival in June, James Hankins, founder of Vizer Consulting, said: “The earlier marketers use their other ‘P’, promotion, to build strength in a brand to justify that increase in price so [consumers] don’t go elsewhere, the better for your business.”

The WARC report makes the case that as consumers look for reassurance in their purchases, “brands that have successfully communicated their value can continue to charge a price premium.”

However, after analyzing some 40,000 brands, Kantar estimates that roughly one-third do not have brand equity strong enough to support their pricing – leaving them vulnerable.

“When recession strikes, a knee-jerk response often overrides long-term strategic thinking. Brand advertising is often cut as the marketing budget comes under pressure, and money is diverted into the channels that can be measured for direct sales impact,” WARC says. “But it is crucial to consider the type of advertising to invest in, for short-, mid- and long-term growth.”

Nancy Smith, CEO, Analytic Partners sounds a warning for marketers that think they can emerge unscathed from cutting back on ad spending. “If we impact on our spend, and our competition doesn’t, or our competition leans in, well, then we can lose a significant portion of our business,” she says. “And these are losses that will be sustained.”

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