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The pandemic has forced many brands to adapt their company budgets to focus on business continuity. That’s why Forrester has predicted a 25% decline in advertising spending this year, which could take years to fully recover. But are ads actually on the decline, and what should brands do?
We’ve turned to advertising experts to learn how the pandemic has affected ad spending and ad effectiveness, and what brands can do to achieve success with ads in the near future.
Spending in the Midst of a Pandemic
“Many brands reduced or even eliminated their ad spending in March and April when the coronavirus first hit, but we’ve come to learn that it was not effective,” stated Alison Lohse, CMO at Santa Monica, C.A.-based Measured. Many brands that ran aggressive promotions across digital channels and T.V. during that time still saw large increases in sales. “Now with many major brands pulling ads due to budget cuts during coronavirus or other reasons,” Lohse continued, “there is more supply and opportunity for brands that might not have been able to afford some ad channels to get in.”
Samuel Scott, Columnist at London, U.K.-based The Drum also doesn't believe there’s been a decline in ad spending across all industries. “It depends on the company because there are positives and negatives to doing so,” he suggested. While consumers are spending less money in some sectors and brands may be strapped for cash, there are also much cheaper ad prices now as well.
While there could be an overall decline in spending, therefore, it’s not likely that most ads are any less effective than they were earlier this year. Lohse does believe retargeting ads may not be getting great results because they’re being overshadowed by promotional ads. “Many brands have been running huge promotions in order to drive revenue during the pandemic,” Lohse explained. That means those brands don’t need to use retargeting ads to prevent customer leakage because promotional ads are already doing so.
“For brands that are reducing their ad spend,” Scott continued, “the likely reason is that marketing is usually one of the first departments to face cuts during economic downturns.” Unfortunately, many business leaders view marketing and advertising as non-essential costs when compared to operating expenses like salaries, benefits, office rent and more.
Achieving Ad Success This Year
While many companies may be decreasing their ad spending temporarily, it’s most likely not because they want to. “Ads are still effective, but it depends on the type of ad and the circumstances,” Lohse said. For brands that will continue ad spending in the near future, here are some things to consider.
Stop Mentioning the Pandemic
“I think advertisers are overemphasizing the coronavirus,” Scott added. Every ad seems to mention the pandemic, yet the situation hasn’t directly affected the demand for the brand’s product or service. “Consumers want to get away from the pandemic,” he suggested, “they don't want to be reminded of it.” When creating ads, therefore, it could be best to continue advertising products the brands have always done.
Get Ad Attribution Right
“Many brands still use last-touch attribution,” Lohse said, "where the last ad the customer saw before buying gets 100% of the credit for the sale.” In some cases, brands also use multi-touch attribution, which attempts to proportionally credit every interaction with a consumer leading up to the purchase. For many brands, neither of these strategies can accurately attribute sales to ad spending, and this makes it difficult for business leaders to understand the value and effectiveness of ads.
Balance Different Ad Types
More recently, brands have been skewing their ad spending towards direct response ads that encourage immediate action from consumers in the short term. That means there’s less investment in long-term brand advertising campaigns that influence how people think and feel about the product. “With the rise of easy online tracking and targeting,” Scott explained, “marketers have been prioritizing direct response more and more while prioritizing brand advertising less and less.” Over time, this could reduce ad effectiveness, so he recommends brands balance both ad types to see the greatest results.
“More brands are turning to experimentation to understand the true incremental benefit of different marketing channels on revenue,” Lohse said. Along with running tests to measure how spending on a particular channel affects sales, brands should learn where spending on a certain channel reaches its max. “This approach gives hard, quantifiable numbers to see where incrementality is driving results and by how much,” Lohse explained, “and to confidently make better investment decisions and turn failing ads into successful ones.”