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Newsletter #12 | How to not waste a marketing budget

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In a previous recession playbook, Byron Sharp writes that, on average, just 20% of a marketing budget is effective. Most ad exposures are either missed or unattributed to the brand. Brands don’t reach enough of their category buyers – or do so in uneven bursts.

To deliver the optimal reach and frequency needed to reach and build mental availability with everyone in the category, ‘Sharp advises marketers to divide their annual budget into 50 weekly portions, or “every month [spend] about a twelfth taking account for seasonality”’ (Cadbury is a good example of this).

With caveats on the product or service, budget size/capabilities, and seasonality (times of high sales volume), the most effective approach is to pick the right mix of media channels for the intended outcome and combine it with the appropriate creatives. 

According to Oxford marketing professor Felipe Thomaz, this approach delivers 

“abnormal and disproportionate returns by that combination of activities, rather than just throwing more money into the bucket and saying, ‘Just go buy me more eyeballs.’ The evidence suggests that doesn't work because as [ad]spend is growing, efficiency is decreasing.”

If advertising efficiency is decreasing, where can marketers recoup these losses to their budgets? And, just as importantly, how can they do so during a period of stagflation?

#1 Don’t go dark

A century of recession studies reveal brands that cut ad spend fare worse than those that don’t cut spend or increase spend. 

‘Going dark,’ or cutting ad spend to zero, is typically considered the worse thing to do. Research from Ehrenberg-Bass shows brands that go dark for a year or more see sales fall, on average, 16% after one year and 25% after two years.

Behind the data, Ehrenberg-Bass, reveals three conditions that affect the rate and shape of sales decline (or increase) when brands go dark. These are

• Sales trends matter. Brands with declining sales will decline faster than a brand with growing sales. Stable sales will begin to fall but less aggressively than a brand with declining sales.
• Brand size matters. Small brands typically decline faster and more significantly than bigger brands.
• Growth rates matter. Smaller growing brands experience a sharp reversal in sales growth, whereas bigger growing brands typically experience sales growth after advertising stops for one to two years.

This is not a normal economic downturn. The cost of living crisis means this is a significant period of uncertainty for marketers – more so for those in particular categories.

#2 Calibrate budget to business size

Budget size plays a significant role in communication effectiveness. Calibrating advertising budgets against market share size (i.e., the excess share of voice model) is more efficient during a recession as competitor budgets are typically reduced. 

Another rule of thumb, discovered by Grace Kite, is to calibrate budgets to be between 5% and 10% of turnover. This will help maximize ROI.

Reducing ad spend may be unavoidable. Different categories have different growth opportunities. Pre-recession sales trends will affect recession and post-recession sales. Smaller or zero-$ budgets will multiply these negative sales and brand trends.

#3 Isolate meaningful efficiencies 

If budgets are reduced, marketers have other levers to isolate new efficiency and effectiveness opportunities.

1. Improve media mix: Oxford SB’s analysis of 1,105 multi-media campaigns revealed that campaigns could be 2.6 times more effective with a different media spend allocation. 
2. Add more channels: Data from Analytic Partners revealed brands can increase ROI by 19% by going from one platform to two, while investing across five platforms could see them gain, on average, an ROI increase of more than 35%. 
3. Optimize creatives: Another study from Analytic Partners showed creative built natively for each channel (i.e., optimize creative with platform best practices) can be 2.2x-3.6x more effective than TV creative that’s repurposed for digital channels.
4. Brand well: Ebiquity’s analysis of 1,300 campaigns revealed distinctively branded campaigns that featured recognizable brand ideas & assets outperformed campaigns that didn’t – delivering +62% stronger short-term profit ROI.

#4 Invest in high-quality creative

YouTube’s ABCDs are designed to help brands increase the efficiency and impact of their creative work. They are often ignored. 

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Across multiple online channels, for the average F500 firm, 7/10 creatives don't meet basic industry-set best practices.

Highlighting the not-insignificant efficiency gains that come from adopting these audience-first, creative principles, Anastasia Leng writes, “those [creative] efficiency improvements quickly add up and might just help you recoup some of that spending power loss while helping you stay on track to hit your goals. Instead of thinking about what to cut, what if we thought about which of our existing systems didn’t scale in parallel with the rapid growth of digital media?”

This is something that Mondelēz looked to solve across all their brands and markets.

How Mondelēz doubled their creative quality 

Having optimized their media for efficiencies, Mondelēz wanted to increase creative effectiveness across different media platforms. To develop this capability, they partnered with CreativeX to automate 9 creative guidelines (Brand early, Frame for mobile …) to ensure fit for platform assets (you can watch the case study video here).

As brands look to unlock new efficiencies, evidence reveals that improving creative quality and media allocation will help. The other part of the equation is to increase the ratio of media budgets allocated to high-quality creative.

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