Opinion

Playing the long game, not just the last quarter, when economic waters get rough

As economic storm clouds gather, it's critical brands ignore the distraction of the short-term to remain focused on the long game, QMS chief executive officer John O'Neill writes. This is how.

Economic downturns are not a new phenomenon. In my many years of experience, no two have been the same but each time we face economic uncertainty, there is an overriding sense of being overwhelmed by the news reports, the projections of financial decline, economic indicators globally and, ultimately, general consumer sentiment.

The latter, of course, is a result of all of these influences.

While an economic downturn tends to feel like poorly chartered waters and Groundhog Day all at once, the reality is that we have the learnings of dozens of companies that have navigated negative growth and recessions dating back to the 1970s.

Their collective history of successes and failures provides the key elements to positively steer a course through disruption. 

Based on this history, we know there are patterns to consumer behaviour and business strategy that can either propel or undermine a brand’s performance. The initial challenge is to understand recession psychology; as media executives and marketers, we all get this and we can all do it.

The basic rules apply: be balanced in your thinking; use historical learnings and apply them where relevant to your business; avoid the lure of short term thinking; and bet quickly on smart decisions that can yield value-creating growth to become your competitive advantage.

Containing costs is smart, but failing to support brands can jeopardise performance over the long term. And there’s the rub. Refining advertising budgets by nimbly adjusting strategies, tactics and product offerings – and crafting communications for this environment – enables businesses to succeed both during and, importantly, after an economic decline. This includes refining media channel choices, with budgets weighted to channels that can deliver a platform where the quality of the brand, audience and performance can be trusted and validated.

At its simplest, history also shows that there are three rules we should live by when managing marketing investment smartly during times of uncertainty.

1. Bet on brand building  

Continue to invest in brand building, balanced with short-term sales activations. In striking this recommended 60:40 balance, you are ensuring your brand communicates both the over-arching brand message and what it can offer customers right now. This approach is not about profiting in a recession as much as it is about capitalising on a recovery. 

Given most economic downturns last between two to five quarters, it is not a far horizon in which to work for maximum business effectiveness.  

2. Defending share of voice

Defend your share of voice, ideally to at least the level of your market share.  

The consequence of allowing share of voice to fall below the brand’s market share usually leads to a fall in market share over the course of the following year, with a much higher price tag to buy it back at a time that media inflation is ramping up. 

History shows that CFOs and CMOs who were strategic enough to implement excess share of voice strategies during the pandemic saw up to a five times positive effect on performance metrics like profit, pricing, share and market penetration and 4.5 times annual market share growth. Now is not the time to shrink into the shadows.

3. Be tactical with tone 

Marketers should debate the tone and nature of their advertising to recession-hit customers, but not the importance of it. “Recession-friendly” messaging, communicated across trusted environments, will help reinforce brand value, drive memorability and ensure customer loyalty once the whistle is blown and the downturn ends.  

​​​What’s in it for you?

Working with these three principles and focusing on media channels most capable of delivering to this roadmap means your strategic response to the current cyclical economic challenges will be met with the ability to propose ROI metrics that deliver sustained brand saliency and sales. 

According to Nielsen Media Mix Modelling, brands that are inactive or significantly reduce their market presence should expect to lose 2% of their long-term revenue each quarter, so the argument for investment is compelling.  

Fair to say, a potential short-term hit to profitability is ultimately worth the long-term profit. So, we should be playing the smart game, which is the long game.

John O’Neill is the chief executive officer of outdoor advertising company QMS

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