Anthony ChiaravalloAnthony Chiaravallo

Every day, it seems there’s more news of corporate cost-cutting. As the economic climate tightens amid an election year and looming recession, businesses often look to marketing as one of the first budgets to slash. This trend isn’t new; marketing has historically been viewed as a malleable expense that can be adjusted without immediate harm to the business. However, while these cuts can provide some short-term financial relief, data suggests that the long-term consequences are both detrimental and lasting.

Marketing budgets are usually the first on the chopping block, largely because advertising expenses are flexible—they aren’t committed until spent, can be paused or restarted quickly and can be reduced without impacting business productivity—or so the logic goes. Yet, this approach overlooks the critical role that consistent advertising plays in maintaining brand health and driving long-term business success.

Recent studies highlight the negative effects of pausing advertising, with a strong emphasis on the critical role of brand recall and ongoing consumer engagement. The 2023 Edelman Trust Barometer reports that reducing visibility and interaction with consumers significantly diminishes brand engagement and trust. This is a crucial insight for businesses to consider, as brand trust is a foundational element of customer loyalty and long-term revenue.

Nielsen’s findings further reinforce the importance of brand recall, particularly in emerging media channels such as podcasts and influencer marketing. It’s essential for keeping a company top-of-mind, ensuring relevance and visibility. Without consistent advertising efforts, brand recall can fade, which leads to subpar market performance. The connection between consistent advertising and brand recall is well-documented; continuous exposure helps to cement a brand in the consumer’s mind, making it more likely that they will choose that brand when making purchasing decisions.

This impact is particularly significant in today’s economy, where continuous engagement post-purchase is crucial for fostering brand loyalty and trust. Once decline begins, reversing it becomes increasingly challenging. Brands that cut back on advertising may find themselves in a downward spiral where decreased visibility leads to lower sales, which in turn justifies further cuts in advertising. It’s a vicious cycle that can be difficult to break.

Treating advertising as an investment rather than an expense is crucial during recessionary times, as every dollar reduced can lead to substantial sales losses. Reducing ad budgets versus completely going dark revealed that for every dollar cut, 11 brands experienced a loss of 3x that amount in sales returns. This statistic underscores the significant impact that advertising has on sales and the high cost of reducing ad spend.

Pausing digital ads is especially problematic, as it can lead to disrupted campaign momentum, reduced ad rank, lost algorithmic learnings and missed sales opportunities. Worst of all, this gives your competitors an edge, as they can now spend less to reach your target customers. In the digital advertising ecosystem, consistent spend helps to maintain and improve ad performance metrics, which are critical for achieving cost-effective results. Interrupting this flow can lead to a loss of the valuable data and insights that drive optimization, ultimately making future campaigns less effective.

If you need to pause digital ads for whatever reason, there’s a better option.

Simply reduce your paid digital spend to a minimum daily budget. For most campaigns, Vallo Media recommends at least $10–$100/day per campaign, depending on the size of your brand and budget. This approach allows you to maintain a presence and continue gathering valuable data, which can inform future campaigns and help you stay competitive.

Additionally, focusing on the most effective channels and high-ROI campaigns can help maximize the impact of a reduced budget. Prioritize platforms and strategies that have historically delivered the best results for your business. This might include social media advertising, search engine marketing or retargeting campaigns that target previous website visitors. By concentrating your efforts on these high-impact areas, you can ensure that your reduced budget is still working hard for your brand.

A large client of ours was recently forced to reduce their paid media budget due to directives from their corporate HQ. Within two months of the lower spend, we recorded a 92 percent reduction in physical visits to the property attributed to digital media using the location tracking system we put in place. This drastic decline highlights the direct correlation between digital ad spend and tangible business outcomes, such as foot traffic and sales.

In 2020, during the height of the pandemic, Coca-Cola decided to reduce its advertising budget by 35 percent. This decision was driven by the belief that marketing wouldn’t make a substantial difference during lockdowns. However, this reduction led to an 11 percent decline in Coca-Cola’s net revenues for the year. This example illustrates the tangible impact that reduced advertising spend can have on a company’s bottom line.

Meanwhile, Coke’s competitor, PepsiCo, maintained its ad spend and reported a net revenue growth of 5 percent in the same period. This demonstrates the critical mistake of cutting ad spend during a crisis, which allowed PepsiCo to gain a competitive advantage and grow its market share at Coca-Cola’s expense. By continuing to invest in advertising, PepsiCo was able to maintain its brand visibility and capitalize on the reduced competition for consumer attention.

Dr. Pepper did the same thing, increasing its marketing investment across product segments during the most recent downturn. This no doubt helped it surpass Pepsi to become the second-largest soda brand, punctuating the benefits of maintaining ad spend during challenging times.

Maintaining your advertising spend—or at least reducing it to a comfortable daily budget—will not only secure your brand’s positioning but also strategically position you to gain market share from competitors. By treating advertising as a crucial investment rather than an expendable cost, businesses can capitalize on reduced competition for ad space, making it more cost-effective to reach their target audiences.

While pausing paid media might offer immediate financial relief, the long-term consequences can be detrimental. Consistent advertising is essential to maintain brand health, engage with consumers and ensure long-term growth. By maintaining advertising during a downturn, businesses can navigate economic challenges more effectively and emerge stronger.

***

Anthony Chiaravallo, Founder and CEO of Vallo Media, has more than 15 years of experience in integrated marketing, digital strategy and paid media buying. He has placed more than $100 million in media for clients including Nike, Amazon, Walmart, FedEx and Resorts World.