The decision of how to allocate media spend in a particular market can be a tricky one, as too little spend can have negative consequences for a brand — such as market share loss — while too much spend can lead to inefficiency and waste.
Research by Millward Brown and ThinkVine has shown that while going dark is never ideal, minimal impact occurs to sales for the first four to six months after all media is pulled. After this initial grace period, sales are negatively impacted and recovery to previous levels can take years. A variety of factors should be considered before pulling all media: growth trajectory of the market, current brand share, advertising & promotion spending intensity, threshold investment level, and category responsiveness to advertising and promotion. Other variables are also important when determining the potential impact of reduced ad spend as they could influence the intensity of the effects on the brand, including competitor product launches, new entries into the market, attack ads, and increased spending by competitors.
So how can brands determine the right level of media spend or whether or not simply reducing ad spend in a given market is better than going dark altogether? There are a couple key principles that can help determine the optimal marketing spend and / or the consequences of going dark.
First, developing a marketing budget that is based on thorough analysis of the market and internal alignment on whether to grow, maintain, or harvest the brand (BCG, “To Spend or Not to Spend”) is vital.
Many brands don’t optimize marketing investment because they budget based on the previous year’s allocation. Building a budget based on strategy to develop each market and product category around the globe will lead to a more efficient allocation of resources.
Second, brands should target spending levels where brand share of voice is at or above brand share of market. Market share gains and losses tend to be proportional to the delta between share of voice and share of market. For every 10 points that share of voice exceeds or falls below share of market, a brand can expect to gain or lose one point of market share per year. Moreover, brands that compete in categories that are more price-driven are more susceptible to share loss from decreased share of voice. Lastly, there is a time-lag effect, in which the residual impacts of advertising continue to benefit the brand and the effects of ad spend withdrawal are not evident until later.
It does not benefit brands to go dark with media, for an extended period of time, in order to save on marketing expenditures. Instead, careful consideration should be given to market dynamics, share of voice relative to share of market, and overall brand development strategy. Achieving optimal return on investment and sustaining the long-term health of the brand will far outweigh the short term gains of going dark.
Sources
What Happens if You Cut Media Spending?, Advertising Age
What Happens When Brands Go Dark? Millward Brown
To Spend or Not to Spend, The Boston Consulting Group
Advertising in a Downturn, IPA
