A new research report has shone a light on the impact that stopping a media strategy has on small, medium and large businesses.
Here’s our whistle-stop tour of the key findings unearthed by the Ehrenberg-Bass Institute for Marketing Science.
The average decline in sales across businesses of all sizes is 16% after one year of no advertising; this drops to 25% after two years and 36% after three years. This is not an even playing field, however.
The report pinpoints a link between the size of a company and the effect of halting their media strategy for at least one year, with SMEs likely to suffer far greater declines in sales.
After a year of no advertising, sales have typically fallen sharply – and the momentum can be difficult to regain if competitors have stolen a big enough march.
SMEs rely heavily on advertising to build share of voice and establish mental connections with consumers. Wresting sales away from more established competitors requires a consistent investment over an extended period; this long-term focus enables small businesses to build robust, memory-based linkages that drive sales over time.
For bigger, established brands – the likes of whom require a less intensive approach to advertising in the first place – higher levels of mental and physical availability mean that sales are likely to remain steady, and may actually continue to grow for up to a year after a media strategy has been halted.
This grace period has an end point, however, with competitor activity and the inability to build or refresh mental networks through mass communication eventually catching up with them.
The size of a business isn’t the only determining factor in how pushing the stop button on a media strategy impacts sales.
A business’ pre-stoppage sales trajectory can also influence how it performs once the stop button is pressed; for example, if a large or medium sized company’s sales were growing before the pulling of ad spend, then they’re likely to continue growing in the first one or two years after stopping. Momentum can be a wonderful thing.
If pre-existing sales trends were steady, then post-stop sales were also expected to remain stable in the first two years – followed by a steep decline. It is, of course, never a good idea to halt advertising if sales are already dropping – it’ll therefore come as no surprise to learn that doing so will only accelerate the regression, regardless of a company’s size.
For small businesses, the outlook is again more precarious. Even if sales were previously growing, a complete pause in advertising will trigger a decline, often below base-level. This reaffirms the advantage larger businesses wield in terms of availability, as well as scale within other marketing functions.
The Ehrenberg-Bass report crystallises one unavoidable fact: small businesses with growth aspirations cannot afford to take their foot of the gas when it comes to their media strategy.
Larger businesses find themselves in a comparatively comfortable position after one year of no activity because they have consistently invested in advertising for years. Share of voice is hard earned; it requires patience, commitment and expertise over a long period of time, but the rewards are evident in everyday life – from the cereal people eat for breakfast, to the mattresses they fall asleep on in the evening.
Pulling spend from advertising to drive short-term net profit – especially during times of huge financial pressure – is understandably enticing. But it’s a huge gamble that can backfire considerably.
So, although ad budgets may seem like an indulgence when other areas of the business are feeling the strain, the reality is sales momentum can only be built and maintained by treating investment in advertising as a vital driver of all-round growth.
To find out how your media strategy can be optimised to deliver higher returns on investment, contact our experts today.