• by John Gaffney , October 9, 2002

Tuesday’s session of the Advertising Research Foundation conference in New York addressed the dilemma of cutting ad budgets in tough times. It concluded that an ad spend cut back can be a market share killer.

“Successful brands have to be effective in a number of areas, but one of the most important was the us of advertising,” said Dr. Stephan Buck in his report, The Impact of Heavy Ad spend Cuts on Premium Brand Share. “The clear finding was that those with the highest ad spend at the beginning of any period were most likely to increase their share during the period. The advertising preceded the growth, which certainly supports a causal connection.”

Buck, an analyst for Taylor Nelson Sofres, referenced several reports. His overall conclusion was that a study of the three economic downturns over the past 30 years shows that those brands who maintained advertising continuity performed better than those who cut ad spend in terms of market share. He also referenced a recent study, conducted in the UK grocery market, that analyzed the relationship between private label grocery brands and premium grocery brands. That TNS study showed that ad spend among total grocery brands were up 17 percent each year before 1997. In 2001 the category fell 11 percent and the gap between the private label brands and premium brands widened. However, that gap came at the expense of tertiary brands who cut ad budgets. By maintaining ad budgets, premium brands were protected themselves from price pressure from in-house private label grocery brands.

Ispos-ASI VP Dave Walker reinforced the ad spend maintenance message. He told the conference that advertising significantly helped a recent research report on brand equity –the measurement of consumer attitudes about a brand.

“Advertising was not the biggest factor contributing to equity; product and package performance, the look and feel of the brand, and the brand name itself, each had a stronger correlation of equity than advertising had,” Walker said. “But favorable ad awareness also had a significant relationship to equity. It contributed to ratings for familiarity and perceived uniqueness.”

Walker also said that advertising influences brand perceptions more strongly than a survey can show. He said advertising forms attitudes about metrics such as product performance and therefore is more powerful than even the consumer realizes.