A new paper in Journal of Advertising Research investigates what happens to alcohol brands when they shut down mass media advertising for a year. Thanks Nicole Hartnett and Byron Sharp for this wonderful new research.
Stopping mass advertising is followed on average by a 16% sales decline in the following year, 25% in the second year and 58% in the fifth year. Growing brands and larger brands can stave off this decline for longer than other brands. Indeed, while half of the brands saw substantial sales declines in the first year, 62% did so after 2 years and 71% after 3 years.
What is my professional opinion about this research? Here are 7 points:
- The category is an acid test: as I shared in previous consultancy work, I would not recommend an infrequently purchased brand (eg automobile) to stop advertising, because the customers in the market renew every month. In contrast, alcohol is a frequently purchase category (in Australia) and has a lot of differentiated brands; two factors that should buffer the damage from stopping advertising. As the authors state, the earliest evidence that brands can stop advertising comes from the 1960s in the beer category. Anheuser-Busch tested the effects of different advertising weight levels on Budweiser beer sales and noticed that test regions that had been completely deprived of advertising showed no significant differences in sales from control regions (Ackoff and Emshoff 1975). Moreover, the brands continued to do other forms of advertising, such as point-of-purchase and discounts. So hats off to the authors for choosing this category: if stopping advertising shows such strong sales declines in alcohol, it most likely will in your category as well.
- The boundary conditions are key: the authors look for and find different effect depending on brand size and growing status, just as Cem Bahadir’s and my research on how to induce consumers to engage in word-of-mouth in emerging markets.
- Definitions of growth trends could be refined: Brands were classified as stable if the difference between previous and base year sales was less than ±10 percent index points. Brands with change greater than ±10 percent were labeled as growing or declining respectively. This is less sophisticated than the trend classification in Bahadir and Pauwels, but they have much more monthly observations to estimate time trends.
- MMM has a hard time picking up maintenance advertising: while their analysis lacks time series modeling sophistication, the authors go through great lengths to correctly classify their variables, and need to measure in years instead of weeks or months. In their words, “Broad-reach or equity advertising is not expected to result in sales spikes when it is turned on. It is largely expected to maintain sales; in other words, to maintain the brand on its current growth trajectory, preserve its market share, or stem decline in the face of new competition. Such maintenance advertising does not cause spikes because its sales effects are spread thinly over time and only can be observed in long periods of advertising cessation”
- Correlation vs causality: the authors acknowledge their results are NOT CAUSAL: ‘A key limitation of this study is the inability to control for other potential confounding variables’ In the words of Nico Neumann: ‘What kind of brand stops advertising for 3-9 years? Mostly those in trouble, so we may confound cause and effect here – brands lost sales because of a bad product or other issues and therefore stopped advertising to cut losses. We don’t know the effect direction without a causal analysis.” In the continuum between mere correlation and causality, i distinguish 4 types of evidence:
- What is the standard of evidence we should hold this study to? Changes in pricing and promotions, distribution, competitor activities, and other marketplace forces likely contributed to the changes observed here. At a more macro-level, during the period of time studied, several disruptive changes also occurred in the Australian alcohol market, such as large company mergers and corporate takeovers, new competitor entrants, a notable trend toward premium craft brands, changes in physical and online distribution, changes in subcategory size and trends, and so forth. The authors acknowledge that the sole effect of advertising cessation on sales cannot be revealed without removing or controlling these other influences. Such controls were not possible in this study.
7. What is the bottom line? These new findings provide support that brands should advertise with continuity, because brand memories fade and must be refreshed and reinforced over time. Even dark periods of several months can prove detrimental to supporting sales and market share (De Canha, Ewing, and Tamaddoni 2020). “In this gap, consumers may be nudged by advertising from a competitor or simply forget to think about the brand when it comes time to make a purchase. Therefore, rather than adopt a pulsing strategy, which would see brands turning equity advertising on and off periodically, a continuity strategy that reduces or excludes dark periods over the long term better supports brand performance”. Indeed, Gijsenberg and Nijs (2019) show that investing in top-of-mind awareness through maintenance advertising insulates brands from competitors’ actions and boosts sales.
So what are you waiting for?
2 thoughts on “When brands stop advertising”
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