There are numerous reasons business leaders may decide to stop their advertising: Difficulty measuring return-on-investment, budget limitations, market saturation, lack of time to develop, manage, and monitor campaigns, or possibly a shift in focus toward customer retention vs. acquisition, among others.
Stopping investments in advertising support for your business can have significant negative consequences, potentially leading to a spiral of continuously reduced sales, loss of market share, and leading to yet further cuts.
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Some of the implications of stopping your advertising may include:
Decreased market visibility, brand awareness, and recognition:
- Out of sight, out of mind. Without advertising consumers are less likely to encounter your brand, leading to reduced familiarity and recognition. To compete for a customer’s business, your business needs to be included within the customer’s consideration set. Reducing your visibility in the marketplace reduces your ability to compete for those customers.
- Competitors gain an edge. Your competitors who continue advertising will fill the void you leave, increasing their visibility and potentially capturing your market share.
- Regular and consistent advertising helps maintain brand recall. When you stop reminding customers of your value and relevance to their needs, the memory of your brand and its attributes fades in consumers’ minds, making them less likely to think of you when making purchase decisions, especially if they are occasional buyers. Further, the previous investments you made in building awareness and brand equity with the marketplace will be rendered wasted and obsolete.
Impact on sales and revenue:
- Sales decline. Research shows that when brands stop advertising, sales tend to decline, with an average drop of 16% after one year and accelerating to 25% after two years and 36% after the third year.
- Loss of leads and sales: Advertising is a key driver of lead generation and sales. Stopping advertising can lead to a decrease in both, ultimately impacting your bottom line.
- Difficult recovery: Regaining lost brand equity and market share after stopping advertising is more difficult and expensive than maintaining it with consistent investment.
Weakened brand health and loyalty:
- Diminished trust and loyalty. Silence from a brand can signal to customers that something is wrong, leading to a loss of trust and potentially prompting them to turn to competitors to meet their needs.
- Reduced customer engagement. Consistent advertising and communication help build stronger relationships with existing customers and fosters loyalty.
- Damage to brand image: Over time, a lack of advertising can damage the perception of your brand, making it harder to attract new customers and retain existing ones.
Increased difficulty in recovery:
- Longer runway to ROI: It takes time to generate a return-on-investment on your marketing. If you stop advertising, you lose the momentum you’ve built, and it will take longer to see results when you restart your efforts.
- Higher re-entry costs: When you decide to resume advertising, you’ll need to invest more resources to rebuild the brand presence and awareness you’ve lost.
Some examples of businesses that experienced negative results after reducing their advertising efforts include McDonalds, Coca-Cola, and Toys “R” Us.
During the 1990-91 recession, McDonald’s reduced its advertising budget while competitors including Pizza Hut and Taco Bell continued their marketing. This led to significant sales increases for competitors while McDonald’s sales declined.
Coca-Cola, in 2020, significantly cut its advertising investment, resulting in an 11% drop in revenues while Pepsi, which maintained its spending, saw a 5% increase.
Toys “R” Us drastically cut marketing budgets instead of investing in innovative strategies, hindering communication with consumers and contributing to decreased store visits and weakened brand loyalty, before filing for bankruptcy.
In summary, while cutting advertising investments might offer short-term savings, the long-term consequences of decreased brand awareness, declining sales, and weakened customer relationships can be detrimental to a business’ health and growth.
If you’d like to learn more about the value of consistent advertising, please give us a call or email us here at Sentinel Solutions. We are experts in multimedia marketing and can help you to effectively invest in marketing and prove your return on investment.
Give us a call if we can help at 603-352-5896 or e-mail to Advertising@SentinelDigitalSolutions.com. We’re here to help you succeed.
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