IPA Warns Against Cutting Marketing Budgets In Tough Economic Climate

The IPA has released a report which warns that if businesses cut their marketing budgets in the event of an economic downturn, they risk significantly damaging their brands.

Advertising in a Downturn says that budget reductions could lead to a loss of market share, a decline in brand image and long-term sales damage.

It was based on research from Millward Brown, Data2Decisions and Malik PIMS, which showed that brands that stop spending on communications for a period of six months or more suffered considerably in the key areas of brand usage and brand image.

According to the IPA, the risk is greater in some advertiser categories than others. Those in price-driven markets, such as motor fuel and mineral water, are more susceptible to share loss when cutting budgets.

By contrast, brands in less price-focused categories, such as luxury cars, tend to be more resilient to reductions in marketing spend.

The report also found that following a budget cut, a brand will continue to benefit from marketing investment made in the previous few years, but long-term harm to the business will be more significant.

The IPA has sought to discourage businesses from other common downturn behaviours, such as diverting communications cash into price promotions, warning that such strategies often lead to losses in the longer term.

It concluded that brand owners should maintain share of voice at or above share of market during a downturn, stressing that the long-term benefits are even greater if other brands are cutting budgets.