What really happens when brands stop advertising

John Bradley and Carrie Bradley explain why a study on the impact of cutting ads can't be applied equally to all brands.

By John Bradley and Carrie Bradley

The world of advertising effectiveness research has been, and still is, in a state of great excitement following the Ehrenberg-Bass Institute for Marketing Science (home of Byron Sharp) publishing a study that poses a CFO’s favourite question.

“What happens to sales when brands stop advertising?”

The paper starts with a quote from the original godfather of advertising effectiveness, the late Simon Broadbent: “The sales of a brand are like the height at which an airplane flies. Advertising spend is like its engines: while the engines are running, everything is fine, but, when the engines stop, the descent eventually starts.”

The key word in Broadbent’s quote is, of course, “eventually,” and here lies the nub of Ehrenberg-Bass’s work: defining how long “eventually” is and by how much do sales decline.

To answer this question, they impressively managed to get the sales data on 57 Australian brands of varying sizes, sales trajectories and categories over a 10-year period, each one of which had stopped advertising at some point during that timeframe.

With a headline like, “on average, sales fell 16% after one year, and 25% after two years,” it’s no wonder that’s been the focus of the news. It’s compelling stuff – the airplanes did indeed fall from the sky! – but the antennae of past attendees at our Data Analytics & Graphics Masterclasses will be twitching at the words “on average” – the most misunderstood and misused term in the marketing lexicon.

The first problem in taking the average sales increase/decrease experienced by all 57 brands becomes apparent when looking at the spread of those sales changes, which range from a decrease of around 97% to an increase of 80%. Quite a spread! So, while the average may be a decline of 16%, most brands had vastly different outcomes from that, positive and negative. So, basically anything can happen.

The second problem comes with averaging percentage changes across brands of very different sizes: let’s say Brand A sells 90 units over the period and Brand B 10 units. If they both stop advertising, sales of Brand A could increase by 8%, while those of Brand B decline by 24% – making the average sales change -16% eventual though the actual sales change of Brands A+B is a 4.8% increase. You get the problem.

If the sales changes had been weighted by the sizes of the brands, the outcome would have been a lot less headline-grabbing than “SALES DECLINE BY 16%!!” And, indeed, it turns out that larger brands tended to do better than smaller brands when spend was cut, as the authors admit deep into the paper, “Big brands appeared somewhat stable after one to two years without advertising.” This is because, “bigger brands’ greater mental and physical availability will likely better insulate sales from decline after stopping advertising compared to smaller brands.”

Indeed, this makes total logical sense, but how often does this finding guide portfolio decisions about on which brands’ budgets should be cut? Our consulting experience tells us that, overwhelmingly, it is the small brands that are cut first, while the Crown Jewels are protected for as long as possible. There can be some good reasons behind this, but – and it is a big but – if you have a one-year financial hole to fill, you are better able to fill it while minimizing adverse consequences for the future by taking the money from your biggest, healthiest brands.

It seems that Simon Broadbent’s quote needs updating. All brands aren’t identikit airplanes: some are majestic condors, soaring effortlessly on their mental and physical availability thermals, while others are Canadian geese, straining every sinew to get and stay airborne, and to who the slightest mishap is disaster.

Of course, Condors cannot stay aloft forever. The word “eventually” catches up with the biggest of unsupported brands at some time or other. But, if cutting adspend is an endlessly recurring annual activity, your problem isn’t choosing which brands to cut, it’s a lack of internal honesty in budget-setting, and even Byron Sharp can’t get you out of that hole.

John Bradley and Carrie Bradley are managing partners of The Bradley Group.