Procter & Gamble versus Coca-Cola
The Marketing Week website recently published an analysis comparing the approach of two multi-national concerns, the consumer goods giant Procter & Gamble and food company Coca-Cola. Both companies are on the so-called "Fortune 500" list and both chose completely different paths in 2020.
As Jon Moeller, COO and CEO-elect of Procter & Gamble states, the strategy of the company was, similar to previous crises, "to push forward, not to pull back" and to "come out of the crisis stronger than we went into it." And so, while in the USA overall investment in marketing dropped by 10% compared to the previous year, Procter & Gamble decided not only to fulfil their original budget for the given year, but even to exceed it.
On the other hand, Coca-Cola was one of the companies that decided, in view of the expected drop in sales, to reduce their marketing budget and volume. Although the company cited numerous reasons for this decision, one being postponement of the Olympic Games in Tokio, the general view is that it was primarily the Covid crisis and changes in consumer behaviour which led to Coca-Cola reducing its marketing spending in 2020 by 35%.
And what is the result? Analyses state that in 2020, when compared to the previous year and despite the crisis, Procter & Gamble managed to increase its annual revenue by 4%, while Coca-Cola experienced a drop in net revenue of 11%. And what is even worse, neglected marketing gives other companies in the sector a competitive advantage. In the case of Coca-Cola, its rival PepsiCo increased its revenue by 5%.
What do the stats say?
The above numbers are no big surprise. As stated by Marketing Science, quoting the results of a 2018 Ehrenberg-Bass Institute survey, not even established brands can afford to neglect marketing. The researchers' analysis of companies that totally ceased all marketing activities revealed that if a company completely stops advertising for one year, the resulting drop in sales averages 16%. In the event of a two-year pause, the decrease is 25%. Although the figures show established companies with big sales and a strong brand are less affected than non-established companies, there is still a direct correlation between reduced marketing budgets and drops in revenue. Even if a company decides to pause advertising for just one year, the analysis shows that getting back to the previous sales numbers then takes several years.
Crisis as an opportunity
Analysis of the strategies of Procter & Gamble and Coca-Cola and the Ehrenberg-Bass Institute survey clearly shows that being cornered by a crisis and cutting marketing budgets may in the long run be detrimental to a company. The opposite is also true: if a company sees a crisis as an opportunity and exploits the fact its competitors are cutting their marketing budgets, it may, by increasing its marketing budget, achieve not only a bigger market share but also increased revenue.
-mm-
Sources:
https://www.marketingweek.com/mark-ritson-pg-coke-dont-cut-ad-spend/
https://www.marketingscience.info/when-brands-stop-advertising/