Consumers Think Fewer Ads Spell Trouble

May 19, 2009

This article is included in these additional categories:

Analytics, Automated & MarTech | Automotive | Brand Metrics | CPG & FMCG | Financial Services | Retail & E-Commerce

More than 48% of US adults believe that a lack of advertising by a retail store, bank or auto dealership during a recession indicates that the business is likely struggling, according to a study from Ad-ology Research. At the same time, a large majority of consumers think businesses that continue to advertise are competitive and/or committed to doing business.

The research study “Advertising’s Impact in a Soft Economy,” which was undertaken to determine whether stopping advertising during the recession could harm a business, takes an in-depth look at specific consumer perceptions regarding firms that continue to advertise in the current economy, as well as those that do not.

Not Advertising Can Harm Brand

Advertising appears to play a key role in consumers’ view of how a business is doing, the study found. By not advertising, businesses may be sending a warning signal to current and potential customers, Ad-ology said.

For example, when consumers no longer see/hear advertising from an auto dealership during a down economy, 50% say they view the dealership as struggling:

ad-ology-car-dealership-not-advertising-perception-struggling-may-2009.jpg

On the other hand, when a dealership advertises during tough times, 34% believe the dealership to be committed to doing business.

Consumer perception is similar for stores and banks. When advertising ceases among the following businesses, consumers:

  • View their bank as struggling (48%)
  • Believe their bank may not be in business much longer (12%)
  • View their favorite store as struggling (56%)
  • Believe their favorite store not be in business much longer (15%)

However, when the following businesses continue to advertise frequently, consumers:

  • Believe their bank is committed to doing business (43%)
  • View their bank as being competitive (30%)
  • Believe their bank is doing well (10%)
  • Believe their favorite store is committed to doing business (47%)
  • View their favorite store as being competitive (30%)
  • Believe their favorite store is doing well (7%)

“It is critical to advertise in the current economic climate, to maintain long-term positive consumer perception of your brand,” said C. Lee Smith, president and CEO of Ad-ology Research. “Advertising not only assures consumers of a business’ reliability in a soft economy, but it can influence where and what they buy, especially when the ads address concerns about value.”

Ad-Avoidance Tactics

The study also found that consumers report being increasingly busy. Some 31% say they don’t have as much time to shop as they used to, and – at the same time as they say that less ads mean companies are in trouble – many take steps to actively avoid advertising. Among the most common steps taken to avoid ads:

  • 42% change the channel when a commercial comes on:

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  • 30% use software to block banner ads in an internet browser.
  • 28% record TV shows to forward through commercials.
  • 13% listen to satellite radio or an MP3 player in their car.

The report also gauges consumer perceptions about the economy, and provides a detailed look at the various media consumers use to research products, shop and search for the best deals.

Additional study findings:

  • 62% of respondents say media news reports make the economy worse, and 44% say they consume less news now than they did a year ago:

ad-ology-impact-media-news-reports-economy-may-2009.jpg

  • 46% of consumers view a company’s products/services less favorably if that company is announcing layoffs.
  • 40% of consumers use coupons more now than they did a year ago% are somewhat willing to pay more for “green” products that claim to be better for the environment, and 7% are very willing.
  • 46%? are somewhat willing to pay more for “healthy” or “organic” food products, while 7% say they are very willing.
  • A deeply discounted price is the number-one factor that would make consumers more likely to purchase a big-ticket item (more than $1,000).
  • TV, newspaper, direct mail, and internet top local media from which consumers saw/heard an ad within the last 30 days that led them to take action.
  • Store websites rank second only to search engines as the way consumers research products and shop online.

Research from Nielsen IAG earlier this year found that advertising does indeed help ailing financial brands, and echoes these findings from Ad-ology.

About the survey: Ad-ology Research surveyed an online consumer panel of 1,225 adults in a manner that is 98% representative of the adult population of the United States.The survey was fielded from April 24-29, 2009.

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