Advertising payback - Brands in a downturn

January 2009

Economic research into UK consumers’ willingness to pay for brands shows a significant fall through the early stages of the downturn.

The study updates previous PwC research, Advertising payback: is TV advertising still effective? (2007), and confirms the continued positive payback from TV advertising but, more importantly, it sheds useful light on brand winners and losers in a recession.

The report covers consumer preferences, changes in consumer’s willingness to pay for a brand and changes in advertising expenditure in seven UK categories: juices, breakfast cereals, shampoos, three car categories and also car insurance, through a period of falling consumer confidence and advertiser spending

Key findings are:

• Brand leaders remain brand leaders – they do relatively well providing they maintain their advertising expenditure relative to competitors. This is true from shampoos to prestige cars.
• Basic "value" brands have also done relatively well – from juices to cars.
• More expensive brands that are not brand leaders do worst.
• But it’s not all about price – there is evidence that increased interest in “value” may make “25% extra” as attractive as “25% off”.
• There is also evidence that risk avoidance has become more important. In cars and car insurance there is increased desire for "protection" – warranties, cover etc. – reflecting an increased need for consumers to limit downside risks.

This analysis, which involves an in-depth examination of consumer behaviour to find the value that consumers place on brands using cutting edge quantitative consumer research techniques, is invaluable for companies planning their response to changing market conditions.

The study shows that competition does not disappear in a downturn. Furthermore, consumers are searching for better value and this does not mean that all they want is lower prices.

The research was commissioned by Thinkbox, the TV marketing body for the main UK commercial broadcasters.