Advertising in Recession

Some advertisers tend to pull back on advertising during economic downturn. I see several advertisers are contemplating to cut down on advertising and few have already done so. This knee-jerk reaction is natural amid news of slowing economy, job losses, turmoil in auto sector and sub-par (read sub-prime) performance by the financial sector. I believe that retrenchment decisions are largely influenced by emotional and psychological stimuli from the external environment. I would digress momentarily to share a joke with you in support of the above premise. A friend, Ahad Rasheed, sent this joke and I quote with some additions.

 

An old man used to sell hot dogs. His eyesight was weak so he neither read newspapers nor watched TV. All he did was selling hot dogs and he sold lots of them and had a good income. Old man son graduates from a business school and joins him in business. He tells his father that economy is not doing well and he should save some cash, as Cash is King! The old man started buying fewer buns and meat, closed his shop before sunset to save on Hydro bills and consequently his sales went down. His brother retired from a government job and had seen the old man prosper by selling hot dogs. So he wanted to invest in hot dog business too. He seeks old man advice. Guess what, the old man advised; the economy is slow and hot dog sales are down. It is recession!

 

Recession is an economic phase, which does necessitate reconsidering marketing and advertising strategies. However, this does not have to end up in cutting on the marketing investments and advertising is one of them. It is convenient for those companies to trim down advertising that consider advertising an expense. It is easy because advertising has a lagged effect and provides momentum to sales, so the adverse effect of curtailing advertising is not apparent soon. The million-dollar question here is, should companies decrease, maintain or increase advertising during economic slowdown? The answer is it depends. Yes, it depends on the company’s objective; whether it is to create brand awareness, brand recall, top of mind or a tactical push via sales discount for the consumers to buy its brand. It depends on share of voice (SOV) and market share objectives.  I think whatever the objectives are, in most of the cases; advertising is a must-have investment for business growth and profitability.

 

When economy is stable or growing there are many players in the market that are aggressively advertising and selling their products and services. It creates noise, lots of noise and clutter. Thus marketers fight for the SOV to stay on top of minds of consumers because if other factors are constant, the SOV drives the market share. In slower economic conditions, average companies drop off the advertising landscape so there is less noise in the market. It is prudent then to continue advertising for increasing market share. If marketers even maintain their ad spend they will get noticed more and increase their market share and sales because there is less noise, clutter and competition. I suggest that marketers should increase the ad spend to dominate and grab even larger share of the market, for both short and long term benefits.

 

Studies have shown that the firms that maintained or increased advertising during recession averaged higher sales growth, both during and following the recession than those that eliminated or decreased advertising. In an analysis of the 1990-91 recession, Penton Research Services found that better performing businesses focused on a strong marketing program to solidify their customer base, take business away from less aggressive competitors, and position themselves for growth during recovery.[i]

 

Moreover, Seth Godin in his book Purple Cow talks about being remarkable and stand out to succeed in the emerging business world. Recession provides the opportunity to savvy marketers for realigning their marketing objectives for developing relevant programs and creative ad campaigns and to be remarkable by advertising aggressively in a less cluttered marketplace. Isn’t that easy?

 

You are thinking if sales are slow and advertising is maintained or increased, it will decrease profitability. Well, in good times organizations acquire unnecessary fat (overheads) and get bloated. Trim down the extra fat and get cost saving from there. There are many heads of account that could be evaluated for costs reduction for maintaining profitability. In conclusion, I recommend if everyone zigs you zag. Be different, be remarkable, know your customer touch points / exposures and connect with them via advertising aggressively for business growth and profitability.

[i] MACTECH, The journal of Macintosh technology


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About Fazal Siddiqi
Fazal Siddiqi Writes on current marketing, branding, communications, diversity and socio-economic opportunities & challenges. He lives in Canada and works for OPAL Marketing Group.

5 Responses to Advertising in Recession

  1. Dan Waldron says:

    Hello.

    I like your site and wanted to know if you would be interested in exchanging blogroll links.

    Thanks in advance

  2. Pingback: Advertising in Recession « ANUBIS

  3. anubis says:

    Great article.

  4. Ajith B Anand says:

    Very motivational article.

  5. Fazal Siddiqi says:

    Thank you Ajith.

    Cheers,

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