Marketing In a Downturn
By Robyn Sachs, President & CEO, RMR & Associates, Inc.
There’s talk of a recession on the street and at the (virtual) office. Everyone has less money to spend. What were once considered necessities are now luxuries. What was once growth is now survival. And anyone with any sense is slashing their marketing budget.
Wrong. Absolutely wrong. In my experience, when your marketing budget is correctly spent, you can generate even greater return during lean economic times than during prosperous ones. You could even gain a permanent market advantage. So, before you panic, read on for three reasons now is the time to double down on your marketing efforts.
- Marketing works harder during a recession
It’s true. The brave souls who stick to their advertising guns during a recession can gain even greater sales advantages than during easier times.
Let’s look at it historically. A McGraw-Hill Research study of business-to-business advertisers, for example, showed that companies that maintained or increased their ad budgets during the 1981-82 recession reaped an eventual advantage of 256% higher sales over companies that cut spending.
A similar study by Meldrum and Fewsmith, Inc. about the 1974-75 recession reinforced this finding. And a study by the Center for Research & Development showed that aggressive recessionary advertisers nabbed 4.5 times the market share gain of their timid competitors.
Want more proof? Kellogg doubled its advertising budget during the Great Depression. This strategy led to a nearly 30% growth in profits, and the company surpassed Post to become the market leader – a position it held for decades. Also consider Toyota, which bucked competitors by not decreasing ad spending during the 1974-75 recession and became the top import in 1976.
When you think about it, it makes sense: In a recession, there’s less market activity. So who’s going to get noticed? The companies that make the most noise. An economic downturn could be your single greatest opportunity to use marketing communications for short- or long-term gains.
- Marketing now could give you an advantage forever
In the 1930’s, during the depths of the Great Depression, a market category leader had the fortitude to not only maintain its commitment to ad spending, but to increase it by 53% in 1930 over the prior year. Its name: Lucky Strike.
Guess what became the No. 1 cigarette brand in the U.S. in the following years and continued its strong performance for nearly 40 years? Lucky Strike. The fact is, it’s much easier — and more cost-effective — to maintain advertising momentum than it is to try to regain it after you’ve lost it. Smart, targeted advertising while the market is down can give you an edge you’ll never relinquish. Remember the companies we mentioned earlier that sustained their ad budgets through the 1981-82 recession? In 1985, after the economy had recovered, their share advantage over their rivals was still growing.
- Marketing works. Anytime. Anyplace.
Let’s not let all of this talk about the economy obscure one basic fact: In good times and in bad, in healthy markets and in ailing ones, advertising works. That’s something that advertisers have always known, even if they couldn’t quantify it. But now there’s solid proof.
Sidney Schoeffler developed an accurate and comparable calculation that showed heavy advertisers outperform low advertisers. The Strategic Planning Institute conducted similar studies that observed how advertising impacts a product’s “perceived quality” to customers. The researchers then analyzed the impact that had on relative market share and price. Ultimately, they were able to actually measure the real profits generated by advertising. “Perceived quality” was found to be the most important factor in determining market share and profitability.
The results: Brands that advertised much more than their competitors had average returns on investment of 30.5%, while brands that advertised much less and focused on promotions averaged only 18.1% returns. How’s that for strength in numbers?
So, if you’re looking for a silver lining in today’s economic gloom, it’s this: The looming recession has handed you a golden opportunity. Use it — and seek out agency partners that know how to make marketing pay its own way. You’ll do best with an agency that dares to hold itself accountable for producing results.