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Soft Times Call For Hard Selling: Why Advertising Is a Must

When Times are Bad, You Must Advertise

  • When money shrinks, competition grows.
  • In down times, money is scarce and consumers are cautious where they spend it.
  • That is the time companies need to argue the case for their products more forcefully, and the best way to do that is to advertise.

Not a Time to Retreat

  • When companies retrench during a downturn, advertising is usually one of the first casualties. It should be the last!
  • Whether a cyclical re-adjustment or a full-blown recession, it presents aggressive firms with an opportunity to increase sales, introduce new products, endure brand loyalty and increase market share.
  • In fact, recessions offer companies greater opportunity to build market share than do periods of limited growth or expansion

Why Not?

  • Many companies do not capitalize on this opportunity because they assume consumers, like them, cut back on expenditures during downturns. Historical evidence suggests the opposite.
  • A study by the U.S. Department of Commerce, covering eight recessions from 1948 to 1981, found consumer spending actually increased almost 5% during the period.
  • The reality is, consumers continue spending even through recessions, though a bit more prudently. And, in some cases, consumers curb spending less during economic downturns than during inflationary times!

"When times are good, you should advertise. When times are bad, you must advertise."
American Business Media

When Ads Stop, Consumers Forget

  • According to Cahners Business Information, only 50% of a target audience will remember an ad a day after seeing it; only 10% will remember it after a month.
  • Companies that court consumers through continued, aggressive advertising during a downturn stand to lure them from more timid competitors.
  • The sight of a familiar brand also helps reassure consumers during hard times and thus cement brand loyalty.

"A recession is the best time to advertise. You'll never have a better chance to expand your business."
Inc. Magazine

Long-Term Goals vs. Short-Term Gains

  • In a study of the U.S. recession of 1981-82, McGraw-Hill Research found that business-to-business companies that maintained or increased their advertising expenditures averaged higher sales growth, not only during the recession, but for the three years following.
  • Companies that decreased or eliminated their advertising, saw their sales drop 4% in 1981, 12% in 1982 and 11% in 1983.
  • By 1985, sales of aggressive recession advertisers had risen 256% over those that had not maintained their advertising.

"There are few things as detrimental as a lapse in advertising. Once you let momentum die, you must start from scratch again."
Charles H. Brower, late president, BBDO

Great Enterprises Move Forward in a Recession

  • While all competitors lose sales volume in a downturn, great enterprises move forward by using the recession to increase market share.
  • Savvy marketers know it costs less to maintain market share than to rebuild it once the good times return. For another, the competitive market is traditionally weak in good times, allowing those who invest in advertising to seize market share without reducing short-term profitability.
  • According to the Harvard Business Review, "advertising in an economic downturn should be regarded not as a drain on profits, but as a contributor to profits."

Aggressive Advertisers Gain Market Share

  • Historically over 75% of companies cut ad budgets during a recession because they are unaware of the positive long-term effects that advertising in a recession would have on their competitive position.
  • WPP Group's Center for Research & Development says during a recession, companies that increase their ad budget substantially (50%), typically gain 0.9% in market share. Modest ad increases (10%) typically gain 0.5%
  • In 1991, while a number of brands cut their combined ad dollars by 15.5%, the top 200 raised their total by 6.2%. As a result, they pulled 4.5 times more share than their extremely wary competition.

"All great enterprises move forward in a recession, and the weaklings move back."
Ed McCabe, founding partner, Scali, McCabe, Sloves, Inc.

"I have yet to see any study that proves timidity is the route to success!"
J. Wesley Rosberg, sr.vp, Meldrum & Fewsmith

Cases in Point

  • In the 1930's, Kellogg Foods maintained its advertising during the Great Depression while Post Cereals did not. As a result, Kellogg gained a domination of the dry cereal market that lasted half a century.
  • During WWII, both Ford and GM stopped producing cars and started making tanks. Ford, then the nation's #1 automaker, cut back on advertising its cars; General Motors continued advertising. At war's end, GM emerged as the number one auto maker, a position it held until 1999. It took Ford 54 years to reclaim the title!

Learning from the Past

  • During the 1974-75 recession, Stanley Works, one of the world's largest manufacturers of hand tools, launched the biggest ad campaign in its history, aimed at consumers rather than businesses. While its industrial tool market fell sharply, its consumer business more than compensated for the shortfall. Its hand tool business since continued to grow at a rate of 8% annually, twice that of its competitors.
  • During the same recession, Chevrolet increased advertising for fuel-saving economy vehicles. Market share rose 2%. Ford, on the other hand, cut is advertising by 14% and five years later had still not regained lost market share!

Remember, In Good Times, You Should Advertise In Bad Times,You MUST Advertise!

"In times like these, consumers don't stop spending money. They just spend it more carefully, and only with companies and products that they are most comfortable with."
John Kypriotakis, president, Lysis International