Sound reasons for advertising, even in a recession
By Darel La Prade
With the recession deepening, our sales teams are hearing a common refrain more
and more often – clients or would-be clients claiming they can’t afford to
advertise.
As an objection, it seems logical enough, at least at first glance – consumers
are cutting their spending, so a business should cut its advertising commensurately.
For businesses seeking to survive, or thrive, during an economic down-turn,
eliminating advertising is a serious mistake. In fact, most research on the
topic suggests advertising in difficult economic times can actually provide a
significant opportunity to capture market share:
* In a study of
* Businesses that aggressively
increased media advertising expenditures during the last recession (just 25% of
all businesses) increased their market share 2 1/2 times the average for
all businesses in the post-recession period.
* Another study documented a 1.5
point increase in market share among businesses increasing ad spending during recessionary periods. By contrast, during expansion periods, 80 percent
of businesses increased advertising budgets with no improvement in market
share, since most competitors did the same thing.
In other
words, cutting an advertising budget in a recession is actually
counter-productive. Advertising now is, in reality, one of the best ways to
weather the storm.
Cost-Effective Ways a Business Can Make
Advertising Work in a Recession
* Placing
advertising in complimentary media can save money and produce results. For
example, combination ads in multiple newspapers, supported by a sensible
internet campaign on newszap.com, can reduce costs and reach thousands of extra
readers.
* Paying attention to trends and taking
advantage of how these trends shape our media can pay big dividends during a
recession. In our company, the conversion of our newspapers to a compact format
provides wary advertisers with just this sort of opportunity to take advantage
of a new approach in print advertising that can positively affect the
bottom-line.
* Don’t go black or drop out of sight.
In an attempt to optimize spending, some advertisers may decide to spend for
advertising in waves figuring that periodic spending in bursts is the key to
driving sales. This is not the case. Other advertisers will simply discontinue
their advertising – another strategy that ends up costing more money – in lost
sales – than it saves in the long-run. If you reduce your advertising budget,
avoid spending the rest of it in bursts, because continuous spending even at
lower levels is more effective.
The bottom-line is that advertising during a recession
presents a business with unique opportunities to solidify an existing customer
base while building new customers. By maintaining a consistent advertising
campaign, a recession can give a business a chance to make serious in-roads
against its competitors that may have cut back advertising.
Excuses for not Advertising
The three most commonly mentioned excuses for not advertising during a
recession are these:
*
People do not have money, so our advertising would be wasted
* We can
afford to slash, since competitors are doing the same
* The money saved on advertising helps
our profits.
People
do not have the money, so our advertising would be wasted: Studies of every recession since
1940 indicate that recessions have little adverse impact on total employment
(the size of the employed labor force has never declined by more than 2
percent) and, similarly, little adverse impact on disposable income. (Real
disposable personal income per capita has never declined by more than 2 percent.)
The pessimism among advertisers is mainly myth, hardly warranted by facts.
Because families start curtailing their purchases during a recession, not less
but more advertising is required to prevent consumption from eroding.
We can afford to slash, since
competitors are doing the same: Equally fallacious is the
rationale that a company can afford reducing its advertising spending because
everybody else is cutting back. Rather than waiting for business to return to
normal, owners and managers should cash in on the opportunity that the rival
companies are creating for them. The company courageous enough to stay in and
fight when everyone else is playing safe can bring about a dramatic improvement
in market position. Some progressive small companies have recognized this.
Instead of withdrawing “into their shells” and waiting for something to happen,
they expand their programs during slowdowns. As a result, they better position
themselves to benefit when the eventual upturn occurs.
The money saved on advertising helps
our profits: Even more tenuous is this excuse: Advertising
should be cut to help sagging profits. Attempts to retain the same profit
margin during a recession, as a business enjoyed prior to the recession,
actually costs more in the long run than continuing to advertise. There is
likely to be a fast erosion of the customer-base that the advertiser has taken
years, even decades, to build. It is nearly impossible to regain the old
customers once they have switched to competitive businesses.
***
Recognition decreases when advertising decreases. But an increase in
advertising, especially during a recession when others are cutting back, causes
an increase in recognition. The bottom-line is our clients need to advertise
more now than ever before.