Why Advertise More During a Downturn
We live in an unprecedented time. Whole industries are facing extreme challenges and millions of people will likely be out of work for a period of time. Most economists and media talking heads are predicting a downturn on the horizon for the U.S. and global economy. It may sound quite counter-intuitive, but this is the time to increase your marketing budget.
There have been as many as 47 recessions in the United States dating back to the mid-1800s. In a recession, the first expense dollar that a company, regardless of the size, typically cuts is the marketing and advertising budget. Following the recession in 2008, ad spending dropped by 13% in the U.S. However, there are studies going back nearly a century that show that advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterward.
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McGraw-Hill Research conducted a study of the U.S. recession from 1980-1985. Of the 600 companies analyzed, the ones that continued to advertise during the early 80’s recession experienced 256% growth by 1985 compared to their competitors that eliminated or decreased marketing spending.
In the 1990 recession, Pizza Hut and Taco Bell snuck up on McDonald’s when the Golden Arches dropped its advertising and promotion budget. Pizza Hut grew sales by 61%, Taco Bell sales were up by 40% while McDonald’s sales declined by 28%. Coincidence? Not.
Companies that advertised during a recession saw the highest growth in sales and net income during the recession and the two years that followed. If companies cut deeply into advertising and marketing budgets in a down period, the cost to retain customers once the economy turns may cost four or five times as much as the cuts saved. Here are even more reasons why you should advertise in a bad economy:
Media is Cheap
We are already seeing it. Google PPC and Facebook spend is down. There are fewer advertisers taking up inventory which means fewer competitors bidding for the same positions. It means that the media is cheaper and will continue to get cheaper at least for a while. Ad inventory still has to be sold. TV, radio, online publishers, and out of home media still has budgets to hit. This allows savvy advertisers to saturate a market, reposition a brand, and/or introduce a new product at record low media costs.
Fill The Void That Big Spenders Left
During a booming economy, big brands have big budgets to play fast and loose with their money, so they’re not as discerning. The money is no object approach that makes media more expensive for smaller businesses to try and compete. As big brands reduce their spending, there is no clutter to cut through. Small businesses have an opportunity to talk openly and personally about a product or service. Once the recession is over, you’ll have gained a whole new customer base that will be difficult (and expensive) for competitors to win back.
Brand’s Can Demonstrate Leadership
Brands can project to consumers what we need most now … leadership, confidence, stability and even entertainment. While we’d normally look to our government to provide this, we’ll remember the brands that provide a voice during challenging times. We’ll forget the brands that go dark. Promotional offers, inspiring content and on-going messaging convey feelings of authenticity, strength, and security.
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Take Advantage of Competitors’ Fears
Most small businesses have a limited advertising budget. During a recession, it’s easy to make up some of those dollars by holding back on advertising. But all that really does is open up the marketplace for more savvy competitors to step in unencumbered and build relationships with your customers at their most vulnerable times. This also represents a significant opportunity for a brand to reposition itself or introduce a new product without competition.
Seize the Moment
Smart brands find a way to remain relevant and in touch with their audiences during challenging economic times. Now, with millions of consumers working from home, shopping online, and communicating almost exclusively through the digital channels, advertisers have new opportunities to meet their customers where they are, show empathy, and connect on deeper emotional level. Only those who adapt to the ever-changing marketing environment will survive and thrive.
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There is simply no reason to panic and pull the advertising ripcord. We’re better equipped with data and tools to be more agile and plan for a shift in the economy. Business owners and marketers should be spending time adjusting their ad messages and exploring short-term price incentives to show understanding of their customers’ needs. We’re already seeing a shift with auto manufacturers. Hyundai, Ford and Chevrolet moved quickly to offer car buyers no payments for three and up to six months. Brands are promoting convenient at-home delivery. While consumers will naturally pull back on unnecessary purchases for the time being, auto leases will come up, we need gas, Wi-Fi, and yes, toilet paper. Product demand is shifting and brands are shifting as well. Louis Vuitton is transitioning from production of perfumes to sanitizers. An expanding list of restaurants is offering free delivery. Supermarkets are allowing specific times for shoppers 60+. Brands are adapting to a new normal and your advertising should not lag behind.
In every significant market change, there will be winners and losers. History has shown that those brands that maintain or even increase their ad budget can get a long-lasting boost in sales and market share. Consumers may not be spending like they were before, but they do spend. You only need to figure out where and how. This is where an agile marketing agency can offer significant value … helping brands and business owners adjust quickly to the new normal and develop relationships that will pay dividends.
While coaches and sports fans believe that defense wins championships, we marketers believe that offense builds market-share during a recession and wallet-share thereafter. When Sam Walton, the founder of Wal-Mart, was asked what he thought about a recession, he responded: “I thought about it and decided not to participate.”