Recession Facts on the Value of Marketing During the Recession
I know anxiety is increasing for many of you as the economy falters. I know it is tempting to begin the process of reducing your expenses. And I know that marketing is one of those areas that typically gets the brunt of those budget cuts. I understand … but you must resist!
Sure, you should always do your best to maximize your marketing resources. That’s true, even in a good economy. But history shows us that now is not the time to slow down your marketing efforts.
Here are some of the facts from past recessions:
1970 recession year – The American Business Press (ABP) and Meldrum & Fewsmith study showed that “sales and profits can be sustained and increased in recession years and [in the years] immediately followed by those who are willing to maintain an aggressive marketing stance, while others adopt the philosophy of cutting back on promotional efforts when sales seem harder to come by “1.
1974-1975 years of recession – The 1979 ABP / Meldurm & Fewsmith study covering 1974/1975 and its post-recession years found that “companies that did not cut marketing expenses experienced higher sales and net income during those two years and the following two years than the companies that cut in one or the other both years of recession. ” 2
1981-1982 recession years McGraw-Hill Research’s Advertising Performance Laboratory studied recessions in the United States. After the 1981-1982 recessions, he analyzed the performance of some 600 industrial companies during that economic recession. It found that “business-to-business companies that maintained or increased their marketing expenses during the 1981-1982 recession averaged significantly higher sales growth both during the recession and over the next three years than those that eliminated or reduced marketing. 3
Cahners and the Strategic Planning Institute (SPI) produced their report, “Advertising in the Media When Your Market is in Recession.” He revealed: “During a recession period, average companies experience a slightly lower rate of return compared to normal times. However, expansion times do not generate a higher level of profit than normal periods as might be expected.” . This phenomenon was explained by an analysis of changes in market share.
“During periods of recession,” the Cahners / SPI report said, “these companies tended to gain greater market share. The underlying reason is that competitors, especially smaller fringes, are less willing or less able to defend themselves. of aggressive firms “. The study then noted that companies that increased media advertising spending during the recession period “gained an average of 1.5 market share points.” 4
Years of recession 1990-1991 – Management Review asked AMA member firms about spending during the 1990-1991 recession. “Fortune follows the brave,” he announced, noting that the data showed that most companies that increased their marketing budgets enjoyed gains in market share. Among the magazine sample, 15 percent reported that advertising budgets “dropped significantly.” Advertising dropped “somewhat” by 29 percent. “The keys to gaining market share in a recession,” Management Review concluded, “appear to be spending money and increasing staff. Companies that increased their budgets and hired new people were twice as likely to gain market share. 5
Beyond the statistics, why might it be more important than ever to trade despite the economic downturn? The idea that marketing plays a more critical role now than it did during previous recessions should be seriously considered. While the role of marketing was once more informative than brand identity building, and considering that never again has the clutter factor been so great, relationships between customers and brands are critical. Relationship marketing has risen to the top of effective marketing campaigns as a means of maintaining an appropriate level of engagement in purchase loyalty. Marketing serves to foster and maintain relationships between the consumer and the brand. 6
The effect on earnings. From the Harvard Business Review, “Advertising as a Tool Against the Recession,” emerges the effect of cutting advertising on bottom line results. “The rationale that a company can afford a cut in advertising because everyone else is cutting [is fallacious]. Rather than wait for business to return to normal, senior executives should seize the opportunity rival companies are creating for them. The company brave enough to stay in the fight when everyone else is playing it safe can cause a dramatic shift in market position. “Further, the article notes,” Advertising should not be viewed as a loss of profit, but rather as a contribution to earnings. , not as an unavoidable expense but as a means to achieve the objectives. Advertising budgets should be related to company goals rather than last year’s sales or next year’s promises. “7
“How Recession Advertising Affects Sales”, American Business Press, Inc., 1979
ABP / Meldrum & Fewsmith Study, 1979
McGraw-Hill Research. Advertising Performance Laboratory Report 5262 New York: McGraw-Hill, 1986.
Kijewski, Dr. Valerie. “Media Advertising When Your Market Is In Recession,” Cahners Advertising Research Report. Institute for Strategic Planning, 1982
Greenburg, Eric Rolfe. “Fortune Follows the Brave”, Management Review, January 1993
Khermouch, Gerry. “Why Advertising Matters More Than Ever”, Business Week, August 2001
Dhalla, Nairman K. “Advertising as a tool against the recession”, Harvard Business Review, January-February. 1980