Recession Marketing Strategies
The dreaded "R" word. Are we or arent we
in a recession? How long will the recession last? What is
a recession anyway? If we are in recession, should you cancel
your marketing plans, batten down the hatches, hunker down
and ride it out? Or should you beef up your marketing efforts
and try to get as much business as possible? These are questions
that businesses have been asking for decades.
Traditionally a recession is defined as two consecutive
quarters of decreasing Gross Domestic Product, which measures
all the goods and services produced by capital and workers
located in the U.S. regardless of ownership. In addition,
during such a period the unemployment rate goes up and consumer
confidence goes down. The defining agency is a private entity
called the National Bureau of Economic Research, which decides
whether were in a recession based on declines in a variety
of economic measures. So, is this a recession? It very well
could be. And if it is, it will historically last for about
a year. The U.S. has experienced nine recessions since World
War II, which means weve lived in recessionary times
one year out of every six. We should be used to recessions,
but the mere mention of the word in any official capacity
sends shivers up the spine of even the toughest businessperson.
The good news about a recession economy is that customers
spend more at the end of each of our recessions, on average
9 percent more, that they had spent at the beginning, according
to Philip Geier, Chairman Emeritus, Interpublic Group, a major,
international advertising agency.
-more-History also reveals that businesses that recognized
the fact that growth does occur during recessions and took
advantage of it, were able to make gains in their market share
despite economic hard times. With media rates softening and
competitors sitting tight and cutting their marketing budgets,
an aggressive business can experience great strides in a recession.
Over the years hundreds of studies have been conducted to
prove companies should maintain advertising during a recession.
In the 1920s advertising executive Roland S. Vaile tracked
200 companies through the recession of 1923. He reported in
the April 1927 issue of the Harvard Business Review that the
biggest sales increases throughout the period were rung up
by companies that advertised the most. After World War II,
Buchen Advertising, Inc. decided to plot the sales of a large
number of advertisers through successive recessions. In 1947,
it began measuring the annual advertising expenditures of
each company. When they correlated the figures with sales
and profit trends before, during and after the recessions
of 1949, 1954, 1958 and 1961, they found that almost without
exception sales and profits dropped off at companies that
cut back on advertising. Their studies also revealed that
after the recessions ended, those companies continued to lag
behind the ones that had maintained their advertising budgets.
In 1979 another study by ABP/Meldrum & Fewsmith, covering
the recession of 1974-75 and post-recession years, showed
similar findings. They found that companies which did
not cut advertising expenditures during the recession years
(1974-1975), experienced higher sales and net income during
those two years and the two years following than companies
which cut ad budgets in either or both recession years.
The findings of six more recession studies to date by the
group present formidable evidence that cutting advertising
in times of economic downturns can result in both immediate
and long-term negative effects on sales and profit levels.
Meldrum & Fewsmiths former Senior VP, J. Welsey
Rosberg reports I have yet to see any study that proves
timidity is the route to success. Studies consistently have
proven that companies that have the intelligence and guts
to maintain or increase their overall marketing and advertising
efforts in times of business downturns will get the edge on
their timid competitors."
There are many examples of businesses benefiting from increased
ad budgeting in a recession. A MarketSense study during the
1989-91 recessionary period shows brands such as Jif Peanut
Butter and Kraft Salad Dressing increased their advertising
and experienced sales growth of 57% and 70% respectively.
During that time, most of the beer industry cut budgets, but
Coors Light and Bud Light increased theirs and saw sales jump
15% and 16% respectively. Among fast food chains, Pizza Hut
sales rose 61% and Taco Bell's 40% thanks to strong advertising
support, reducing McDonald's sales by some 28% MarketSense
concluded the study by reporting. "The best strategy
for coping with a recession is balanced exploitation of ad
spending for long-term consumer motivation, plus promotion
for short term sales boosts."
Here are some strategies you can use to help your business
thrive in recession economy:
- Don't cut your advertising budget, increase it. Let
your competition cut theirs.
When you increase your spending, you increase your share
of voice. If your competitors cut back, your message grows
- Develop a strategic marketing plan so you don't waste
money advertising the wrong message in the wrong place to
the wrong audience.
- Reassure your customers. Implement marketing strategies
that allow buyers to feel they are minimizing risk by doing
business with you.
- Achieve greater media efficiency by taking advantage
of softer rates and special promotions.
- Start sponsoring. This type of awareness advertising
gives your business valuable exposure to targeted, core
- Keep your friends. You know who your loyal customers
are. Keep in touch with them and let them know what you
have to offer.
- Maintain continuity to sustain awareness. Advertising
works cumulatively so you have to remind people frequently
about your brand or they'll forget you.
- Step up public relations efforts. Be sure to maintain
a media presence with smart, effective PR programs.
- Don't "cheapen" your advertising by trying
to save on creative or production costs. Your customers
will notice and worry about quality. This is a time to stress
quality and value.
Rather than being frightened by recession, step up and give
it your best. Be smart and remember this advice from Ed McCabe,
founding partner of Scali, McCabe, Stoves advertising agency:
"All great enterprises move forward in a recession, and
the weaklings move backward. The dumbbells cut back on advertising.
The smart people don't."
Nov 15, 2001