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Recession Marketing Strategies

The dreaded "R" word. Are we or aren’t 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 we’re 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 we’ve 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 1920’s 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 & Fewsmith’s 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 even stronger.
  • 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 audiences.
  • 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

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