It is `recession' time and this bad word has suddenly become a reality all over. The marketing industry is the worst-affected among the various business participants. This statement is not disregarding the fact that layoffs are happening, stocks are piling up and salaries are being cut. Come a dull season, and the first thing to get affected is marketing and specifically in marketing it is advertising—the most non-measurable of the 4Ps of marketing. The reason is that recession connotes lower sales and hence lowers the net income. Managements believe that reducing `discretionary expenses' such as that on promotions can be easily made, and there would not be any negative result. This however is not always true when the whole issue is seen from a long-term perspective. The past experiences in the marketing world have taught us that it is always suicidal to cut ad budgets during a recession without any raison d'être. This article deliberates on this issue which often grips the marketing fraternity and also offers reasons as to why it is required to keep the ad budgets on even during a recession. The article will also reiterate what Bruce Burton—the founder of BBDO and a great advertising legend had once said, "in good times, people want to advertise, in bad times, they have to". A study conducted by McGraw-Hill Research on 600 US companies during the period from 1980-1985 concluded that the ones who maintained or even augmented their advertising expenditures during the 1981-82 recession went on to get more sales, both during the recession and for the following three years, in comparison to the ones who reduced their ad expenditure. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that did not keep up their advertising. Another study documented a 1.5% increase in market share among businesses that increased ad spending during recessionary periods. On the contrary during good times, it was found that 80% of all the companies heaved up advertising budgets but this did not result in any major growth in market share, because the competitors also did the same thing.
These results do not suggest that advertising has to go on, no matter whether it is useful or not, whether it pays back or not. These only suggest that advertising should not be seen as just a tool to increase sales of a particular quarter. Also even before the cuts are made, companies should analyze whether the objectives are defined. And whether with a reduced ad budget these objectives would be fulfilled? Companies should do cause and effect studies on those companies who have done a similar thing in the past and then analyze the results of the same. Companies should also analyze whether a cut would allow the competitors to race ahead. If a thorough analysis is not done and companies just go on a cost-cutting spree with recession as a reason, disaster will be the result. Sergio Zyman lampoons such companies like Samsung who in 2001 decided to "eliminate unnecessary costs by seeking ways to reduce travel, traffic, advertising and miscellaneous expenses." When advertising becomes as negligible as other miscellaneous expenses, it is only natural that it gets to see the axe first, when remote signs of a recession appear. As seen here, past recessions are proof that marketers who have taken the approach of "going through this together" with their stakeholders and buyers have done a better job than their competition. It is not for nothing that value-driven brands do better than the premium positioned ones in the tough times. It is an accepted fact that brands that increase advertising during a recession, especially when it is clear that the competition is going for a cutting, will improve their market share and return on investment at lower cost compared to that during the normal times. This is simply indicating that advertising and recession can coexist at the same time. |
