With an economy mired in recession many businesses react by cutting spending. The first casualty is usually marketing. The problem? You need customers – and you need them now. Marketing is more important than ever and cutting back could spell disaster.
The good news? There are still customers out there. You just have to work smarter to attract them. The even better news? History teaches that smart, strategic marketing during economic downturns presents tremendous opportunities for businesses – and pays off.
Lessons From The Past
Historic data demonstrate that aggressive marketing during recessions increases both marketshare and profitability. A slew of studies show these facts hold true for every recession since World War II. The American Association of Advertising Agencies sums up diverse studies spanning the last century in a commissioned report “Advertising in a Recession.” Among the findings are:
- Buchen Advertising tracked advertising dollars versus sales trends before, during and after the recessions of 1949, 1954, 1958 and 1961. Not only did their study find that sales and profits dropped off at companies that cut back on advertising, it also found that, after the recession had ended, these same companies continued to lag behind those that had maintained their ad budgets.
- A jointly-sponsored American Business Press/Meldrum & Fewsmith study of the 1970 recession found “that sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture.” A follow-up 1979 study further revealed “that companies which did not cut advertising expenditures during the 1974-75 recession, experienced higher sales and net income (during those two years and the two years following) than companies which cut in either or both recession years.”
- Following the 1981-82 recession, McGraw-Hill Research’s Laboratory of Advertising Performance reported “that business-to-business firms that maintained or increased their advertising expenditures during the 1981-82 recession averaged significantly higher sales growth during the recession and the following three years than those which eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn’t keep up their advertising.”
- Cahners Publishing Company, with the Strategy Planning Institute, released a report in January 1982 which disclosed that “during recessionary periods, those businesses (who spent more) tended to gain a greater share of market. The underlying reason is that competitors, especially smaller, marginal ones, are less willing or able to defend against aggressive firms.”
- During the mostly-recessionary period from 1980-85 McGraw-Hill found those companies that did not reduce their marketing budgets increased sales 16-80%.
- MarketSense compared 101 brands during the recessionary period 1989-1991 and found that those which increased ad support enjoyed increased sales.
Many of these studies, and others, originated from sources with a vested interest in extolling the benefits of advertising. Even so, the findings are convincing. Statistics only tell part of the story though. Understanding the true potential of recession marketing requires looking beyond mere numbers to consider the consumer. Examining the human impact is central to marketing, and there’s no better way to do so than through the lens of one of the most compelling case studies in marketing history.
“Advertise Your Way Out”
That’s the simple and proven recession survival philosophy of consumer goods manufacturer Procter & Gamble. Their straightforward approach began during the Great Depression when then-P&G president, Richard Deupree, ignored shareholder protest and brazenly ramped up marketing investment as rivals cut back.
While the competition either faded or failed P&G brands remained visible and gained market share. They provided a sense of security in people’s daily lives, just as the company’s vitality offered hope in a shattered economy. Amidst great fear and uncertainty, indelible emotional bonds formed with consumers who found comfort and reassurance in familiar brands they could rely upon. Through the bleak years of the Depression, P&G’s marketing transcended mere promotion by weaving its brands into the cultural fabric and cementing their authentic value in the lives of consumers.
Leading The Pack
This bold marketing established P&G’s dominance in the 1930s while casting the die for market supremacy throughout the rest of the century. As of 2008, the Cincinnati, Ohio based company was the 8th largest corporation in the world by market capitalization and the 14th largest U.S. company by profit. 2007 Nielsen estimates ranked P&G’s U.S. ad expenditure at $2.62 billion, with combined global ad expenditure reaching $9.4 billion, making them the leading advertiser in both the U.S. and the world. Currently 24 P&G brands each generate more than a billion dollars in net annual sales, and another eighteen have sales between $500 million and $1 billion.
Is all that marketing worthwhile? View it from the consumer standpoint. How many of these P&G brands do you recognize, and what emotions are conjured when you read them: Bounty, Braun, CoverGirl, Crest, Crisco, Dawn, Downy, Gillette, Head & Shoulders, Ivory, Olay, Oral-B, Old Spice, Pampers, Puffs, Secret, Tide and Vicks. Chances are you’re familiar with most, if not all, of those brands, even if you don’t use the products. Some have existed since before the Civil War and while quality is certainly the key component to their longevity and success the value of effective marketing cannot be overstated.
Smarter Marketing Makes The Difference
Perhaps your marketing budget rings in a bit below $2 billion. Not to worry. Businesses of all sizes, with all budgets, seeking to be proactive in a recession can utilize a number of different techniques to optimize brand performance. Studies show that companies that have thrived during recessions and emerged stronger tend to have the following traits in common:
- Brand Integrity
Your brand is your single most important asset. Brands shape the relationship between you and your customer – and that relationship is now more important than ever. Your brand creates desire, influences behavior and forms lasting emotional bonds. Brands engender loyalty that commands a premium, which ultimately enhances your bottom line. Recessions are not the time to cut corners and dilute your brand.
As proof, the BrandZ Top 100 Global Brands list compiled annually by Millward Brown Optimor provides empirical data confirming top brands buck economic trends. For the past three years, the BrandZ Top 100 portfolio has enjoyed a significant lead over the S&P 500 – the value weighted index of the 500 biggest companies listed on the US stock exchange. Significantly, their lead has not diminished during the recession. This illustrates that strong brands perform better in a downturn and are better positioned to grow once recovery begins.
I kicked off with brand integrity because it encompasses all of the following:
- The Big “V”
People don’t stop buying during recessions, they just look for greater value. Strong brands don’t slash prices. Rather, they communicate their enduring relevance in the lives of consumers. Deliver on value without compromising quality. Keep providing the experience customers have come to expect – add even greater value where you can – and you’ll keep commanding a premium.
- Increased Advertising
Turbulent economic times are when your brand should be most visible. Diminished ad sales create a buyers market that give you leverage to negotiate attractive rates to stretch your advertising budget. If the economy is keeping the competition from advertising it’s the perfect time for your brand to seize consumer mindshare. Think P&G.
- Long-Range Focus
Remaining committed to long-term goals and executing on plans provides reassurance to your customer base – your most critical target now – as well as investors, lenders and stakeholders. Even as budgets are trimmed, maintaining momentum and a forward-thinking brand strategy is critical to weathering the storm.
Launching a new business, product or marketing initiative among weakened competition may offset or outweigh the investment in waiting until a more robust economic environment returns. Consider the advice of Andrew Carnegie who said the most valuable lesson he learned in business was that “The best time to expand was when no one else dared to take risks.”
- Creative Partners
Developing and executing compelling, persuasive and effective marketing can be overwhelming when you have a business to run. Collaborating with a professional design and branding studio will make your life easier and maximize the return on your marketing investment. A trusted creative partner will be in tune with your brand and your message, and will know how to leverage the power of design and branding to help you attract and retain customers.
Market Or Die?
Every business must communicate and connect with consumers. The old adage, “market or die” is particularly prescient in a deep recession where making decisions to simply survive may not be enough. Playing it safe is the riskiest – and potentially the costliest – move you can make in marketing.
As I’ve shown above you don’t have to break the bank to keep your brand top-of-mind. Prudence is paramount, but if your business is focused more on accounting than brand development and marketing, you’re headed for trouble. The real question behind recession marketing isn’t, “can we afford to do it,” but rather, can you afford not to?