We can debate for days whether our country’s economy is officially tagged with the “R” word, but no one will question that the state of affairs is, at the very least, “challenging.” So what’s the best way for organizations to direct their marketing and advertising efforts, during this period of economic flux?
The short answer? Prudently. Nobody can afford to be cavalier about an economic slowdown, but the costs associated with a knee-jerk reaction may be even greater. Over the last 50 years, the U.S. economy has weathered nine recessions with an average duration of 11.4 months. So, any plan of action should consider how to best position your brand and products for both short-term needs and long-term growth.
Don’t Fall Silent
The first impulse for many organizations may be to concede long-term goals to the short-term reality and reduce any investment that doesn’t seem absolutely essential to immediate, daily operations. But dramatically slashing marketing budgets tends to backfire and produce negative effects quickly – not just tomorrow, but today.
Dr. Valerie Kijewski of the Strategic Planning Institute researched industrial businesses operating in turbulent economic environments, and she documented an important trend. Frequently, companies that curtail their marketing efforts experience more severe revenue losses than companies that maintain their programs. That’s because reduced customer awareness leads directly to loss of market share. Conversely, a joint study by the Strategic Planning Institute and Cahners Publishing found that those businesses that increased their advertising spending during a recessionary period gained an average of 1.5% in market share.
What key factor applies here? Marketers can’t expect the forces of inertia to maintain market share for them. Customers will forget brand messages unless they’re reminded – repeatedly. In fact, according to research conducted by the Cahners Business Information unit, one day after seeing the typical ad, only 50% of the target audience will actually remember it. And in a month, only 10% will. That’s why smart plans for marketing in a weakening economy include efforts to improve retention – via ad frequency, strategically sound creative and clarified message.
Monitor Sales and Market Share
No doubt about it, anemic sales can portend trouble. But, sales alone don’t tell the whole story. Historically, companies that increased market share during recessions recovered more quickly and more fully. McGraw-Hill dissected the performance of 600 business-to-business firms during and after the 1981-1982 recession. According to the study, companies that reduced advertising during the recession increased sales by only 19% during the following five-year period, while companies that maintained or expanded their advertising during the recession grew their sales by 275% during the same period of time.
MarketSense conducted a study of 100 household brands during the 1989-91 recession and found that when Jif peanut butter raised advertising expenditures, the brand experienced a sales increase of 57%. While overall ad spending was down in the beer category, Bud Light and Coors Light spent more on advertising than the average marketer, and saw their sales increase 15% and 16%, respectively.
Eat Your Rival’s Lunch
There is a silver lining to an economic slowdown: it offers aggressive advertisers an optimal environment for stealing market share. During the last economic downturn, Fortune Magazine urged its readers to “look at recession as an opportunity to deliver the death blow to marginal players.” In 1999, Inc. declared, “A recession is the best time to advertise. You’ll never have a better chance to expand your business.”
That’s because many businesses win a slightly larger share of the pie, as the weakest competitors fold. And multiple studies confirm that a pro-active campaign can yield measurable results. The WPP Group’s Center for Research & Development reports that during a recession, those that substantially increase advertising (by about 50%) typically gain 0.9% in market share. Modest ad increases (about 10%) generate gains of 0.5% in market share.
Get BANG For Your BUCK
As compelling as the evidence is for stepped-up ad activity in a sluggish economy, some companies determine that financial reasons preclude allocating additional resources to marketing. These businesses, even more than others, must ensure that their advertising is on target. During the last two U.S. recessions certain strategies proved more effective than others:
• Demonstrating value.
Slow economies produce a habit that most advertisers hate. Consumers (and business-to-business customers) pay more attention to price. A successful advertising program compensates by building perceived brand value for the product (or service). Otherwise, customers may forsake their loyalties and seek a cheaper substitute.
• Clarifying the benefits.
Readership studies repeatedly confirm that when ads stress product benefits in the headline and copy, they are two to three times more likely to be remembered.
• Quickening the purchase.
During periods of economic uncertainty, customers may postpone buying decisions. It is essential that advertisers equip their target with reasons why purchases should be made now – for example, by giving prospects an extra reason to act immediately, by offering an incentive to purchase.
Essentially, marketing during an economic downturn is premised upon an eventual economic recovery. And advertisers who seize the opportunities while avoiding the short-term pitfalls will position themselves to rebound ahead of their competition in the long run.