Advertising During a Recession: What Small Businesses Should Know

While cutting back on advertising during a recession seems intuitive, several major studies conducted since the Great Depression say you should take advantage of this timely marketing opportunity. Why?

• In hard times, you must remind consumers of the value and benefits of doing business with you.
• If your competitors advertise, you need to maintain your advertising as well, or you will fall behind in the long run.
• If your competitors don’t advertise, you can grow during the recession and several years after that.

This post will explain what happens to advertising during a recession. We’ll also explore studies that show why you should continue advertising even though you may have fewer resources during an economic downturn.

What Happens to Advertising in a Recession?

When a recession hits, businesses have tighter budgets and fewer resources to invest in marketing and customer service. Typically, sales become the top priority because sales campaigns directly generate revenue for a business. 

But that doesn’t mean advertising completely goes away. Some brands continue their ad campaigns and take advantage of fewer competitors in the market. After all, it’s easier for your ad to stand out when fewer messages from other brands flood your communication channels. 

Advertising in a Recession: Examples

If your brand is facing a recession or preparing for one in the future, it’s important to set aside resources for marketing and ad campaigns. Why? Historically, brands that invest in advertising during a recession experience higher sales than those that don’t. 

Let’s take a look at a few examples.

Roland S. Vaile (Harvard Business Review, April 1927)

In 1923, the United States experienced a brief recession. The Harvard Business Review found that the companies that continuously advertised during the recession maintained brand visibility and customer loyalty. It also found that these brands were better positioned to take advantage of economic recovery, leading to even more profits in the future.

Buchen Advertising Inc. (New York Times, July 1971)

Buchen Advertising Inc. conducted a series of studies that analyzed advertising spending during several recessions. In 1949, 1954, 1958, and 1961, Buchen Advertising found that sales and profits dropped for companies that cut back their advertising spending. After the recession, those companies continued to trail behind those maintaining their ad budgets.

The American Business Press and the Strategic Planning Institute

The American Business Press published a study analyzing the 1970 and 1974-75 recessions. The study found that profits increase during a recession when brands invest in an “aggressive” advertising strategy. Sales typically decrease for those who choose to cut back on their advertising spend. 

McGraw-Hill Research Laboratory of Advertising Performance (LAP)

McGraw-Hill published a series of reports analyzing advertising performance throughout different years and industries. One study examined the 1974 recession and found that brands that maintained or increased advertising had higher sales growth. They also experienced a five-year average increase in sales of 132% vs. a 79% increase for those who cut their ad spend.

These reports also analyzed 1981-1982. They found that business firms that maintained or increased their ad spend averaged significantly higher sales growth during the recession and the following three years. Over the preceding five years, they had an average sales growth of 275% vs. a 19% increase by those who reduced their ad spending.

Cahners Publishing Company, 1982 Study

The Cahners Publishing Company shared a catalog of informative charts that visualized the impact advertising had during the 1982 recession. Businesses that increased advertising gained an average of 1.5 points of market share. During market expansion periods, some 80% of businesses increased their media advertising budgets – but saw no particular gain in share because most firms did the same.

WPP Group’s Center for Research & Development 

In the 1980s, businesses that increased advertising by 20% to 100% gained an average of 0.9 percentage points of market share. Conversely, those that increased spending modestly (less than 20%) only gained 0.5 percentage points of share. Those who reduced advertising only boosted share by 0.2 percentage points.

Advertising Spend During a Recession

As we mentioned earlier, ad spending typically drops during a recession. In fact, if we look at the past twenty years, ad spending has been fairly consistent except for 2009 and 2020. What happened in those years?

From 2007 to 2009, we experienced the Great Recession, one of the most severe economic downturns since the Great Depression. Ad spending dropped as expected as businesses cut costs to maintain operations.

In 2020, COVID-19 shut many businesses down and restricted how they could interact with customers. Traditional ad spending fell sharply as businesses couldn’t advertise on offline channels, even if they wanted to. They had to shift to ecommerce solutions because fewer customers were visiting stores due to safety restrictions in various industries. 

Is Advertising Recession-Proof?

No. Advertising is not recession-proof. In fact, data indicates that when recessions occur, many brands reduce their advertising spending and focus on other areas of their business. 

However, the data also shows that brands that stick it out and continue to advertise during a recession typically increase sales and grow faster than brands that don’t. That’s because fewer companies are competing in the ad space, making it easier for your brand to stand out from the competition. 

Advertising in a Recession

If you’re anticipating a recession or your industry is currently in one, I recommend maintaining your advertising strategy if possible. Not only will you withhold brand visibility, but you’ll be in a better position to win back customers when the economy improves. Use these case studies to inform your strategy, and remember that when other businesses cut their ad spend, that creates an opportunity for you to stand out in your market.