Advertising

Lessons Learned from Advertising in a Recession

By | 04.18.13

Lessons Learned from Advertising in a Recession

Recession RecoveryCongratulations, you survived the recession. You did some things right when many did not. You trimmed your costs, worked extra hours, improved efficiencies, improved your customer service, and most importantly, you advertised… didn’t you?

While it seems intuitive to cut back on your advertising during a recession, several major advertising studies conducted since the 1929 Great Depression all say “Advertise!” Why?

  • In hard times, you must remind consumers of the value and benefit 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 stand to grow during the recession and several years after that as well.

What the Studies Said

Roland S. Vaile (Harvard Business Review, April 1927) 3

1923 Recession – Finding: The biggest sales increases were by companies that advertised the most.

Buchen Advertising Inc. 3

1949, 1954, 1958 and 1961 Recessions – Finding: Sales and profits dropped for companies who cut back their advertising. After the recession, those companies continued to lag behind the ones that had maintained their advertising budgets.

The American Business Press and the Strategic Planning Institute:

1970 Recession – Finding: “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, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get.”

Confident vs. Cautious Advertisers1974-75 Recession – Finding: Advertisers who didn’t cut back their spending had higher market share with higher sales and increased net income during and after the recession.

McGraw-Hill Research Laboratory of Advertising Performance (LAP), 19863

1974-1975 – Finding: Those that maintained or increased advertising had higher sales growth and showed a five-year average increase in sales of 132% vs. a 79% increase for those that cut their ad spend.

1981-1982 – Finding: Business firms that maintained or increased their ad spend averaged significantly higher sales growth both during the recession and for the following three years. Over the preceding five years they had an average sales growth of 275% vs. a 19% increase by those that reduce their ad spending.

Cahners Publishing Company, 1982 Study3

Finding: Businesses that increased advertising during the recession 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 thing.

WPP Group’s Center for Research & Development (formerly Ogilvy Center for Research & Development) 3

1990 Study – Finding: Businesses who increased advertising, 20%-100%, gained an average 0.9 percentage points of market share. Whereas, 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.

Heed the warnings of these studies and George Santayana’s famous quote, “Those who do not learn from history are doomed to repeat it”, and make history rather than be history.

Sources:

1. American Business Press and Meldrum & Fewsmith, 1980;
2. Innovating through a Recession by Professor Andrew J. Razeghi – Kellogg School of Management at Northwestern University.
3. Studies provided by “Advertising in a Recession”, 2006 CRM Associates.

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