Marketing in Tough Times – John Kypriotakis

The recent recession did not escape the notice of your customers, who reduced their marketing and advertising budgets as a result. This has translated into problems for many industries and since shallow recessions typically mean weak recoveries, we may not see significant improvement soon. Times are still tough.
So, what does your company do when the going gets tough? Most likely, if it behaves like the rest of the world, what normally happens is the obligatory reduction of all “unnecessary” expenditures, and sadly that includes most, if not all, of your advertising and marketing dollars.

Although it sounds logical, “…we are in tough times so cutting expenses makes sense”, in reality this is a losing proposition that will get you nowhere. In fact, there is plenty of empirical data to show that, if you have the foresight to implement the right strategies, an economic slow down might be the best time for your company to grow.

The first step…

Don’t take your eyes off of your customers. We have been communicating to our clients for a long time, and it is especially true now, that “Your best customers are somebody else’s best prospects.”

This is a great time to show your existing customers how much you appreciate them. It is imperative that, at a minimum, you maintain all your existing relationships and use this period to build even stronger bonds.

What’s next?

Advertise! And better yet, advertise a lot. Why? Because, there is ample evidence to support the fact that maintaining or increasing your advertising and marketing investment in slow times is actually more effective than in good or growth periods.

A key reason is that when the marketing and advertising “noise” goes down, the voice of those still talking sounds that much louder. When your competition (and others outside of your industry) have stopped advertising or reduced their marketing efforts, it’s your opportunity to saturate the market with your message.

Since your message is one of few reaching the audience, your odds are much better for a greater return on your marketing and advertising dollar. When the upturn does come around, and it will, and your prospects and customers are looking to increase spending, your company (or your brand) will likely be the first one that comes to mind because you’re the one that has been the most visible all along.

When the president of Proctor & Gamble was asked his opinion about the reduced rates for ads for the 2002 Super Bowl, he said they were taking advantage of the lower prices and doing “more” advertising with the goal of increasing market share.

Contrast this with the Kmart strategy to decrease advertising in September and October of 2001. The result? Sales dropped an astounding 5% in October. An article that John Gaffney wrote for Business 2.0 in February 2002 recounts the following regarding Kmart and its CEO, Chuck Conway.

“By the late fall the company had lost far more in sales than it had saved in marketing costs… In a conference call to analysts, Conway admitted his misstep and announced that he was increasing Kmart’s marketing budget. “There is no doubt we made a mistake by cutting too much advertising too fast. Clearly we’ve learned where the threshold of pain is in advertising.””

Whose example are you going to follow? Not sure yet?

Here are a few more examples from “Advertising in a Recession” a book by Bernard Ryan, Jr., published by the American Association of Advertising Agencies* in 1999. By the way, these are but a few of a myriad of examples, studies, tables and charts in this great book. A must read!

Ronald Vail, an advertising executive, tracked 200 companies during the 1923 recession. In April 1927 he reported in an article he wrote for the Harvard Business Review that the companies that advertised the most during that period enjoyed the biggest sales increases.

The Buchen Advertising Agency measured the effects of advertising for Business-to-Business companies through successive recessions in1949, 1954, 1958, and 1961. They found that not only sales and profits dropped off for those companies that cut back their advertising, but in addition, when the recovery came about, these same companies also lagged behind those that did not cut back.

American Business Press, Inc. in their 1979 book “How Advertising in Recession Periods Affects Sales” states the following: “The findings of the six recession studies to date present formidable evidence that cutting advertising appropriations in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels.”

McGraw-Hill Research analyzed the performance of 600 industrial companies during the recession of 1981-1982. Their findings published in their 1986 book with the title “Laboratory of Advertising Performance Report 5262” state that “business to business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased advertising.”

A Cahners Publishing Company study in 1980 and a Center for Research and Development study in 1990 both concluded that those companies that maintain or increase their advertising during recessionary times stand to gain the most market share during that period.

Coopers & Lybrand and Business Science International concluded the following in their joint 1993 report “Companies That Maintain Aggressive Marketing Programs Are Less Affected by a Recession”, published by Penton Media in 1993. “Businesses that maintain aggressive marketing programs during a recession, outperform companies that rely more on cost cutting measures. A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.”

Profitability you ask? Regarding profitability from maintaining or increasing marketing levels in slow times, Dylan Griffiths in an article that he wrote for the Periodical Publishers Association in the U.K. concludes the following after studying the Center for Research and Development study mentioned above: “The analysis shows that increases in market share brought about by advertising can be achieved more cost effectively during a recession. A company that advertises aggressively during this period will be better placed to increase profitability once the market in which it operates returns to a condition of stability or expansion.”

Keep in mind that most of your customers, and prospects, are facing tough times too. They are looking for reassurance, expert guidance, and advice on how to manage through this slow down. Be there for them. The more visible you are, the more confident they become regarding your legitimacy and staying power, especially in tough times.

In times like these, consumers do not stop spending money, they just spend more carefully and only with companies and products that they are most comfortable. As the many studies sited above show, the surest way to be one of the beneficiaries of the unique patterns of recessionary spending is by marketing aggressively and being more visible during these tough times.

Source: John Kypriotakis is president of Lysis International Inc. Tampa, FL 813-792-8500