This is Your Opportunity
By Sandra Pearce, MPA Media Marketing Manager
When the economy is tanking, sales have gone down and you're worried about your company's financial future, you may, like many executives, opt for one or two courses of action. Before I even tell what they are, my advice is "Don't do either".
During a recession consumers don't stop buying, they get more selective. Studies show us that during a downturn the level of total customer spending will ordinarily only drop a few percentage points. Your customers are still going to buy 90% to 95% of what they were buying before. They're going to buy from someone. Most likely they'll buy from businesses they know and trust, businesses that are consistently visible and that have products they perceive to be worth their money. They look more carefully for value in their purchases and price alone does not mean value.
Here's the first thing I advise you NOT to do.
Don't lower your prices. That tactic usually backfires by making your customers think your products weren't worth what you were charging before. Typically it results in selling the same number of products, or fewer, at lower profits per product. The other large downside to price cutting is getting your prices back up to a profitable level after the crisis has passed. Not to mention the long term damage it could do to your brand equity. Anyone who has ever had a conversation with me about marketing knows how strongly I feel about the value of branding.
In the midst of a recession it's easy to be reactionary and instinctive. Our instincts, and the bad news we hear in the press, tell us that the economy will probably keep going down. So we make the hard decision to cut the budget. The advertising budget seems the most innocuous and easiest to cut. So we slash a few percentage points off of the expense column and cut the marketing budget. But here's the Catch-22: If we cut our ad budgets, sales WILL go down and we'll be worse off then we would have been had we left that budget alone.
So here's the second thing I advise you NOT to do.
Don't cut back on or stop advertising. The reason for this advice is simple. All research* conducted in the last three decades on recessionary advertising says the same thing, "This is no time to cut your advertising."
Many of you have already heard me talk about this research, but it bears repeating: Companies that stay the course or increase their advertising see increases or much smaller declines than their competitors.
Most of the time, when people are reading ads they're not ready to buy, they're just window shopping. But when they are ready to spend money they've already got a brand or company preference. To sum it up, the more visible you are, the more confident your customers and prospects become. When they're ready to buy you want it to be you that they call.
You must be thinking, "Of course she says to keep advertising, she works for a company that sells advertising." If I were you, that would be running through my mind about right now too. But we all know that if it weren't for advertising our companies would only survive on word of mouth, possibly some guerrilla tactics and by chance. But you can't control word of mouth and in the end, guerrilla tactics only work for concert promoters. And only casinos win games of chance.
Remember too that during any period of economic downturn your best customers become someone else's best prospects. When you stop inviting them to do business with you, a more aggressive competitor may become much more attractive. They're readjusting their buying patterns and their thinking. The biggest impact of this is that they will reassess their traditional brand and supplier loyalties. As buyers begin to explore other alternatives, they become much more responsive to advertising. This is when you need to not only hold onto current customers but also aggressively attract new ones.
Earlier in my career I worked for an ad agency and for large corporations. I saw the effects that cutting out and cutting back on advertising -- versus maintaining and increasing messaging-- had on companies during and after economic downturns. So the conclusions of the research came as no surprise to me.
Companies that cut back advertising see a decline in sales and lose market share during and especially after a recession. Companies that stay the course or go bigger see greater gains.
 A negative economy can be a crisis situation for many businesses, but it was President Kennedy who reminded us: "When written in Chinese the word crisis is composed of two characters. One represents danger while the other represents opportunity."
Our current economic situation means opportunity for those who are prepared to take advantage of it and danger for those who aren't.
References:
- "How Advertising in Recession Periods Affects Sales," American Business Press, Inc., 1979
- ABP/Meldrum & Fewsmith study, 1979
- McGraw-Hill Research. Laboratory of Advertising Performance Report 5262 New York: McGraw-Hill, 1986.
- Kijewski, Dr. Valerie. "Media Advertising When Your Market Is in a Recession," Cahners Advertising Research Report. The Strategic Planning Institute, 1982
- Greenburg, Eric Rolfe. "Fortune Follows the Brave," Management Review, January 1993
- Khermouch, Gerry. "Why Advertising Matters More Than Ever," Business Week, August 2001
- Dhalla, Nairman K. "Advertising as an anti recession tool," Harvard Business Review, Jan.-Feb. 1980
But they won't continue to know and trust you unless they see you. The key to thriving in this economy is to keep advertising.
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