Economy Shmonomy: Dont stop marketing

October 2008 | Posted by Carolyn Pikoulas
In an economy that seems like the only safe investments are Ramen Noodles and Aspirin, companies are tightening their belts on spending and making cuts anywhere possible. Unfortunately, marketing is one of the first areas to be let go. This is concerning, because a large body of evidence indicates that cutting marketing budgets has instant and long-term negative effects on your brand. Studies have shown that businesses that maintain or increase their marketing strategy will yield higher sales growth both during and after the economic downturn. Your company should keep a robust marketing and advertising budget in today's economy.

While your competitors make the mistake of cutting back on marketing, make your move and gain market share. A study from Penn State and the University of Texas found that companies like Intel, Microsoft and Wal-Mart have used recessions as opportunities to overtake weaker competitors. During the downturn of the early nineties, Intel launched its "Intel Inside" campaign, which helped make the company a leading chip maker. Recently, during the post-9/11 downturn, Wal-Mart invested in its "Every Day Low Prices" campaign, and it became the world's largest corporation in February 2002. For those companies who don't invest in marketing and advertising, David Ogilvy (known as "The Father of Advertising") has some advice: "The man who stops advertising to save money is like the man who stops the clock to save time."

The American Business Press book "How Advertising in Recession Periods Affects Sales" states: "Cutting advertising appropriations in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels." Not only do sales and profits drop, but when the economy recovers, those same companies will lag behind competitors that didn't cut back on advertising and marketing. So, when your boss calls for budget cuts, make the case that your company has an immediate opportunity to upstage the competition.

As competitors cut back their advertising, the opportunity for your advertising to stand out becomes greater. Maintaining your presence in the market establishes consumer confidence and communicates that your company has a strong foundation and can sustain economic adversity. Conversely, brands that pull back on their marketing and advertising efforts risk disappearing from the minds of consumers. And since people spend more time at home during times of economic uncertainty, it's a safe bet that they'll be watching more television, surfing the internet and reading more magazines, yielding larger audiences for your advertising.

In another study of U.S. recessions, McGraw-Hill Research analyzed 600 companies from 1980 through 1985. The results showed that businesses that maintained or increased their advertising expenditures during the 1981-1982 recession, averaged significantly higher sales growth than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive advertisers had risen 256% over those that didn't keep up their advertising. Companies that cut advertising during the recessionary years maintained flat sales during the period and only modest sales growth in the following two years.

Based on the research, there are tangible reasons for turning it up in a down market. Although there are no easy answers or silver bullets, marketing is an integral investment that can help sustain the company through tough times now and reap greater rewards in the future.