ADVERTISING IN A RECESSION

By Ed Shane

 

Headlines in Advertising Age reflect an important story:

 

            “P&G, Unilever slash ad spending…but food companies stay the course.”

 

            “Ad cutbacks backfired for bankruptcy victims.”

 

Procter & Gamble cut media spending by 19.6% last quarter; Johnson & Johnson by 8.6%; L’Oreal by 6.6% and Unilever by 4%.

 

On the other hand, Kraft Foods, General Mills, Hershey and Kellogg all cite increases in marketing and advertising spending.  Ad Age reports that Kraft stayed top of mind through marketing and also instituted a 7% price hike. 

 

Cause and effect? 

 

Mervyn’s department stores and S&A Restaurants, the owner of Bennigan’s and Steak & Ale declared bankruptcy recently.  Each company had dramatically cut marketing and advertising in the past 12 months, says Ad Age.

 

The same was true for Sharper Image, which slashed its ad budget 82% in the two years before filing bankruptcy in February.  Baker’s Square Restaurants cut spending 19% in 2007 and filed in May, 2008.

 

We’ve always said it pays to advertise during a recession.  In branding presentations, I often use the story of Wrigley gum, which advertised during World War II even when there was no sugar available to produce their product.  Nonetheless, Wrigley was top of mind when the war ended and chewing gum hit the shelves again.

 

During the recession of 1981 and 1982, McGraw-Hill analyzed 600 businesses in 16 industries to measure advertising impact.  The result was that those companies that advertised showed significantly higher sales than those who did not.

 

The study continued after the recession eased.  By 1985, sales of companies that advertised aggressively during the recession had risen 256% over those that did not advertise.

 

The “R” word is rampant, although from an economist’s perspective, there are additional components that make up the real thing.  Your advertisers – and their customers – don’t care what this economic mess is called.  They know that gas prices are high, houses are not selling and the economy stinks.

 

Then the headlines begin to repeat: “Radio revenues are down,” and we buy in to the bad news.  Nonetheless, now’s the time to advertise.   Tell your clients:

 

On air rates are the lowest they’re been in years.  Now’s the time to    advertise.

 

Daily newspaper circulation is in the tank.  Soon, you’ll discover your newspaper dollar isn’t getting the results you need.  Now’s the time to use radio.

 

Mr. Advertiser, if your competitor is cutting back, now’s the time to seize the opportunity to be top of mind in your category. 

 

Maintaining market identity costs less than building it later on.  Now’s the time to strengthen your identity.