Invest in Your Company through Advertising

During uncertain economic times, advertising is not the place to cut spending. But don't take it from us. A McGraw-Hill survey conducted in the 1980s showed that businesses that maintained or increased their advertising budgets during the 1981-82 recession had increased their sales by 256% three years later. Those who cut their budgets had increased their sales too; but only by 19%.

There's truth to the adage, "Out of sight, out of mind." A paper by Kellogg School of Management Professor Andrew J. Razeghi, "Innovating Through Recession", quotes the McGraw Hill study and others when recommending businesses maintain or increase advertising during difficult times. "The worst thing you can do is to disappear from a marketing perspective," Razeghi says.

The title of another article, this one in Knowledge@Wharton, "When the Going Gets Tough, the Tough Don't Skimp on Their Ad Budgets”, pretty much says it all. According to the article, "If companies cut deeply into advertising and communications in a down period, the cost to regain share of voice in the market once the economy turns around may cost four or five times as much as the cuts saved." This correlates with the business truism that you can't cut your way to profitability.

Research also indicates that advertising costs may be lower in down economies, due to decreased demand. And, since there tends to be less advertising in lean times (not everyone takes good advice), there is less competition facing your message. This means you can take advantage of a downturn to make your company stand out from the crowd. The current economic situation also presents the opportunity to differentiate your company with a revamped message and a revised advertising mix.

A recent Ad-ology study determined that 48% of U.S. adults believe that a company that isn't advertising during a recession must be hurting. And conversely, a majority think those that continue to advertise are committed and competitive.

It's clear that cutting advertising in a down economy is "penny wise and pound foolish." But even in the best of times, a well-crafted advertising plan is a sound investment in your business. After all, in the words of British poet, politician and historian Thomas B. Macaulay, "Nothing except the mint can make money without advertising."

Category: Marketing
Tags: advertising, budget