Wednesday, December 10, 2008

Why Advertise in a Recession

Well, now that the Senate has declined the opportunity to extend a loan to the Big Three, you may be wondering - what the heck will my business look like next year? As I've said before, I don't believe the future of the aftermarket is all gloom and doom. Yes, our economy is a little shaky, but people still need to get their cars fixed. And tools will break, and worn-out equipment will need to be replaced.

How do you get your share of the sales? Besides continuing to improve on your "blocking and tackling" I would put forth another recommendation: look at your advertising and improve upon it in 2009 to gain market share. It's easy for me to say - just advertise more.... but it is not that simple. You truly must examine your message. Is it still right for current conditions? Does it say what you want to express to your customers? Will it help sell more tools or equipment? Does it meet your needs? If not, you need to adjust.

Today, there exists a large body of data that clearly shows there is a direct cause and effect of increasing or decreasing advertising during recessionary periods. In summary, they show:
Advertising builds brand strength: Companies that invest more in advertising over a period of years experience faster growth than those that spend less.
Advertising speeds recovery: Companies that have increased their advertising during a recession have recovered more rapidly than their counterparts that have maintained or reduced advertising.
Advertising affects sales: Organizations that have continuously increased their advertising investment have enjoyed similar increases in sales. For example, Meldrum & Fewsmith Advertising and the BPA studied 64 business-to-business companies that advertised during a recent recession. Thirteen firms cut advertising an average of 20 to 50 percent during the two years of recession, while the remaining firms increased their advertising investment 30 to 70 percent during the period. Those firms that increased their advertising stance not only continued to grow but also grew at a more rapid rate when the country's financial picture improved. This growth was achieved in both sales and net income. The results have been similar in every advertising investment study conducted since the 1920s.

The first study, conducted by Roland S. Vaile, covered advertising and sales of 200 firms between 1920-1924. He concluded that a definite spread occurs between sales of firms that increase their advertising and those that decrease it. He added that, when intensive advertising during the depression was part of the sales technique, sales were maintained in better volume than when advertising appropriations were cut.

Recessions and Competitive Edge
For more than 80 years, advertising agencies and publications have been telling client management that a recession provides a unique window of opportunity for those firms that are market driven. Marion Harper, former president of McCann-Erickson once said, "A time of recession is the most favorable time for a change in competitive positions. Companies that are second in their fields, by applying extra pressure and devising creative strategies, can gain advantages that they can carry into times of prosperity. Whatever their position, if companies wish to be growth companies, they must certainly behave like growth companies." Charles Brower, former president of BBDO, stated, "Instead of waiting for business to return to normal, you should be cashing in on the opportunity your overly cautious competitors are creating for you ... the fact that your competitors are pulling back can make your advertising dollars look and act even bigger. There are few things as detrimental as a lapse in advertising. It costs much more to get advertising momentum up than it costs to keep it going. Once you let momentum die, you must start almost from scratch again."

The producer who maintains his or her normal level of promotion when competitors have reduced theirs soon finds that they gain a similar increase in competitive share of market. It provides a rare opportunity for management to change market position. Then when business improves, they will grow at a much higher and more profitable rate. One of management's most important roles is to exploit competitive opportunities. While most management teams tend to hold off on being aggressive until all of the marketing variables are favorable, this action puts you right back in the middle of the pack so that you are competing with all of your competitors.

Taking this approach, some of your advertising investment is an expenditure since you have to vie head-to-head and toe-to-toe with your competition rather than taking advantage of opportunities. In today's refinement of marketing warfare, the winner is the one who takes optimum advantage of every strategic and tactical marketing blunder by his or her competition. The smart marketeers acknowledge that economic cycles are elements in the marketing battlefield that have to be used to advantage if the firm is to improve its position and increase marketshare.

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