Marketing in a Recession: The Best of Times or the Worst of Times?
Pick up the newspaper: Our country and the world are in a state of anxiety about the economy, especially in light of a potential recession. What does that mean to us as marketers? Just how does the recession affect direct response advertising? Recessions are different from other economic downturns and need to be approached differently, but there are ways to weather the storm.
History teaches us that recessions reward the aggressive advertiser and penalize the timid one. Indeed, firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising.
By 1985, sales of companies that were aggressive recession advertisers had risen 256 percent over those that didn’t keep up their advertising. Why? One reason is that a recessionary market can provide an opportunity for businesses to build a greater share of market through aggressive advertising. Sometimes, we need to remind ourselves about the short-term benefits of advertising: It creates sales immediately; it generates added business from current customers; and it brings in new leads and prospects. In short, as one marketer pointed out, “When times are good, you should advertise. When times are bad, you must advertise.”
One trait of a true recession lies with shifts in consumer patterns. We can no longer expect even our core base of customers to behave in ways familiar to us and comfortable to them. Preparing for changes in consumer behavior will allow us to jumpstart new messaging, platforms and technologies—when this makes strategic sense—to capture the attention of both loyal and new customers. One false assumption is that it’s safe to reduce the advertising budget if the competition is reducing theirs. Research shows that companies maintaining or increasing advertising during periods of economic slow-down will boost market share.
Some companies will even see an increase in sales over their competitors that decrease advertising. And while it may be beneficial to look at cutting costs for some advertising activities, marketers must not abandon smart practices solely for the sake of the bottom line. Rather, you must ask how to best optimize your marketing success with restricted resources. According to a recent Forrester Research report, marketers who move into areas like word of mouth, blogging and social networking will withstand tightened budgets. In contrast, marketers are likely to decrease spending in traditional media and even online vehicles geared to building brand awareness. A recession brings fickle consumers and tightened budgets, but smart marketers will transform these challenges into new opportunities.
And, as we know, the smartest marketers will embrace the fundamentals of direct response advertising. DR marketers know that even though consumers will tighten their belts during a recession, a solid consumer relationship will last longer than any recession. Further, DR marketers know how to optimize their media spending—whether it will be for TV, online, in print or in other media. This allows us to cut media that doesn’t perform while media rates adjust to the pressures of supply and demand. For my money, if I’m going to sell a product or service during an economic downturn, direct response is the only way to go. Who wouldn’t go with the only accountable form of advertising?
Ed Garrubbo is ERA’s Board Chair and CEO of Creative Commerce, LLC
Tags: Advertising, creative commerce, Direct Response, ed garrubbo, ERA, recession