This came to Hedra via an email in July 2009........

Hi to all,

A few times a quarter I come across something that I want to share with all those folks in my network of advertisers. Some of you folks use my services on a regular basis some of you seasonally and some of you have never worked with me. What ever the relationship is I think this is a good read no matter if your a business owner currently advertising, a business owner currently not advertising or one of the Advertising Agency I service. This article simply points out what has happen over the last many recessions we have gone through since the 1940's in regards to those companies that do advertise next to those that do not. I think you well enjoy the read.

What I have learned over a 26 year broadcast career is that my job is to educate customers on Why Advertise (which this story is about), Why Radio (I work for radio stations) and then lastly why our group of stations. So if any of you enjoy the read and would like to visit with me more about your project and how radio can help you gain market share please e mail me back or call me.

 

Best regards,

Larry Church, Account Executive

580 & 630 KIDO am

www.KIDOAM.com

 

 

Why Advertise in Uncertain Times?

A special report for business owners and managers

 

"On Hold"

That seemed to be the overwhelming response echoing around the business world. It seems that no matter how the question is phrased, the reply is almost always, "the decision is currently on hold."

Recently, Economists are often heard stating that "if we are not careful, we will talk ourselves right into a recession. "If we're not careful, we are going to put the economic rebound "on hold."

As marketers, it's important to understand that "not making a decision" is, quite frankly, a decision itself. Markets are not static and they are not going to wait for you to attain a higher comfort level before making a decision. Those who see today's situation as an opportunity, and who proceed with the implementation of their well thought out marketing campaigns are the ones who will emerge as the main winners when local, regional and global economies make their respective moves to the up side.

You have two choices in today's climate: a) be an "Ostrich Marketer" and stick your organizational head into the sand awaiting confirmation that the market rebound has occurred, or b) be an "Eagle Marketer" and use your long-term, wide-horizon perspective to get yourself positioned to take advantage of the market up turn AT THE START of the up turn.

To help you become Eagle Marketers, here are research results that successful business owners and mangers have turned to for inspiration when facing an economic slow down.

Although shallow and short, the 2001 recession did not escape the notice of many business owners and manager, who reduced their marketing and advertising budgets as a result. This has translated into problems for many industries, and since shallow recessions typically mean weak recoveries, we may not see significant improvement soon.

Times are still tough. So, what does a company do when the going gets tough? Most likely, if it behaves like the rest of the world, what normally happens is the obligatory reduction of all "unnecessary" expenditures, and sadly that includes most, if not all, of your advertising and marketing dollars. Although "we are in tough times so cutting expenses makes sense..." sounds logical, in reality this is a losing proposition that will get you nowhere. In fact, there is plenty of empirical data to show that, if you have the foresight to implement the right strategies, an economic slowdown might be the best time for your company to grow.

The first step... Don't take your eyes off of your customers. It is especially true now that Your best customers are somebody else's best prospects! This is a great time to show your existing customers how much you appreciate them. It is imperative that, at a minimum, you maintain all your existing relationships and use this period to build even stronger bonds.

What's next? Advertise! And better yet, advertise a lot. Why? Because, there is ample evidence to support the fact that maintaining or increasing your advertising and marketing investment in slow times is actually more effective than in good or growth periods. A key reason is that when the marketing and advertising "noise" goes down, the voice of those still talking sounds that much louder. When your competition (and others outside of your industry) have stopped advertising or have reduced their marketing efforts, it's your opportunity to saturate the market with your message. Since your message is one of few reaching the audience, your odds are much better for a greater return on your marketing and advertising dollar.

When the upturn does come around -and it will- and your prospects and customers are looking to increase spending, your company (or your brand) will likely be the first one that comes to mind because you're the one that has been the most visible all along.

When the president of Proctor & Gamble was asked his opinion about the reduced rates for ads for the 2002 Super Bowl, he said the company was taking advantage of the lower prices to do more advertising-with the goal of increasing market share.

Contrast this with Kmart's strategy to decrease advertising in September and October of 2001. The result? Sales dropped an astounding 5% in October. In an article for Business 2.0 in February 2002, John Gaffney recounts the following regarding Kmart and its CEO, Chuck Conway: ''By the late fall the company had lost far more in sales than it had saved in marketing costs.... In a conference call to analysts, Conway admitted his misstep and announced that he was increasing Kmart's marketing budget. 'There is no doubt we made a mistake by cutting too much advertising too fast. Clearly we've learned where the threshold of pain is in advertising. '"

Whose example are you going to follow? Not sure yet?

Here are more examples from Advertising in a Recession, a book by Bernard Ryan Jr., published by the American Association of Advertising Agencies* in 1999. By the way, these are but a few of the examples, studies, tables, and charts in this must-read book!

Ronald Vail, an advertising executive, tracked 200 companies during the 1923 recession. In April 1927 in an article for the Harvard Business Review, he reported that the companies that advertised the most during that period enjoyed the biggest sales increases.

The Buchen Advertising Agency measured the effects of advertising for business-to-business companies through successive recessions in 1949, 1954, 1958, and 1961. The agency found not only that sales and profits dropped off for those companies that cut back their advertising, but in addition, when the recovery came about, these same companies also lagged behind those that did not cut back.

American Business Press, Inc. states the following in its 1979 book, How Advertising in Recession Periods Affects Sale: "The findings of the six recession studies to date present formidable evidence that cutting advertising appropriations in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels."

McGraw-Hill Research analyzed the performance of 600 industrial companies during the recession of 1981-1982. Their findings as published in 1986 in Laboratory of Advertising Performance Report 5262?" Business-to-business 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 which eliminated or decreased advertising."

A Cabners Publishing Company study in 1980 and a Center for Research and Development study in 1990 both concluded that companies that maintain or increase their advertising during recessionary times stand to gain the most market share during that period.

Coopers & Lybrand and Business Science International concluded the following in a joint 1993 report, Companies That Maintain Aggressive Marketing Programs Are Less Affected by a Recession, published by Penton Media in 1993: ''Businesses that maintain aggressive marketing programs during a recession outperform companies that rely more on cost cutting measures.

A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery." What about profitability? Regarding profitability from maintaining or increasing marketing levels in slow times, in an article written for the Periodical Publishers Association in the U.K. Dylan Griffiths concludes the following after studying the Center for Research and Development study mentioned above: ''The analysis shows that increases in market share brought about by advertising can be achieved more cost effectively during a recession.

A company that advertises aggressively during this period will be better placed to increase profitability once the market in which it operates returns to a condition of stability or expansion." Keep in mind that most of your customers, and prospects, are facing tough times, too. They are looking for reassurance, expert guidance, and advice on how to manage through this slowdown. Be there for them. The more visible you are, the more confident they become regarding your legitimacy and staying power, especially in tough times. In times like these, consumers don't stop spending money. They just spend it more carefully - and only with companies and products that they are most comfortable with.

As the many studies cited here show, the surest way to be one of the beneficiaries of the unique patterns of recessionary spending is by marketing aggressively and being more visible during these tough times.

History shows that companies that fare the best during recessionary times do so by continuing to communicate with customers and build their brands regardless of temporary economic conditions. These companies actually increase their advertising and marketing spending during economic recessions, and later reap huge dividends on their investments.

According to The Harvard Business Review, "advertising in an economic downturn should be regarded not as a drain on profits, but as a contributor to profits." Over 75% of companies cut advertising budgets during a recession because they are unaware of the positive long-term effects that advertising in a recession would have on their market share and competitive position. Recessions are actually one of the best opportunities to dramatically change their market positioning both during and long after it.

During the Great Depression in the 1930s, Kellogg maintained its advertising, while Post did not. Consequently, Kellogg gained domination of the dry cereal market that lasted half a century.

Ford was the number one automobile company from 1920-1945. They were big advertisers up until the war. During the war they cut their advertising, stopped producing cars and built tanks like most companies. However General Motors built tanks, and continued advertising for their cars. When the war ended and the American troops came home and decided to buy cars, the women who had seen ads for General Motors over the years and not Ford told the men that General Motors was the way to go. Thus the men bought GM automobiles and from 1946-1999 GM was the number one automobile company. Ford learned a 54-year lesson, because that's how long it took them to regain their position at number one.

In 1976 Schlitz Beers allocated $30 million to major media, while Miller spent $28 million. But during the recession Miller heightened advertising and raised it to $32 million in 1977, $50 million in 1978 and $59 million in 1979. Schlitz neglected to aggressively meet the standards that Miller set with their advertising budgets, spending 25% less. By 1979 their expenditures were well below Schlitz Beers at $44 million. Today Miller is the #2 US brewer accounting for more than 21 % of US beer sales. Schlitz, who was once the #4 US brewer, now struggles to compete with the top three brewing giants.

The airline industry is another example of capitalization through advertising during a recession. Throughout the 1978-1979 recession airlines did more advertising than ever before. By 1979 United Airlines had a $14 million dollar increase from $23 million in 1976 to $37 million in 1979. Delta Airlines had a $10 million dollar increase from $20 million to $30 million and American Airlines had a $7 million dollar increase from $22 million to $29 million.

In the recession of 1981-1982, Proctor and Gamble assertively introduced Pert Shampoo, which is still a market share leader today.

McGraw-Hill reported in their study of U.S. recessions that business-to-business firms that maintained or increased advertising expenditures during the 1981-1982 recession had higher average sales growth during the recession and in the following three years. The companies that eliminated or decreased their advertising lost positioning that they were not able to take back. By 1985 it was reported that companies that were aggressive advertisers during the recession experienced a 256% rise in sales over the timid companies that took the opposite route. In 1991, while a number of brands cut their combined advertising expenditures by 15.5%, the top 200 brands raised their total by 6.2%. As a result the aggressive advertisers pulled 4.5 times more market share than their extremely wary competition. As you see, it pays to maintain and or increase advertising when operating in a troubled economy.

It's important to remember that there are always prospective consumers looking to acquire your product or service, no matter what condition the economy. One of the biggest misconceptions about recessions is that people spend less, therefore companies should advertise less. According to a study conducted by the U.S. Department of Commerce, in the eight recessions from 1948 through 1981, consumer spending actually increased. In fact, the average increase in consumer spending for all eight recessions was almost 5%. Consumer preferences change during recessions not spending. Consumers focus more on quality and value. Consequently it is up to the advertisers to appropriately build brand awareness, as well as brand preference.

When times are good, you should advertise; when times are bad, you must advertise (American Business Media). Recessions are the survival of the fittest. The major goal during a recession should be to strategically invest and execute. Advertise wisely and creatively, so that when the recession is over, your competition will not know what hit them. While they're cutting back on their expenditures, thus decreasing ad and other promotional clutter, the aggressive marketer is dominating the media and maintaining a strong image of corporate stability.