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by Renee Fellows

February 4, 2008— Oil prices have soared to nearly $100 a gallon and our once Bull Market seems to be rapidly trading in its horns in for a bearish fur coat. What’s a small business owner to do when the market leaves you hugging every last nickel? The immediate reaction is to cut expenses and halt all spending. And the first department to face cuts at the chopping block is usually marketing. But, say market research experts that decision may be short-sighted.

Let’s Look Back to See the Future

Historically there are mounds of research that point to a correlation between increased marketing spending and growth in long-term market share and profitability. But first, what exactly is a recession? It is traditionally defined as two or more consecutive quarters of decreasing Gross Domestic Product. A private agency, the National Bureau of Economic Research is the deciding judge on whether or not the economy is officially in a ‘recession’ based on declines in economic measures.

If this is in fact a recession, there is a ray of good news. In previous recessions (there have been nine recessions since the end of WWII each lasting approximately 12 months), U.S. consumer spending increased significantly at the end of each recessionary period. On average consumers spent 9% more than they had spent at the beginning, according to Philip Geier, Chairman Emeritus, Interpublic Group, a major, international advertising agency. So it makes sense for businesses to advertise through a recession. The companies will be better able to maintain branding and consumer awareness and when the recession is over, those who have advertised will be first to reap the rewards of increased consumer spending.

The American Association of Advertising Agencies, or AAAA (4A), reports the following findings in a commissioned study, Advertising in a Recession by Bernard Ryan, Jr.

• In 1947, Buchen Advertising tracked advertising dollars vs. sales trends before, during and after the recessions of 1949, 1954, 1958, and 1961. Not only did it find that sales and profits dropped off at companies that cut back on advertising. It also found that after the recession had ended, these same companies continued to lag behind those that had maintained their ad budgets.

• Cahners Publishing Co, together with the Cambridge-based Strategy Planning Institute, released a report in January 1982 outlining the results of an extensive study. The report disclosed that during recessionary periods, those businesses (who spent more) tended to gain a greater share of market. The underlying reason is that competitors, especially smaller, marginal ones, are less willing or able to defend against aggressive firms.” The study also pointed out those businesses that increased media advertising during the recessionary period gained an average of 1.5 points of market share.

• MarketSense compared 101 household name brands during the recessionary period of 1989-1991. The brands Jell-O, Crisco, Hellman’s, Green Giant and Doritos saw sales drop by as much as 26 to 64%. Jiff peanut butter raised ad support and experienced a sales increase of 57%; Kraft salad dressings saw a rise of 70 percent. In the beer category, overall spending was down 1 percent, while Bud Light and Coors Light, each spending ahead of the category, saw sales increases of 15 percent and 16 percent respectively. Pizza Hut sales rose 61 percent and Taco Bell’s 40 percent thanks to strong advertising support, with McDonald’s volume down approximately 28 percent.

The Recession Opportunity

What research and history have proven is that businesses who are keen to strategic marketing can experience tremendous growth both in brand awareness and profitability during a recession. The decision must be made if your business is an aggressive risk-taker or if you will play it safe and hold back. For the average small business owner, the response to cut spending (especially in marketing) means that no one will be laid-off and business will operate mostly unchanged. If you’re feeling adventurous, you can take advantage of the growth opportunities available during a recession. Here are a few suggestions from “Advertising in a Recession’ that you can incorporate into your new recession marketing strategies:

• Concentrate on core values. Revisit your brand key messages and be sure that all of your marketing and public relations materials effectively resonate the message. Be consistent across all mediums

• Talk to your target audiences. How many times in the several years of your client relationship have you reviewed your company’s capabilities? Probably once at the initial client meeting and never again after that. Schedule a meeting with you clients and provide an overview of your business’ capabilities. Your client may be surprised and you may even gain additional work during otherwise tight times.

• Be a community citizen. If you’re not already involved in community non profits, take a look around. In a recession need will increase and there will be even greater opportunity for your business to reach into the community and provide a helping hand. Sponsor events, volunteer, mentor and provide marketing dollars. You’ll get the increased good will in the community and the gratification of building a stronger community.

• Take advantage of softer media rates. Increasing your ad budget when your competitors are cutting theirs and take the lower media rates as an opportunity to tighten your message and increase frequency. Consider buying longer term contracts to appreciate the reduction in costs.

• A recession is no time to agency hunt. Your current ad agency has a deep understanding of your brand message and can respond quickly to changes in the market. A new agency will require time to develop new messaging and ad designs, time you may not have to lose.

• Focus on what you do best. That’s right, above all else you need to be sure that your products and services don’t slump just because the economy is tanking. Produce a top-notch product or first-rate service and you’ll further solidify your brand and customers will see the value you bring to the table.

Advertising benefits are two-fold.

In the short term advertising generates immediate sales though current customers and brings in new prospects and sales. In the long run, advertising works cumulatively to raise brand awareness. The more a brand advertises the better the public understands and ‘knows’ the brand and are more likely to buy from that company. In a perfect world, the owners and managers of a company would know each client personally. The reality makes that an impossible task. Advertising crosses the divide and can engage your audience in a real and deeply emotional way.

How does your consumer define their value solution?

The key to creating the right advertising for your company is to truly understand what’s important to your customers and demonstrate the value of your product or service. Price points are critical during a recession. The customer must feel that they are receiving value for their dollar and that the product or service is of the highest quality. A case in point is Pizza Hut’s marketing campaigns. "As the economy changes and our customers' behaviors change, we are always working to anticipate their needs,” says Brian Nichol, Chief Marketing Officer for Pizza Hut in a recent Ad Age survey. “The current situation requires Pizza Hut to redefine how the consumer obtains value solutions. We've acted quickly to create an everyday value pizza solution, Pizza Mia, which is just five bucks with superior taste."

Studies have shown that it takes four to six months to see the effects of an advertising effort. By immediately cutting your advertising during a recession, you’re in effect, throwing away almost a half year’s worth of work and investment. That doesn’t mean that you shouldn’t alter your marketing tactics. Much to the contrary, review your messaging and reduce or eliminate emotional ads replacing them with more factual feature/benefit style messaging that tout the product’s superiority.

To learn more about creative advertising strategies and making your marketing dollars work harder, talk with Renee Fellows at ClearPoint Marketing Communications at (603) 434-9433 or visit the web site at www.oneclearpoint.com.

Renee Fellows is the owner of ClearPoint Marketing Communications in Derry, New Hampshire. She works with small business clients to develop marketing and public relations strategies that bring business and customers closer together. She can be reached at 603-434-9433 or via email at Rfellows@oneclearpoint.com.

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