Can I afford to advertise in a Recession?
Posted by Scott Dunn on January 29, 2008
I came across an article the other day in the New York Times (it was sent to me by a fellow Town Planner Publisher) which asked a simple question: “Does it pay to advertise during a recessionary period?” My first thought was why would someone (especially the New York Times) write about advertising in a recession when we are not in one. A recession is defined as two straight quarters of contraction (I knew my Economics degree was going to come in handy some day). As of this writing, there has not been one quarter of contraction, much less two. I guess when you work for the media you actually start believing your own hype! Never the less, I did find the content of the article very, very, very interesting. It is nothing new, revolutionary or something that has not been said for hundreds of years. YES, you MUST ABSOLUTELY ADVERTISE in a recession.
I know, I know…I sell advertising, so what else would I say? No?? While it is true that I sell “Kick Ass Advertising”, another company actually came up with the findings. No, that company does NOT sell advertising. The name of the company is McGraw Hill Research. They actually use this thing called math to figure it out.
In a nutshell what they found is this: After analyzing 600 companies from 1980 through 1985, those who advertised the same or increased their advertising averaged significantly higher sales both during the recession and after it. My first question was this: What does significant mean? According to McGraw Hill, significant means 260% over those who stopped advertising. If you don’t believe me, see the graph below.
Lastly, the article went on to explain that a company by the name of Meldrum & Fewsmith found that advertising during a recession not only increases sales but increases profits as well. How can this be you ask? Simple…it is called Top of Mind Awareness. When I say car, what do you think of? How about TV or computer? That is called Top of Mind Awareness. If you stop advertising for one second, you risk the chance of losing Top of Mind Awareness.
Still don’t believe me? I guarantee you that every single one of your answers was influenced by advertising. How many of you came up with TATA Motors? (Go on and google it.) Unless you have lived in India, you are not familiar with them. TATA Motors does not advertise in the USA, so how could you be?
As always, please post your thoughts and comments. If you would like to see something covered in a blog, shoot me an email or give me a call.
dbradley92 said
Scott, Thank you for saying that we are not in a recession. Don’t believe the hype! I have only been in business at my current location for one year, and I have realized stronger sales than the best year I ever had at my old location. Business is steadily growing and getting stronger, just like the economy.
People think that the economy can turn around over night, and that is just not the case. It takes years and years for economic trends to take shape. When President Bush took office the economy had been trending down for a long time. The terrorist attack just helped to make everyone realize that the economy was hurting.
Now the President is just the President, and I have been President longer than he has, therefore; I realize that a crashing economy is not something a President can cause in a mater of months. This economy has been trending upward for years now, and I didn’t mean to get so political on you, but I bet you that when everyone realizes that we are not only NOT in a resection, but that the economy is actually strong and growing, the next President will get the credit for it, even though he will have had little to nothing to do with it since these things take years and years.
JReid said
Scott, you have nailed it again. Great insight and perspective. You’re on a roll!
Colleen Gildea said
Hi Scott,
I love this article and would like to reprint it in the Electronic Recruiting News. Let me know what you think.
Colleen
Scott Dunn said
Colleen,
I am glad you enjoyed the article and thank you for your kind words:)
You are more than welcome to reprint this article in the Electronic Recruiting News.
If you have any questions, please let me know.
Also, if you do print the article, please let me know when you do and feel free to add your link here in a reply.
Scott
Joy said
Great article Scott, are you familiar with any research done for B-2-C sales?
Matt said
Yes it is a good article – but Dbradley92 – how are things going for you now – what is your up to date view?
Best
Matt
David Bradley said
OK Matt, here is my take. Sorry it has taken me so long to get back to you. It has been almost a year since my last comment on this subject. And yeah, it has been an interesting year. When we had no gasoline in Alpharetta – oow – I took a real sales hit. So So So much negativity – every day in the news. Looks like we have created a bit of a recession, huh Matt?
Well, I can go back to this original article and say that I not only continued with marketing over the last year, but I increased the amount of marketing that I was doing. IT’S WORKING! In my original comments I said that I had only been in business in my current location for a year, and had realized stronger sales than my best year at my old location. Well, I can say the same again now almost a year later. My sales are even stronger this year, and November ’08 turned out to be the best month I have ever had in the 13 years I have been in business.
So my up to date view is that you still don’t have to believe all the hype. Don’t let your business fail because the media is telling you it will. Maybe this article is more suited for our current situation than it was a year ago but I haven’t given up on the Economy yet. I don’t think it is as bad as they say. I think this is short lived scare not a long term economic trend. Although the direction we go from here might be more of a political discussion and our current political scene might mess up my prediction. I can tell you this; my business will continue to grow.