Research Suggests Advertising Grabs Market Share During Recessions
Numerous studies suggest that recessions provide opportunities for proactive companies to grow their sales and gain market share on more complacent competitors. Just because the economy is poor doesn't mean you should shut down your advertising campaigns. If everyone did that, there's a good chance we'd create a self fulfilling spiral of reduced economic activity. History reveals that aggressive advertising and marketing during recessions can result in gains both during and after a recession.
If your company increases or at least holds its advertising steady during a recessionary period, while your competitors become less visible, you have a strong likelihood of gaining market share. If advertising had no impact on sales, then businesses that did not advertise would have long ago outperformed those that did advertise, due to the increased costs incurred by advertising. This has clearly not been the case, as U.S. companies spent somewhere around $160 billion on advertising in 2008, according to advertisement buying giant GroupM. Companies still spending money on advertising during a recession not only keep their brand in the public eye, their activity projects an image of stability that purchasers embrace.
Below are summaries of some of the studies that have been done over the years on advertisings impact during recessions.
- Penn State Institute for the Study of Business Markets (2002) - The study found that aggressive marketing has a direct impact on performance during the recession, as well as after it. The benefit is largest for companies that already have well established brands.
- McGraw-Hill Research (1987) - Business-to-business firms that maintained or increased their advertising spending in 1981-82 averaged 275% sales growth between 1980-1985, while those that cut budgets averaged only 19% sales growth.
- Frankenberger/Graham (2004) - Oregon State professors looked at 2,600 companies and concluded that advertising during recessions helps contribute to the financial health of the company for up to three years into the future.
- American Business Press Studies - Studies of the 1970 and 1974/75 recessions concluded that companies that did not cut advertising spending increased profits during the recession and in the years that followed.
- Coopers and Lybrand - A study of the 1990-91 recession found that companies with already focused marketing plans performed better during the recession.