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Advertising during recession

Written by: Manik Kinra

Article Overview: The article is on advertising & how advertising is not a expense but investment

Advertising during recession

With most companies feeling the heat of reducing revenues and eroding net worth, one of the first things that CEOs decide to “save money” is reduce the advertising budget. Now this primarily depends on whether the company views Advertisements as expense or investment.

But to me recession provides a wonderful opportunity for companies. Now consider the few myths that most CEOs have;

Myth 1 # All the companies are reducing the advertising budgets and hence the competition doesn’t demand doing so much of advertising. Wrong – This is just the right time for you to take charge and go one up against your competition and so if your competition is not doing advertising during recession – you have an opportunity

Myth 2 # People don’t buy much during recession and hence advertising wouldn’t reap in the benefits. Wrong – People don’t buy much during recession and hence you need to do more aggressive advertising to get people to buy.

Also some of the recent studies show that recessions have only a 2% reduction in people’s disposable income but despite that people tend to sit back and maintain liquidity. Worse is that companies don’t realize that by luring people through advertising they can get them to buy your product; even during the recession. Study done by McGraw-Hill’s showed that a 13 page advertising during recession increased company’s recognition from 32 to 45%. For 1980-85 recession all those companies which did not reduce their advertising budgets increased sales by 16 to 80% & most important was the fact that the increase in sales was not a temporary thing but permanent.

So though the question of advertising budgets during recession is something which has been asked during every recession and studies have shown that companies who did reduce suffered more and who maintained or increased did smart business, not many have gone ahead and gone with the same or more advertising. In 1975 GM and Ford used two different strategies and where GM kept with the same budget and Ford reduced budgets – so while GM increased the sales and Ford’s sales went down by 14%.

Now that leaves me with a question – If we continue or increase our advertising budget during the recession – wouldn’t that lead to controlling of recession?

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Article Tags: advertisements, budget, budgets, ceos, disposable income, doing advertising, ford, gm, liquidity, mcgraw hill, money, myth 2, myths, page advertising, recession, recessions, right time, smart business, temporary thing



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