21 Oct The Up Side of Down

If every problem presents an opportunity, then 2009 is sure to present opportunities for all of us. Wall Street will continue to be a roller coaster. Untried leaders (whether it be the president or vice president) will be in the White House. Prices will be up. Employment will be down. And consumer confidence will be as low as the balances in most of our retirement and college savings accounts.

Not a great forecast for those of us trying to sell something.

We’ve experienced recessions before – in 1973-75, 1981, 1989-92 and even 2001-2002. And, from a marketing standpoint, there’s much to be learned from our past.

Because customers spend less in a recession, revenues and profits typically go down. This, unfortunately, makes most people feel they should reduce their ad budgets accordingly. This is a mistake. It opens the door of opportunity for your competitors to steal market share from you. You want to be the market share stealer, not the victim. So, by all means, maintain your ad budget if at all possible.

Studies have proven that brands that maintain their budgets during a recession come out stronger and with bigger gains than those that cut expenditures. In fact, many studies show that brands that continue to advertise reap the benefits for two to three years after the recession ends.

Consider increasing your budget.

Warren Buffet follows a simple rule: “Be fearful when others are greedy, and be greedy when others are fearful.” Right now, according to his recent article in the New York Times, Buffet is buying American stocks, claiming, “…bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”

The same holds true for our ad dollars. While 80% of businesses increase their media ad budgets during market expansion periods, they see little result from it as their competitors are doing the same. Increasing your media spend during market downturns, on the other hand, dramatically raises your chances of increasing market share. And, since advertising often becomes cheaper in a recession, you can buy more media for less.

The World Advertising Research Center cites two examples:

Kellogg and Post cereals:
“Back in the 1930s, Kellogg maintained its advertising during the Great Depression while Post did not. Kellogg thus gained domination of the dry cereal market that lasted half a century.”

Miller and Schlitz beer:
“In 1976, Schlitz’s major media expenditures were $30 million to Miller’s $28 million. But in the recession years, Miller boosted advertising, rising to $32 million in 1977, $50 million in 1978 and $59 million in 1979. When Schlitz finally went to $44 million in 1979, it was spending 25% less than Miller. The rest is history.”

There are many more examples in all industries – airlines, automotive, furniture, financial – that tell us to hold fast. Having a constant presence in front of your target audience during difficult economic times may even make you appear safer and more aspirational to your audience. So while few of us will be able to increase our budgets in 2009, I hope you will at least take a lesson from history and try to maintain them. So you can hang onto your share of market and we can all hang onto our jobs.

Now if you’ll excuse me, I’m going to enjoy a Miller beer with my Kellogg’s cereal. I might even buy some American stocks.