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Numerous studies through the years have shown that maintaining or increasing ad spending during a recession will increase sales, profits, and market share. As one major business-to-business advertiser said, "When times are good, you should advertise. When times are bad, you must advertise."
Case Studies
An American Business Press Study of 143 U.S. firms during the 1974-1975 recession found that those that maintained ad spending had a positive effect on sales in the long run. Sales rose 37% after two years, and 35% after four years.
McGraw-Hill Research analyzed 600 companies in 16 different industries from 1980 to 1985 and found that firms that maintained or increased their ad spending during the 1981-1982 recession averaged significantly higher sales growth during the downturn and for the three years that followed, compared with those that stopped or scaled back their advertising. By 1985, companies that advertised aggressively during the recession had sales that soared 256% over firms that did not maintain their advertising.
Penton Research Services and Coopers & Lybrand, in partnership with Business Science International, found that better performing businesses focused on a strong marketing program during the 1990-1991 recession. This allowed them to solidify their customer base, steal business from their less aggressive competitors, and position themselves for future growth during the recovery.
The Power of Television
Summer Vallillee and Jessica Avery, Client Consultants with Nielsen Canada, say that continuing to advertise during an economic downturn, especially on television for fast-moving consumer goods, yields a higher long-term (3+ years) return on investment (ROI) than other types of marketing. Advertising ROI also improves when TV ads are combined with other marketing tools, such as trade deals. The combination of the two can yield 18% greater profitability over the longer term. Eliminating TV advertising in order to reduce short-term marketing expenses can have negative long-term results.
The media buying agency ZenithOptimedia points out that television is doing relatively well during this economic downturn. It explains, "as happened in the previous two downturns (in 1991/92 and 2001/02), advertisers will continue to shift their expenditure from secondary media to television, being familiar with its power to build brands. . .Television viewing tends to rise in recessions because it offers escapism, and at a much lower price per hour to the consumer."
Sources: McGraw-Hill Research, Penton Research Services, Coopers & Lybrand, in conjunction with Business Science International and The Strategic Planning Institute of Cambridge, MA, Meldrum & Fewsmith, CARF"s Workshop on "Advertising in a Recession" (March 2008), C21Media, 12/08/08
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