The Truth About Marketing in a Recession

January 26th, 2009 by Bob Bly

Whenever there is a recession, all the ad magazines run articles extolling to their readers the importance of continuing to advertise in a recession.

Since these articles are usually contributed by ad agency owners and marketing consultants, one could make an argument that they are self-serving.

After all, the marketing consultants and ad agencies make money only when companies buy their marketing and advertising services.

Do they REALLY believe that spending money on marketing in a recession is smart business?

Or are they pushing clients to keep spending so the consultancies and ad agencies won’t starve?

During a recession, when money is tight, should companies ramp up their marketing activities and spending … keep them steady … cut back … or stop altogether?

What say you?

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This entry was posted on Monday, January 26th, 2009 at 10:04 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

45 responses about “The Truth About Marketing in a Recession”

  1. dianacacy said:

    Sadly, I say yes. Maybe not an increase in advertising as much as an increase in quality of the advertising. Recession time is not a time to be a lazy advertiser.

    People are more conservative. They will need to see your ad more often to convince themselves it’s ok to spend the money. They will have to feel that they need the product or else they may not go for it.

    When money is tight, I believe the advertising spending should depend on the company, the product, and the market. If the company has a good advertising campaign going and their product is a necessity that the buyers will not stop buying during hard times, I say stay steady.

    Whatever a company does, they need to get with a good marketing consultant and explore their choices.

  2. Bob Bly said:

    Dianacacy: To play devil’s advocate: does every company REALLY need to “get with a good marketing consultant”? Given the wealth of marketing advice available online today, can’t a business owner or manager learn and do this on her own?

  3. Ken Norkin - Freelance Copywriter said:

    It’s not what we say.

    It’s what the research says.

    Granted, most of the research on this issue was conducted or commissioned by magazine publishers — a study by Crains (or perhaps it was McGraw-Hill) is one I used to cite back in the 80s and 90s. But the point was that companies that continued to market throughout a recession not only increased their chances of surviving the downturn but also — as compared to competitors who had cut back — increased their market share or category leadership when it was over.

    Ken

  4. dianacacy said:

    Bob,

    If the company/business owner has the time, employee manhours, and the person doing it has the capability to assimilate and use the information to the fullest effect.

    I can see them getting the basics and coming across where they can improve it here and there, but I do wonder if most have the proper resources. For many, a consultant may be a cost saver in the long run.

    I’m thinking in terms of all available avenues of advertising.

    If it involves just one area, such as magazine ads, then, yes. I believe the average company/business owner has the resources to do it.

    I may be prejudiced, but I feel the results would be jumpstarted by working with a consultant. Even if all they can afford is an hour consultation on how to improve it themselves.

  5. Note Taking Nerd #2 said:

    Dumb business owners think they’re in the product or service business.

    Smart business owners realize they’re in the business of marketing the product or service.

    Marketing never stops unless you have capacity problems. And even then you anticipate a drought by turning the marketing back on if the pipeline isn’t full enough to hold you over.

    As to how much should be done, it all depends the economics of your business. As long as the results of your marketing support your Cost Per Sale you’re golden.

    When your marketing produces the right economics ramping it up gives you the edge in a time when everyone’s running scared with their tail between their legs.

    You take all the business everyone else is neglecting.

    It all comes down to the math of your business.

    Great topic choice Bob.

    Talk to you again soon,
    Note Taking Nerd #2
    http://www.mynotetakingnerd.wordpress.com

  6. Bob Bly said:

    Ken: unfortunately, the various Crain and McGraw-Hill studies, which I have used as references in my work for years, have the same flaw of conflict of interest as the articles I cite. The studies invariably “prove” that marketing in a recession is vital, and that cutting your ad budget in a recession is tantamount to suicide. And what do the sponsors and publishers of these studies sell? Advertising space! Can you see why business owners are suspect of their findings?

  7. Wendy Sullivan said:

    There is more than one reason to keep advertising in a recession. The more overlooked one by us creative types is the SHAREHOLDER perspective. What if Microsoft were to cut its advertising budget for the recession? What would be the shareholder reaction? I’d say they’d get nervous, wondering if the company had the cash flow to operate as normal.

    Even if a company is facing ruin, they have to keep up appearances in order to leverage their brand to shareholders and banks. That way everyone can look at them with a sigh of relief and say “Oh good, they’re going to be around in 2 years time. Let’s park our money there.”

    Wendy ~ former corporate whore

  8. Ken Norkin - Freelance Copywriter said:

    Bob,

    Sure, there may be a potential conflict of interest in the advertising and publishing industry being behind the research on the impact of marketing in a recession. But, honestly, who else would have any interest in doing that kind of research in the first place?

    And regardless of whether there actually is conflict or what one may think about the conclusions, the objective facts may be independently verified. At the beginning of a recession, company X had sales of $Y and market share of Z%. At the end of the recession, throughout which they marketed at or above pre-recession levels, they had sales of $Y+ and market share of Z+%.

    If results can be documented and if it can be demonstrated objectively that the companies who continued marketing enjoyed their results at the expense of those that didn’t, then it shouldn’t matter who did the research.

    But it’s possible to throw out all the research and talk common sense along the lines of what Note Taking Nerd says above.

    It would go something like this:

    You’re in a recession, Mr. Businessman. In good times or bad, your business depends on both new customers and repeat customers (assuming in this case that’s so). So the question is: If you cut back on your marketing — including advertising — where are those new customers coming from? And if your repeat sales to existing customers aren’t automatic or if purchasing your product is discretionary, how are you going to make those repeat sales? The more expensive your product or service and the more dependent you are on an outside sales force, where are their leads going to come from?

    It’s okay if you don’t want to tell me. I’m just a copywriter who wants to help with your marketing.

    But your owners and investors might not be as forgiving.

  9. Peter Lunn said:

    In a recession a business does need to operate more prudently, but often the department most likely to face the hardest cut back is marketing.

    A recession is not the time to pull back from marketing rather it is time to be more thoughtful and creative in your marketing efforts. When others pull back, spaces open up and give the smart marketer an opportunity to step into the void.

    Slowing down on your marketing in a recession in a bid to save money is as stupid as slowing down your watch to try to save time.

  10. Michael Lockyear said:

    Surely if you stop / reduce marketing during a recession, the effects will be even worse. I think that it is reasonable to suggest that a business needs to work harder to get a sale during a recession.

  11. Scott Aughtmon said:

    Hi Bob,

    I interviewed 38 top experts in business, sales and marketing about methods that businesses could use to survive and prosper in a recession.

    And when I asked them, “What’s one of the common mistakes that most businesses make in a recession?,” almost every single one of them said, “They stop advertising.”

    I like what Jay Conrad Levinson (Guerilla Marketing author) said in his interview, “Stopping marketing to save money is like stopping your wristwatch to save time.”

    I think business owners need to keep marketing during this time. They just need to be smart about what kind of marketing they choose.

    They need to make sure it’s tested marketing, and direct response marketing, so that they’re looking for some response to every ad. They can’t just advertise to “get our name out there.”

    They should focus on “2-Step” marketing and get people to raise their hands and show interest before they try and sell them something.

    That’s my 2.5 cents. :)

  12. Michael-Software-Ent said:

    Okay, I’m not sure how many of these excellent comments are from folks who own businesses other than those selling copywriting/marketing services (or similar line of work).

    I own a software company, and perhaps can add a different perspective.

    Over the past 3 months, I’ve cut my advertising dollars (PPC). Why? Let me give a simplified explanation. I run 10 different Google PPC ads. They all used to be profitable until about 6 months ago. Now only about 4 of them are – the other 6 ads lose money. They were more targeted at “fence sitters”, who don’t buy any longer.

    So, I’ve stopped running those 6 ads – and only run 4 ads now. I’ve cut my ad dollars by almost 50% in the process. (I’ve oversimplified to get the point across here).

    I’m not sure I believe this “Thou shalt advertise more during recession” mantra. As Bob points out, almost always those who preach that are biased.

    As Warren Buffett once said – “Don’t ask a barber whether you need a haircut”. Because the answer is always “Yes”! :)

    P.S. My company is profitable. It will remain profitable, as long as I only run profitable ads. What will YOU do if you were in my position?

  13. Roger Cufaude said:

    I will start by saying I am a neophyte in the world of advertising, but I think I have a fair bit of common sense. (I’m studying copy writing)

    Any “study” can be weighted to one side or the other and I always suspect them until I find out who paid for it—including scientific consensus and polls. The adage “follow the money” works well here.

    While I hope companies will still advertise during this dip in our economy, I would think people responsible for the advertising buck would, at least, be more cautious if not down right stingy with it. And who can blame them. Michael (above) illustrates my point and I think his 50% figure is accurate. It could grow higher though in the coming years…ouch!

    It does make me wonder if I have chosen the right path in my studies. But I’m not of “the sky is falling” crowd so I remain optimistic.

    Roger

  14. Anregen vs. Einsparen: Werbung- & Marketing-Etats in Zeiten der Rezession | Werbeblogger - Weblog über Marketing, Werbung und PR » Blog Archiv » Anregen vs. Einsparen: Werbung- & Marketing-Etats in Zeiten der Rezession said:

    [...] Bob Bly stellte vorgestern in seinem Blogeintrag The Truth About Marketing in a Recession sich und seinen Leserinnen und Lesern die Frage, die ich mir weiter oben stellte: Argumentieren wir [...]

  15. Neil said:

    Bob:

    Two simple points in response to your post and reply to diancacy.

    1. Those who have the strategic plan and the resources (cash) will always come out ahead in a recession by promoting their business to take market share. My current strategy.

    2. If the company owner can do their own marketing effectively (time, expertise) then they probably don’t need a copywriter either. (grin) I will always outsource to ‘experts’ if I can’t muster the talent from within.

    Thanks again for you postings. I share them often in my business news publishing world.

  16. Jodi said:

    The answer is not necessarily “more” advertising. The answer is smart advertising. I’m a marketing consultant too and I agree with Michael that continuing to run unprofitable ads would be foolish.

    It would be equally short-sighted to stop ALL the ads he’s running. A viewer comment sent in to MSNBC recently said that during the last downturn, his business stopped marketing to save money. Pretty soon their customers forgot about them and they were out of business!

  17. Ken Norkin - Freelance Copywriter said:

    Michael,

    Yes, I’m a copywriter who writes marketing communications, so I have a bias toward marketing in a recession.

    But I also practice what I preach.

    For the first time in about 12 years, I am actively marketing myself to new prospects with direct mail postcards and letters. I’m reaching out to make more people aware of me and get them to visit my web site to see what I do.

    I can’t see any way to get new business in this recession than by increasing my marketing.

    Ken

  18. Bob Bly said:

    Michael: I’m with you, because I am also a business owner, not just a copywriter and marketing consultant. I am bombarded by calls from vendors telling me to step up my marketing by hiring them or buying their media. In some cases, it feels like they don’t really care about whether it works or if I can afford it, but that they are just trying to get me to write them a check for a few thousand dollars. Of course, they keep the money even if the ads they sell me online don’t work. I take the risk. They take none. That’s the way it should be, but it does raise into question whether their motivations and recommendations are pure and unbiased.

  19. Jon said:

    Bob,

    Quite simply business owners should always be doing more of what works.

    It’s that simple.

    Not running an ad that’s making you money is dumb, as is running one that isn’t.

    If an ad isn’t working, you drop it. If it is, you keep running it and split-test it if you can.

    One advantage of the current economic conditions is advertising rates are at rock bottom: a client of mine recently got an 82% reduction off the rate-card simply by following some simple advice I gave him.

    It’s not hard for business owners to quadruple their advertising ROI even in the best of times, simply by making the ads half as expensive to run and twice as effective.

    – Jon

  20. Lydia Dishman said:

    Hi Bob:

    To add to the responses from business owners and professionals, here is a (very prescient) synopsis of a study done in 1980 from the Harvard Business Review, “Advertising as an antirecession tool,” comes the effect of cutting advertising on the bottom line.

    “The rationale that a company can afford a cutback in advertising because everybody else is cutting back [is fallacious].

    Rather than wait for business to return to normal, top executives should cash in on the opportunity that the rival companies are creating for them. The company courageous enough to stay in the fight when everyone else is playing safe can bring about a dramatic change in market position.”

    In addition, the article points out “Advertising should be regarded not as a drain on profits but as a contributor to profits, not as an unavoidable expense but as a means of achieving objectives. Ad budgets should be related to the company’s goals instead of to last year’s sales or to next year’s promises.” (originally published by Dhalla, Nairman K. “Advertising as an antirecession tool,” Harvard Business Review, Jan.-Feb. 1980)

    Thanks for posting on this timely subject,
    Lydia
    @lydiabreakfast on Twitter

  21. Bob Bly said:

    Not to quibble with Harvard, Lydia, but was the article written by business owners, consultants, or professors? Academics who teach marketing would likely take this position, but their view only has meaning if backed up by personal experience or research. Theory doesn’t matter and never has.

  22. Lydia Dishman said:

    In the interest of full disclosure, I am NOT affiliated with Harvard Business Review, I am simply a reader who has found a lot of good information by reading their case studies.

    I quote this from their site, “all HBR articles share certain characteristics. They are written for senior managers by experts whose authority comes from careful analysis, study, and experience. The ideas presented in these articles can be translated into action and have been tested in the real world of business.”

  23. All Business Prospects said:

    Recesion has affected all.We have to do more efforts to stay in business.Thanks for sharing your thoughts
    Mike
    http://allbusinessprospects.com

  24. Becca said:

    I agree with what you’ve said, but I also wanted to add that there are some excellent ways to market your business that are free, such as blogging and other social media sites. These types of things are increasing in popularity daily, and even businesses are taking notice. I read a recent article about hot job skills for 2008, and it shows that demand for people with blogging skills has increased by 4 times what it was just one year ago. That’s incredible!

  25. Susanna Hutcheson said:

    The people who spent a ton on advertising in the Great Depression ended out the most successful while others went under. That’s proof enough for me.

  26. Bob Bly said:

    Susanna H: Can you cite a source for your claim?

  27. Frank Irias said:

    Here’s an interesting article about the way Kellogg’s came out ahead of Post after the Great Depression (because Kellogg’s kept up with its marketing efforts) :http://www.bizjournals.com/nashville/stories/2002/01/07/focus2.html

    I’m a firm believer that you should keep your name out there during a recession. You want your name in people’s minds when the economy picks up.

    Cut marketing if you must, but be smart about it. Go for direct mail or email campaigns that give you results you can track. General advertising, although effective for brand awareness, doesn’t let you account for money spent like direct response.

  28. Susan Martin said:

    I agree that companies have to step up their marketing and focus on those types of campaigns that you can track, but as Becca said, let’s not forget that advertising is just one form of marketing.

    Aside from determining which ads or direct mail campaigns are pulling most effectively, and making the necessary changes; I believe that companies have to step up other marketing efforts in other areas as well. Online efforts like expanding websites, article marketing, whitepapers and blogging, as well as offline efforts such as relationship building and networking are less expensive but very effective ways to get your message out there, with great ROIs.

  29. Marketing my business said:

    Great post. Wrote a post on something similar as it relates to what we’re doing for one of our businesses, on the marketing front, that’s working.

  30. laurence ainsworth said:

    hi bob,

    the answer is an unequivocal yes! Its not because I’m a consultant is because whatever sales and marketing you undertake recessions make it harder to win business so your cost per customer acquisition goes up. I wrote an article on this at http://tinyurl.com/bopxj9.

    The logic is simple but devastating in its result. If you need £y per month to make ends meet and you spend £x in marketing & sales to get it; and in a recession your sales metrics half for example, it now costs 2x to get the same £y. If you cut marketing spend to say 1/2x then the recession metrics deliver 1/4y. Or alternatively you just go bust.

    Rgds

    Laurence

  31. Simon Patrick said:

    The key to this is whether you know your marketing, especially advertising, is being effective.

    Most ads fail to have any traceable content, a unique offer or offer code, a number just associated with that ad, etc. As John Wanamaker said in the 1920′s – “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

    If you know which ads are profitable, and the introduction of internet tools such as Adwords has transformed this capablity, then the answer is simple: maintain or even increase spending on profitable ads.

    If you don’t know which marketing activities are profitable then you better find out, and fast.

    http://www.needsmet.co.uk

  32. Jeff Ogden said:

    I think the whole idea of more or less advertising missed the point, Bob. I think we need to start over — get a deep understanding of prospective customers — what are their pains? what media do they consume today? where do they get info?

    Then totally revamp marketing based on what you learned. Just because PPC worked in the past does not mean you should use it today. You may also find that an event like the CMO Thought Leadership Summit is vastly more effective than Search Engine Strategies.

    Question everything — that is my advice. I hope you agree, Bob.

  33. Robert Bolson said:

    In 1929, rival cereal makers Kellogg’s and Post were in a close race to win the breakfast cereal market. When the Great Depression started, Kellogg’s maintained their advertising spending while rival Post cut back. When the Depression was over, Kellogg’s was way ahead and had achieved a category dominance they have maintained to this day. Post never regained what it lost.

  34. Bob Bly said:

    Jeff: DO you think the CMO Thought Leadership Summit is vastly more effective than Search Engine Strategies?

  35. Armando Ortega said:

    Bob,
    Could be self-serving. Same as when a doctor tells you to have an annual check-up.
    Two good things about advertising and marketing during a recession: (1) There are less competitors advertising because they are more scared than you; (2) People still are buying and they love buying from those who have not given up hope. It means they -buyers- are not alone.
    Armando Ortega

  36. Mental Exercises said:

    It has ALWAYS been my opinion that it’s during these so called recessions or “downturns” in the economy that one can actually TAKE market share.

    It has become the norm to stop spending when things get tough, I for one have done the opposite whenever I could afford it. Its during these times that my business grows!

  37. John Tabita said:

    Bob:

    To answer your question, “does every company REALLY need to ‘get with a good marketing consultant’? Given the wealth of marketing advice available online today, can’t a business owner or manager learn and do this on her own?”

    In my experience, yes, they can, but most don’t. Many do not because, when they started their business, they went from “having a job” to “owning a job.” I’ve seen this time and again from business owners who are “too busy” grooming dogs, giving perms, or whatever, to take the time out to work ‘on’ their business, instead of just ‘in’ it.

    Another obstacle is fear. My cousin owns his own business. He’s quite an agressive guy (quit his job on a Friday, attended a week-end workshop on laser printer repair, and hit the street on Monday looking for business). All his marketing is cold-canvassing and he’s been very sucessful doing this way for 7+ years. But every time we talk about marketing and other ways he could get business, he gets all freaked out, because he doesn’t understand it.

  38. Portland Acupuncture said:

    The car business has been cutting back to long now that they are starting to get use to doing just that. It’s almost as if they have forgotten how they got to where they are in the first place and that is to spend money to make money.

    I say spend! But spend it wisely.

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  43. Mark said:

    I say spend because when things turn around again they’ll REALLY turn around.

  44. Mark said:

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