Ads in a Recession
While you can't advertise your way out of a recession, you can have a strategy for grabbing a larger "share of mind. "
Your sales are soft, profits are down, and the press is obsessed with economic gloom and doom. Your advertising doesn't seem to be pulling, and you are thinking of cutting back, saving your bait until the fish are biting again. Then along comes your ad agency account executive telling you to spend more, to "advertise your way out of the recession."
If that sounds like something you heard in the last recession, you're right. Ad people have been trying to prove that advertising is an effective weapon during economic downturns since at least the twenties. An ad man writing about a study of the 1923 recession in the Harvard Business Review concluded that "of 200 companies studied, those that advertised prospered."
Aggressive marketing during recessions does make sense in most cases, and may be even more essential today. You can no longer count on your competition to lie low during economic downturns just because you do. This may be especially true of foreign competitors, who may not be suffering to the extent that you are and can afford to take an aggressive marketing stance.
But you do have to be more nimble than ever to ensure that each dollar you spend on advertising is effective. Smart marketing during a recession requires that you understand the trends in your industry, appreciate consumers' changed buying habite and devise a strategy to grab market share from weaker competitors.
For starters, your advertising strategy should be based on economic and geographic patterns in your own industry. The duration and depth of downturns may vary from industry to industry and from region to region. As we saw in the eighties, prosperity and recession can occur at the same time in different parts of the country. To deal successfully with recession, you should learn all you can about typical cycles in your own business. For example, you may want to cut back on advertising at the onset of recession but start spending heavily when you judge that the recovery is about to start.
You should also know as much as possible about consumer psychology in these cycles. Diffcult as it is to predict in good times, consumer behavior becomes even trickier during recessions.
Fear is a principal motivator. Consumers become cautious and conservative in a downturn, normally placing a higher value on well-known brands and trusted names. Occasionally, however, they show a willingness to break away, to try something new that may be more rewarding — perhaps as a way of offsetting the recession blues.
Some shifts in buying patterns are familiar from past recessions. For example, people tend to travel less frequently by air, and instead make greater use of the telephone. They do less eating in restaurants. On the other hand, they may reward themselves for their belt-tightening by increasing their consumption of convenience foods such as deli counter and gourmet takeout meals from supermarkets.
During normal growth periods, many people seem to feel they should be able to afford more, and that compared with what others have, they have been slightly cheated. They have higher expectations in good times, when all seems well with the world. The old metaphor of "keeping up with the Joneses" is an important part of the consumer mind-set.
During a recession, the employed tend to feel thankful they have jobs and are not nearly as discontented. They may now perceive that the Joneses are unemployed or in deep financial trouble. They are less willing to buy on credit, and more willing to defer purchases that once seemed essential.
To cope with the fear factor, advertisers have to work harder to provide a rationale for buying now rather than later. They must offer reassurances that customers who buy their product now are making a sound decision and not a frivolous one. They must portray the product as a conservative, sensible investment.
Advertising alone, however, cannot spur people in a recession to buy as much as they normally would in better times. That does not happen — despite all the enthusiastic advice to "advertise your way out of the recession."
Assuming you already are advertising at levels that will ensure the best return on investment, any planned increases in spending are not likely to turn your market around, although they may slow the drop. Whatever your level of spending, you can expect some loss of ROI during the recession. It may fall less than you would suppose, however. A study of the 1981-1982 recession by the Strategic Planning Institute, a think tank in Cambridge, Massachusetts, showed that ROI for its 200 or so member corporations fell on average only from 28 percent to 24 percent.
What seems to happen in many industries is that market shares change during recessionary times. Weaker companies retreat, at least from market segments they consider secondary. As a result, they lose ground to stronger companies that have the means to move swiftly into these segments or spend heavily to slow their own sales decline. Under these market conditions, advertising can help companies capture a share of mind, which, in turn, leads to a larger share of market, which, in turn, increases sales.
Above all, a company should have an advertising strategy for the recession, a plan to maintain or expand its share of mind. Here are some specific things you can do:
Gather data on long-term trends in your product category. Use your own records, industry journals, and trade associations. Don't forget to examine the annual reports and other available data from publicly held competitors. The reports of investment analysts on these companies may be the most helpful source of all.
Guess as to the like1y length of the recession in your industry. Sure you may be wrong, but developing a plan is not as risky as drifting with no plan at all. If you are conservative, estimate the length generously. If you are aggressive, figure on a shorter duration.
Spend more coming out of the recession than you did going in. This is counter-intuitive: The natural inclination of companies is to attempt to stem the drop in sales with stepped-up advertising. Later, when the downturn continues and financial pressure builds, they cut back sharply. This is like taking your foot off the gas just when you're reaching the top of the hill.
Don't confuse a weakening trend line in sales of your product with a recession. Advertising for a product category that is saturated (for example, television sets) will not be nearly as effective as dollars spent on promoting a growing product category (such as video cameras).
Decide where to deploy your resources. You must figure out where to concentrate your advertising dollars, the market segments you want to defend, and those in which you'd like to increase market share, Take into account how your competitors are likely to counter your strategy.
Cost out your ad program based on these objectives. Look for ways to cut corners. You don't always need large color ads to accomplish your creative goals. You can shave a column off a full-page newspaper or magazine ad and run it in black and white.
Employ flights of ads, running them a few weeks at a time with brief stretches in between. But avoid long lapses between flights, lest consumers forget you and your message.
Negotiate with the media for savings. Make them a partner in what you're trying to accomplish, which is steady pressure during a troubled period. Magazines are in their own reces- sion and are increasingly open to bargaining. The television networks aren't giving an inch so far. But local media generally respond favorably when an advertiser has a plan and is willing to help the media's own planning by committing future dollars.
Consider bartering for space and time. Such arrangements may become increasingly popular if the recession deepens.
Rethink your creative directions. Values such as trustworthiness, reliability, and long-term service become even more important during recessions. Therefore, pushing lower prices may not be the best strategy; it may, in fact, tend to cheapen the product and the reputation of the company. Rather, look for ways to persuade customers that making a purchase now has advantages over delaying it. An offer of extended service contracts, for example, may trigger sales without detracting from your product's quality image.
Most of these suggestions are plain common sense, even when there's no recession. There is much to be said for coordinating advertising spending with industry cycles rather than the conventional calendar or fiscal year planning. And understanding the psychology of your marketplace is about as fundamental to productive advertising as anything I know.
Tom Garbett is corporate advertising director at Doremus & Co. and the author of two books on the subject.
What's worked in past downturns
During the 1973-1975 recession, Quaker Oats increased sales by suggesting that its products were a cheap source of protein. In later recessions, Quaker has also stressed economy by showing the low cost per serving of its cereal.
In the 1980-1982 recession, Arm & Hammer promoted the old habit of brushing teeth with baking soda. Later, it introduced a toothpaste based on baking soda.
Also in 1980-1982, A-1 Steak Sauce began to push use of the sauce on hamburger.
In the same recession, Ziploc boasted in its ads that its sealed food bags were an excellent way to save high-priced leftovers.
While admitting that its tires were slightly higher-priced than competing brands, Michelin, in its 1980-1982 ads, stressed that they were "surprisingly affordable."
Both the Sony Walkman and the IBM PC were introduced during recessions, suggesting that good new products can achieve success even in a tight economy.