Tough Times. Tough Decisions.
August 19th, 2008 | Posted by Stan
During down economic times, many companies face tough decisions. Sales are down, price-cutting is prevalent, staff is being reduced and lack of revenue is killing them. These are extremely difficult realities to deal with and even harder for companies to figure out the best way to navigate these stormy waters.
Unfortunately, marketing (and in turn advertising) is usually one of the first places that companies look to help save the bottom line. Seems to makes sense. It is an expense that they can save now. If the company goes dark for a while they should be okay, customers will still be there later. Then when times get better they’ll reinstate the marketing budget.
I am not insensitive to the challenges facing companies today. I understand the hard financial decisions that need to happen during down markets. I’ve lived through a few. And each company is different, their business model is different and their objectives are different, so my thoughts may not apply to all. But in my most simplistic viewpoint – if revenues are down, wouldn’t you want to support the area that should help generate business for your company?
Here’s some food for thought from an article on MacTech.com:
“In a study of U.S. recessions, McGraw-Hill Research analyzed 600 companies covering 16 different SIC industries from 1980 through 1985. The results showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn’t keep up their advertising. Sales for the companies studied were relatively even before the recession, but varied sharply during and after it. Companies that cut advertising during both of the recessionary years maintained flat sales during the period and only modest sales growth in the following two years. In contrast, the companies that maintained their advertising experienced significant sales growth throughout the four-year period.
“A series of six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only increases sales but increases profits. This fact has held true for all post-World War II recessions studied by American Business Press starting in 1949.”
You can read the entire article here.
Based on the research, there are tangible reasons for turning it up in a down market. And yes, tough times call for tough decisions, so there are no easy answers. And marketing isn’t necessarily the silver bullet that will make everything all right for every company. But marketing can be an integral investment (not an expense) that can help sustain the organization through tough times now and reap greater rewards in the future.




