Tell me if you’ve ever heard the following: “All research shows that businesses that spend on marketing in a recession are ahead of their competitors when the economy recovers.”
In the last year, I’ve heard this statement at every networking and conference event I attended. It’s a great buzzword, and if people actually believe it, that would be even better. I am the principal of a marketing company, and I need my clients to think about the value of marketing.
Here’s the question: What research is this? But I haven’t heard any of the marketers who have uttered these words of wisdom, such as name a researcher or cite a report that relates to their findings. I decided to call them on their bluff and examine “all the reports” that my colleagues keep promoting.
After conducting an internet search, I came across several articles and papers referencing studies that support this sound bite.
- American Business Press, Inc., 1980. “How advertising in recession periods affects sales.”
- ABP/Meldrum & Fewsmith Study, 1979
- Dhalla Nairman K., “Advertising As An Antirecession Tool,” Harvard Business Review Jan.-Feb., 1980
- Kijewski, Dr. Valerie. Cahners Advertising Research Report, “Media Advertising when your market is in a recession.” The Strategic Planning Institute.
- McGraw-Hill Research. Laboratory of Advertising Performance Report 526, New York, McGraw-Hill 1986.
- Greenburg, Eric Rolfe. “Fortune follows the brave,” Management Review (January 1993).
Eureka! These studies would allow me to tell my clients, “Spend! Spend! Spend!” They wouldn’t need to believe me because I have the data. Just needed to refresh my memory on the information.
It seems that a citation of a research report from 25 years ago is much easier to find than the report itself. I found a recent study, along with some summarised findings, on the reports mentioned above. As is the case with most data, the information can be twisted in many different ways.
In 2005, a study entitled “Turning Adversity into Advantage: Does Proactive Marketing during a Recession Pay Off?” was published in the International Journal of Research in Marketing. The authors of the study note that firms that actively market in a recession report positive results.
You could stop there, or I can also say that it’s not a universal rule and that companies are not advised to increase their marketing budgets in recessions.
Marketing is so integral to the business strategy of large consumer brands like BMW, Dell, and Wal-Mart that drastic cuts in marketing would have a greater impact on their bottom lines than just the recession. B2B organizations that have active sales and business development teams may not feel the same effect of a reduced marketing budget because marketing is a component of filling up the sales pipeline.
Companies need to be aware of the impact of marketing on sales. Will marketing cuts made on a whim hurt the business long-term? Likely, strategic marketing cuts based on the customer’s spending capacity and how it impacts an organization’s sales process are smart business practices.
The McGraw-Hill report on the US recession of 1981-1982 is the one that seems to be cited the most. The study concludes that “business-to-business firms that maintained or increased their marketing expenditures during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased marketing.”
You may have the same gut reaction as I did to this statement. If you frame it differently, however, the concept behind the statement has a real impact. “If your company decreases communication with your current and prospective customers and your main rival maintains or increases communication with your current customers and potential clients, whose business will grow more during and after the recession?” Each organization is different. If you want a clip that explains why marketing is important, this one would be a good choice.
If the revenue doesn’t exist, no one will be able to make a marketing budget appear. This is especially true for small and mid-sized businesses. Instead of trying to find yesterday’s budget in vain, marketing professionals should be smarter about what they already have. What does this mean?
Before launching a project, it is important to set measurable campaign objectives. First, talk about the results. If you are unable to launch a campaign with the budget allotted and achieve the desired results, you should scrap it and focus on something more measurable.
This does not mean Social Media “because it’s free!” Social media isn’t free unless you count person hours. It can be expensive if there are no clear objectives and no vision for the campaign.
You can continue to expand your media mix but still manage it. You can’t do everything. You can’t be everywhere. You can only do enough to get one round of data for each communication channel. Choose the channels with the greatest impact.
It also means battling for your customers. Some companies will not survive the recession. It is important to be creative in your pricing and with the products and services you offer, as well as working harder than your competitors.
Rather than spending, companies should plan marketing for the recession. Yes, you should market. But market smartly.