by Pat Yatskis – Marketing Strategist
Welcome to the first Plum Truck blarticle (part blog, part article).
Here’s the scoop on this article. I did some research last March when the recession was hitting hard. I thought, “I know businesses are cutting in pretty much every facet of their operations, but what does history tell us about the impact of cutting, maintaining or increasing a marketing/advertising budget during financially difficult times?” I know I am a nerd, but hey that’s why I do what I do.
So here you go if you are interested in this type of stuff:
Many lives have been altered and spending habits have shifted since the market has fallen out. In our area, North Dakota and Jamestown businesses have not felt the brunt of the recession, when compared with other states. All businesses are now faced with the challenge of adjusting to recession-minded customers who have lost investments or 401Ks and are loaded with fear. Businesses have a couple options.
Option One: Go into state of hibernation slashing any budget in effort to store a little fat for the winter. This is the road many take yet some are forced to. It only feels natural, not just because hibernation is normal for us living in North Dakota, but also, when fear hits our human nature has us look shortsightedly. The problem with this approach is slashing budgets allows businesses to save a little fat, but there is no guarantee that fat will last the winter months.
Option Two: take the road less traveled and capture the market.
Study after study has confirmed that maintaining and even increasing advertising efforts during a recession is best course of action not just for the longrun, but also the short run. Need proof?
During the recession of 1923 Roland Vaile, an advertising guru, tracked 200 companies and in the April 1927th issue of Harvard Business Review, the companies with the largest increases in sales were the ones who advertised the most. After World War II, Buchen Advertising, Inc. decided to plot the sales of a large number of advertisers through successive recessions. In 1947, it began measuring the annual advertising expenditures of each company. When they correlated the figures with sales and profit trends before, during and after the recessions of 1949, 1954, 1958 and 1961, they found that almost without exception, sales and profits dropped off at companies that cut back on advertising (Clark Company, 2008). Their studies also revealed that after the recessions ended, those companies continued to lag behind the ones that had maintained their advertising budgets. In 1979 another study by ABP/Meldrum & Fewsmith, covering the recession of 1974-75 and post-recession years, showed similar findings. They found that “companies which did not cut advertising expenditures during the recession years (1974-1975), experienced higher sales and net income during those two years and the two years following than companies which cut ad budgets in either or both recession years.”
Yesterday’s luxuries have become today’s expenditures for recession-minded consumers. It is important to point out that it doesn’t matter if you view your product/service as a luxury or necessity, it matters how your customers see your product or service. If your customers see your product or service as an expenditure, time to reposition.
Here is a guide for successfully implementing of this concept
Focus less on image, self-completion and self-actualization and instead focus more on relaxation, comfort and peace-emotion based advertising.
People still have money to spend on things, but they just need to be convinced that your product or service is right.