With the talk of an economic recession being inevitable, many companies will look to cut advertising spend – but this is why you should maintain your advertising efforts – and even increase them!
The coronavirus outbreak has caused a global crisis the likes of which has not been seen in living memory. Not since the Spanish Flu has there been such a significant virus pandemic and no one saw this coming.
So now, all but the very biggest of businesses have shifted their priority from growth to mitigation, and in many cases pure survival – conserving as much cash as they can until the storm has passed.
Stock markets around the world have been affected significantly as the virus has spread and businesses are preparing themselves for an inevitable economic shrink. If a recession does come, and it almost certainly will, businesses will look to cut back spending in any area they can.
In many cases, the first thing to go from the corporate budget is advertising.
According to Forbes, in the aftermath of the last recession in 2008, ad spending in the U.S. dropped by 13%.
But in a recession there is a golden opportunity. Advertising in a recession is a vital strategy, even to be increased, in order to maintain a strong image to potential customers and clients.
Not only does the cost of advertising generally drop during a recession, it acts as a once-in-a-decade chance for a company to seize a larger portion of the ‘market share’ and increase not only their presence in the market but their influence. Advertising is the only way to do this effectively.
According to Forbes, “An increase in ‘share of voice’ typically leads to an increase in ‘share of market.’ An increase in market share results, with an increase in profits.”
Thinking long term is crucial in a time when others are focussed on the short – and this set of circumstances is no different. It can be the difference between surviving the recession and thriving beyond it.
One example underpins this point perfectly: Kelloggs’ cornflakes. In the 1920s, there were two powerhouses of dry cereal: Kellogg’s and Post. When the Great Depression came, Post played it safe and drastically cut their advertising spend. What did Kellogg’s do? They significantly increased their ad spend and even used the quiet market volume to push a new product: Rice Krispies.
On the back of that bravery and long-term thinking, Kelloggs’ profits grew by 30%, they overtook Post, and became the undisputed leader in their market.
So for all the shooting companies who might be reading this, and are thinking of cutting their ad spend to manage the recession, ask yourself this – do you want to be Post, or Kelloggs?