Most “corporations are still choosing to cut costs as a means to improve productivity as opposed to investing in human or technological capital.” – Carl Tannenbaum, LaSalle Bank/ABN Amro
One of the first business casualties in a recession is often the advertising budget. The instinct is to save money by cutting back on advertising. Though this strategy might seem to make common sense, recessions are times that call for uncommon business wisdom. Recessions reward the aggressive advertiser and penalize the timid one.
A recessionary market can provide an opportunity for an industrial business to break from traditional budget-cutting patterns and build a greater share of market through aggressive media advertising. This according to The Strategic Planning Institute of Cambridge, MA in an analysis of more than 1,000 industrial businesses in the PIMS (Profit Impact of Market Strategy) database.
In fact, the study indicated that businesses that are aggressive media spenders can increase their share of the market more than the average business during market downturns. Correspondingly, businesses that reduce media expenditures in expansion times suffer the loss of market share. It was demonstrated that aggressive businesses may be able to accomplish these gains through greater expenditures without reducing short-term profitability.
Businesses that maintain aggressive marketing programs during a recession outperform companies that rely more on cost-cutting measures. Penton Research Services reports that shortly after the 1990 – 91 recession, Coopers & Lybrand, in conjunction with Business Science International, surveyed CEOs from growth companies about the effect the recession had on their profit growth and the actions they had taken in response.
Better performing businesses were more likely to have taken such actions as selling to new customers, expanding to new markets, and increasing ad spending. A larger percentage of firms only “somewhat” slowed by the downturn than companies “significantly” slowed indicated that marketing actions were most effective in coping with the recession. A strong marketing program enables a firm to solidify its customer base, take business way from less aggressive competitors, and position itself for future growth during the recovery.
A survey determined that 3 in 5 growth companies slowed by the recession found aggressive marketing worked better than traditional cost-containment measures to beat the downturn.
- Among those firms reporting they were ONLY SOMEWHAT slowed by the recession, 63% placed primary focus on marketing; 26% focused on cost containment.
- In contrast, firms that were SIGNIFICANTLY slowed by the recession were considerably less market-driven as a group: 46% placed primary emphasis on marketing; 45% concentrated first on -cost containment.
These results bear out the effectiveness of an offensive strategy in times of economic uncertainty. Generally, companies looking first to build market share fared better than their counterparts who relied predominately on cost-cutting techniques.
Further, an overwhelming majority of American executives, 86 percent, agree that companies that advertise in a down economy stay more top-of-mind when purchase decisions are being made and create more positive impressions about their commitment to their products and services. And a whopping 99 percent agree that even in a down economy, it’s important to keep abreast of new products and services, according to a Yankelovich/Harris Interactive Research Report.
About the Author
Devon Blaine is experienced in all facets of the communications industry. Formerly an actress, model, and stunt driver, she founded the agency in 1975. Besides designing communications campaigns that help businesses maximize their success, she has long been active in numerous entrepreneurial organizations, thus earning a reputation as “the entrepreneur’s entrepreneur.” She has incorporated the knowledge gained from these ventures into the philosophy of The Blaine Group. The agency has an award-winning track record in serving the public relations needs of fast-track emerging-growth companies and major corporations alike.
She was three times president of the Los Angeles Venture Association (LAVA), a founding board member and a past president of the Los Angeles chapter of (NAWBO) National Association of Women Business Owners. Devon also serves as a mentor for the Stubbs Alderton & Markiles Precelerator, the South Bay Entrepreneurial Center, and the Innovation Incubator at Cal State University Dominguez Hills.
About The Blaine Group, Inc.
The Blaine Group specializes in developing and implementing public relations campaigns and marketing strategies as comprehensive communications campaigns or as stand-alone entities. The firm represents many authors and fast-track, emerging-growth companies. It also handles investor relations and financial public relations activities for its publicly-traded clients. The Blaine Group is located at 8665 Wilshire Blvd., Suite #301, Beverly Hills, CA 90211. The telephone number is 310.360.1499 Visit www.blainegroupinc.com.