People still believe that every business must continue, even increase advertising to come out of this recession “alive” and perhaps as a market leader.  They’re wrong.

I interviewed a European executive for an upcoming engagement in Lithuania who said, “As we know, advertising more during a recession makes a company come out stronger once the recession is over.”

I thought; do we actually know this?

After all, if advertising were the key ingredient to recessionary success, everyone should and would advertise and be guaranteed growth and survival. 

So I called ten ad agencies and questioned the gurus.  Did they know the source of the theory? Even the wise sages of advertising admitted they had no proof.  Further, NOT ONE had increased its own ad program and budget; three had downsized, laying off staff.

I also contacted advertising professors and studied the stats including a McGraw Hill research study of 600 firms. In 1981-1982, firms that maintained their ad spending averaged higher growth during the recession, with sales rising 256% over those who cut back on advertising. Although the numbers and studies could persuade you to continue to spend, beware of what all the study didn’t say.

The study doesn’t track firms that went out of business—they could have been big advertising spenders—nor did it include struggling firms due to a number of shortcomings lie poor marketing and outdated products. An elephant could crawl through the holes.

The data seemed to be inconclusive.  Here were my thoughts.

·         If advertising by itself meant proven growth then everyone should be growing just by advertising and if everyone advertised they’d all win.  The president could then just say to the auto industry and the banking sector, “Advertise and thou shall grow.” Yeah right! 

·         The data suggests that markets and industries operate in a vacuum with companies spending efficiently with all advertising yielding returns. The “science of advertising” hasn’t been proven.

·         There’s more to advertising yourself into success.  Those professing more advertising don’t consider operational and legacy costs, consumer behavior, inflation/deflation, currency valuation, and product viability when determining expenditures during a bull or bear market.

·         The research was conducted in hindsight and not based upon sampling companies prior to the recession, to accurately compare and assess advertising returns pre and post recession.

·         The data supporting the cause often refers to new product launches or entrepreneurship as the basis for growth during and post recession.  Consider that any new venture always starts off with a zero advertising history and desire and need to advertise and market.  This data should not be confused with increasing or decreasing advertising.  If a new product is launched during a recession, decision makers have already redefined their product/ service to fit current conditions. New products’ and/or companies’ stats can’t reliably predict success for established products and/or companies like Dell, Toyota, Lufthansa, Caterpillar, and Hilton.

·         Measuring advertising success and Return on Investment even in today’s computerized world of analytics can be difficult.  Since the myth “advertise during a recession” has been around longer than my grandmother, how precise were the analytics during the thirties, fifties, or seventies?

·         During recessions, companies are inclined to decrease advertising budgets for fear of the future and to balance expenditures with decreased revenue and compressed margins.

·         Firms increasing advertising spending have likely been prudent—lean and mean and operationally efficient—prior to the recession now having money to spend.  Oracle, Johnson and Johnson, Microsoft, and Exxon today have lots of cash. This doesn’t mean that if they saturated the marketing with advertising, Microsoft would sell more Microsoft Office. In fact, I’d argue it would be a waste of their cash in today’s climate.

·         Aggressiveness in advertising does not always equate to increased revenue in a strong economy, so the case for it during a recession is still speculative.  If this were true, give your ad agency all your money and you’re sure to grow. 

·         Often what appears to be heavy advertising is an attempt to move inventories, especially seasonal, annual, or dated, rather than to increase market share or to grow.  Saks ran the 70%-off 2008 Christmas sale earlier than its competitors did to get rid of inventory to avoid holding merchandise. Although this may look like marketing during a recession, I’d call this tactic “bailing out the boat so it does not sink.”

·         Advertising volume can appear to be increasing in certain segments during a recession, yet  a closer look may also reveals that the entire advertising and promotion industry may also be discounting similar to traditional firms.  This means a $35,000 ad campaign may appear like a $60,000 campaign in exposure.  Newspapers, radio, TV, cable, Internet, printers, call centers are all trying to survive.

What does this mean? That advertising during a recession won’t create more business.  No.  It just means that the “continued and increased advertising during a recession” can also lead to disaster.  Your real job must be to determine whether advertising is actually good for YOUR business at this time.

Here’s where I’ve seen advertising shifts that will help guide you’re thinking today:

1.       Serve current customers: Given your cash flow, resources, and other individualized factors, you might be safer to serve your current customers—get to know them better — no new advertising dollars needed—rather than to attempt to gain more market share—requiring more money to gain visibility and to persuade.

2.       Protect cash: Cash-flow analyses, budget reductions, staffing changes, and scheduling adjustments are just some of the ways that you can stretch your organization’s dollar.  If you don’t have the stats and track record to support an actual ROI on advertising, think about putting money where you do know you’ll get a return on it.

3.       Adjust pricing structure: How beneficial, valuable, and useful are your products and services during this time? The answer will help you understand whether you need to reduce, maintain, or even increase your prices. Be careful if you do drop prices as this may have a long term consequence.

4.       Shift to alternative marketing means: Advertising alone isn’t a magic pill. You might find that one-on-one phone calls with current or prospective buyers is a more cost-effective way of maintaining or increasing sales.

5.       Improve what you sell: Are your products and services on par with your competitors’ wares? Now could be the time to change or even overhaul your offerings to better meet the demands of today’s current marketplace.

6.       Be flexible: Expand or contract your organization to weather this storm.  You want to be poised to take advantage of opportunities that become present as the economy rebounds, and that means making smart choices today.

7.       Shift focus to targeted marketing :  You might be wasting money by blanket marketing without clearly defining the buyer.

8.       Assess whether your products are worth selling:  I tell my NYU students, “People fall in love with their own ideas.”  End the love affair, divorce the product, free up cash flow to increase efficiencies.  You’ll have more advertising money to promote newer and better products, too.

9.       Control inventory:  If you end up holding too much inventory—a real no-no in a recession—you might need to increase advertising to unload it.  Further, advertising doesn’t guarantee that buyers will take extra inventory off your hands.

10.   Work on new product and service development for two reasons: One the market has changed and two when firms emerge from a recession the market or consumer behavior has changed.  For example, this recession is creating a buyer behavior where they are waiting to make the purchase after the price has dropped to it’s lowest point – deflation.

11.   Review your advertising agency with an updated perspective.  Money flowed easily during the past boom, so your agency might have been just riding a wave and not as skilled as you thought.

12.   Spend more time looking at your P&L to see if the advertising is really working or are there are factors that need attention and that no advertising will help.  Me too products, poor quality or service issues may bring customers in to buy but then they leave out the back door empty handed. I bought custom-cut metal from a local company, and the pieces came in scratched. I rented two cell phones for my trip to Europe, and one failed to work.  I won’t use either company again. 

13.   Discount only when necessary.  While making a purchase in Lithuania last week, a store clerk stunned me with an impromptu offer of 45% off. Prepared to pay full fee, I wondered how much the store lost by discounting too early.

14.   Sometimes old strategies work best and maybe not.  Pick up the phone, visit face to face, or write a letter. Tweet, email or blog.

The repercussions of The Great Depression of the 1930s lasted over 25 years. Today, as millions lose jobs and homes and “experts” guess when we are bottoming out, we can’t predict how long close to 6 million US citizens and a possible 50 million global workers will be without work.  Therefore, every dollar spent must count toward growing your business and/or keeping your prospects and customers buying from you when they’re ready to buy. Ignore the myth and think on your own.  Then take your next best step.  

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