Should I Advertise During An Economic Slowdown?
When times get tough and the belt-tightening begins, as Marketers, we know that one of the first budgets to take a hit is the marketing and advertising budget. Conventional wisdom, which it really shouldn’t be at all, is that if demand is declining and there are fewer customers, the marketing budget should be smaller to reflect the shrinking audience. But is that the right move? Is there solid financial data to back that up? We did some research and the answer is rather surprising.
The historical evidence uncovered indicates that brands that maintained their marketing budgets during economic downturns fared much better than their counterparts who made cuts. We’ll outline a few examples in moment, but the general consensus is that those brands who maintained and accomplished the following benefits: Increase in market share, faster recovery of sales and growth than competitors after the rebound.
This dates back to the Great Depression. In the 1920s Kellogg was an upstart in comparison to its rival, Post, who dwarfed Kellogg’s sales. However, during the Great Depression, Post made significant cuts to its marketing budget while Kellogg doubled down on radio and print, even promoting its newest product, Rice Krispies. As a result, Kellogg’s profits increased 30% and their market share surpassed Post crowning them new industry leader.
Or, for something more recent, we can review McDonald’s during the 1990’s recession. In response to flattening sales, McDonald’s cut their budget in order to weather the storm. Meanwhile, much smaller brands like Taco Bell and Pizza Hut held the line and maintained their budgets. The results? After recovery, Pizza Hut saw a 61% increase in sales, Taco Bell and 40% increase, and McDonalds saw a DECLINE of 28%.
The reality is that customers didn’t vanish, it is more a measure of demand becoming pent up as consumers wait for things to stabilize. And once the economy recovers, the demand is unleashed. It is important to invest in your brand in order to leverage this sudden increase. We learned this through the COVID lockdowns that once everything opened back up a huge wave of demand was unleashed across markets driving shortages and driving up prices.
The moral of the story is that if you treat marketing and advertising like an expense, it will behave like and expense and be a drag on your business. If you treat it like the investment it is meant to be, done carefully and intelligently, it will yield a return that will put your brand above your competitors.
