Editorial
Cutting AdvertisingDuring Recession is Not an Option
These are challenging times for businesses.Many local operations -- big and small -- are struggling to recoupdifficult losses sustained during this year. And companies everywhereare faced with tight budgets and tough decisions. Small retailstores are struggling to stock their shelves, meet the cost-cuttingtactics of competitors, and draw in now-frugal consumers whosepurchases they scrutinize more so now than ever.
But the reality stands that everyone stillneeds petrol for his or her cars. Families need to eat. Childrenreturning to schools need clothes and supplies. And, people stillneed supplies from light bulbs to gardening tools. Businesses,large and small, who sit back and weather the storm with the beliefthat, once the economy picks up, so will business are missingout on tremendous opportunities. Companies must show the consumerthat they are stable enough to withstand hard times.
Now is the time for smart companies to seizemarket share and position themselves to lead the inevitable economicturnaround. Business owners must remember what it was like tostart a new business, gain name recognition and entice customers.Withdrawing from the public until the economy picks up and cash-flowincreases will mean having to reinvent the company all over again.A cost that will weigh far more than a few quarters with lowerthan average profits.
The way for companies to maintain theirmarket share is simple: To Advertise.
Take, for example, the real estate and developmentindustry. Despite a decrease in revenue, The Ritz Carlton continuesto rise, realtors continue to show property, and even fast foodestablishments continue to race to fill the orders of those hungrypatrons who only have time for a quick bite. Why? Because thesebusinesses continue to advertise. Construction is beginning topick up, the availability and need for owner-occupied homes hasnot waned, and the consumption of food has not been put on hold.
In a study of the United States recessions,McGraw-Hill Research analyzed 600 companies in 16 different industries.The results showed that businesses that maintained or increasedtheir advertising expenditures during a recession averaged significantlyhigher sales growth, both during the recession and for the followingthree years, than those that eliminated or decreased advertising.Sales of companies that were aggressive recession advertisershad risen 256% over those that didn't keep up with their advertising.
History shows that companies that fare thebest during hard economic times do so by continuing to communicatewith customers and build their brands regardless of temporaryeconomic conditions. These companies actually increase their advertisingand marketing spending during economic recessions, and later reaphuge dividends on their investments.
If a company fails to maintain its marketidentity during an economic downturn, current and future salesare jeopardized.
Maintaining market identity costs much lessthan rebuilding it later on. Advertising through both boom anddown times sustains the necessary brand recognition. And, herein Cayman, there are institutions set up to assist the businessowner in maintaining their market share. There is help for thecompanies who shudder at the idea of having to close their doorsafter years of service to the community and revenues for the company.
Maintaining a company's advertising duringan economic downturn will give the image of corporate stabilitywithin a chaotic business environment and give the advertiserthe chance to dominate the advertising media. During an economicdownturn, a strong advertising/marketing effort enables a firmto solidify its customer base, take business away from less aggressivecompetitors and position itself for future growth during the recovery.
Simply put, advertising during an economicdownturn should be regarded not as a drain on profits but as acontributor to profits. Increases in market share brought aboutby advertising can be achieved more cost effectively during arecession. A company that advertises aggressively during thisperiod will be better placed to increase profitability once themarket in which it operates returns to a condition of stabilityor expansion.