Take Advantage – Market in a Recession

Aphorisms stay with us over the years because however corny they may seem, these memorable sayings have the ring of truth. When life gives you lemons, make lemonade and every cloud has a silver lining remind us that what seems to be a bad situation can often become an opportunity if we only seize the moment. Carpe Diem. Today’s recession can become tomorrow’s big break for businesses that know how to take advantage of the possibilities and the potential for growth.

Federal Express was founded in 1971, right after two years of recession, and it survived and grew through the gas and oil shock of ’73-75. Time Inc. launched People Magazine in the recession of 1974 and Microsoft was begun in 1975 because its time had come. Go all the way back to the Great Depression and you’ll find that during that era, radios and refrigerators become household staples, although we seem to remember that no one had any money.

The truth is that while consumer spending drops in tough times, it doesn’t stop altogether. Buyers make different choices; they apply new criteria to their selections; and they search for more value and less luxury. That’s why companies have to keep advertising even in a recession. You may change your medium and your message, but you can’t stop marketing and hope to succeed because the public will forget you and your competitors will steal your market share.

Remember Schlitz with its real gusto in a great light beer? No? Neither does anyone else. Andy Azula, the creative genius who does the great UPS Whiteboard commercials came to a recent Atlanta Ad Club meeting and told the story about  “the beer that made Milwaukee famous” when it was the number two brand in the country. As the recession of ‘73 took hold, Schlitz decided that its position was secure and they stopped advertising. At about the same time, the Miller Brewing Company was an also-ran that was launching a new product. Miller Lite took the world by storm with its memorable tastes great – less filling campaign that dominated the airwaves and the consumers’ consciousness. In 24 months, Miller was number two and Schlitz was on its way to being forgotten.

“Out of sight. Out of mind. Out of business,” says Azula and the ad agency that employs him, The Martin Agency, can prove it. Furthermore, Ad Age recently produced a white paper about advertising in a down economy and called it, “a great time to innovate and change…reassess.” You can either cower in the corner, cutting your budget and your sales efforts which will multiply your losses now and make it harder for you to compete in the future or you can take charge of the situation to make the most of your marketing now and position your company to really take off when the economy revives. Here’s what you need to know:

The Economy Always Expands and Contracts. It always has and it always will. But through 2008, the real GDP was still positive and inflation was very low. 2009 may be tough but the rate of decline is already slowing and the rate of personal consumption is off only slightly, not nearly as much as in ’74 or ’80. History tells us that real disposable personal income per capita has never declined by more than 2 percent. Consumer spending starts to rebound in the middle of a recession (leading us out), so now is the time to position your company for the recovery, which will most likely accelerate in 2010.

Strong Marketers Can Greatly Increase Their ROI. The paradox, according to the Martin Agency, is that companies think they can reduce their ad spending because everyone else is cutting back. But by staying in the game, you can increase your share of voice, increase your market share, and maintain your sales and revenues. When the economy recovers, the customers you kept and the new prospects you won will have a multiplier effect on your growth, which should be reflected by a handsome gain in your gross and net profits. Another fact, often overlooked, is of those companies that pull back and lose market share, most will have to spend nearly 60% more than their usual levels to regain it – if they can. Studies show that it is difficult to regain old customers who have made new relationships and the ultimate effect of pulling back ad spending may last for 2-3 years beyond the recession.

Go With Your Strengths. Take the time to evaluate your offering and identify the best performers in your portfolio of products and services. Advertise the winners and hold off on promoting any marginal performers. Stress value and stay away from discounting because that cheapens the image of your company and conditions to customers to look for those lower prices in the future. Cutting prices eats away at your bottom line and your brand. McDonalds is advertising the “value meal” over super-sizing; Hyundai is promising a “buyers assurance” plan rather than offering dealer pricing incentives; and Coca-Cola is inviting us to “Open Happiness,” just what we all need in these troubled times.

It may seem counter-intuitive, but a recession is not the time to cut back on your marketing and ad budgets. Re-think your message and re-assess your media buy. But remember that people still have to live in their homes, put food on the table and clothes on their backs. We may be staying a little closer to home, but families are still taking trips and going to the movies or a concert. Life goes on in a down economy and marketers who know how to navigate the tough times will manage better in the short term and they’ll be rewarded with substantially more growth when the economy revives.

Steve Brett

58 Advertising

Copyright 2009