Is Now a Good Time to Cut Back on Marketing?
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Is Now a Good Time to Cut Back on Marketing?

No one knows who said it first, but there's an old adage that says, "When times are good, you should advertise. When times are bad, you must advertise."




Well, let's turn that around a bit because that adage likely goes back many years when advertising was about the only way brands could get their message across. Today, we would most likely say:

"When times are good, invest in marketing.
When times are bad, you must invest in marketing."

That works better, and there is no better time than right now than to consider this saying and the importance of marketing in a downturn.


While governments around the world are pumping in money to help soften the fall due to COVID-19 and get things going again, no one doubts we may have some tough months ahead of us.


But why do so many companies cut back on marketing when downturns occur? While some cutting back may be inevitable, it's mostly fears of declining revenues that causes so many to cut marketing budgets significantly, if not entirely.



We saw this happen in the last recession in 2008. Ad spending in the U.S. dropped by an overall 13 percent, amounting to hundreds of millions of dollars. Here's how that was broken down:

  • Newspapers got hit the most when ad revenue dropped 27 percent.

  • Radio spending dropped 22 percent.

  • Magazine advertising dropped by 18 percent and television by about 5 percent.


We should note that online advertising also dropped about two percent. However, there was not a large amount of money going into online advertising in 2008. It was still in its infancy, and most marketers were just getting their feet wet with this new medium.  


OK, so we know this is a typical pattern and that once again today, many brands will be cutting back on their marketing budgets. But, if you are considering this, consider this first:


  • If all your competitors are cutting back on marketing, then there is less "noise" out there. This means you have a much better chance of getting your message heard.

  • If you are thinking of introducing a new product, now is the time. New product introductions invariably take a lot of effort. But with less noise, and many brands putting a hold on new product introductions during downturns, once again, this increases your chances of familiarizing more consumers with your new products.

  • Expect some marketing costs savings. If you are an advertiser, then you know advertising charges are not set in stone. Negotiating is all part of the game. As we saw earlier, with many companies cutting back on advertising, newspapers, magazines, and other platforms need your dollars. You may be able to negotiate some sweet deals right now.

  • History teaches us that those brands that cut their marketing spend in tough times, lost what is referred to as "share of mind." Consumers forget about them. Lost sales, lost profits, even lost companies, happened next.


 Let's take a closer look at this last point.  



Amazon

We know Amazon as a mega-giant, making money "hands over fist." But if you go back in their history, they had year after year when they were losing money.  But, in 2009, a year into the Great Recession, Amazon sales grew by 29 percent. They continued to innovate, and they ramped up their marketing budgets, most noticeably with their new Kindle e-reader. By Christmas 2009, Amazon customers purchased so many Kindles - and along with them e-books - that more e-books were purchased that year than printed books.

McDonald's

During the 1990-91 recession, McDonald's figured they could rest on their laurels and dropped virtually all their advertising and promotion spending. After all, they were way ahead in profits and sales of any other quick-service chain. But Pizza Hut increased their marketing budgets as did Taco Bell. Result: Pizza Hut sales up 61 percent during the recession; Taco Bell sales up 40 percent. McDonald's sales, down 28 percent.


Toyota

The 1973 energy crisis hit most all car manufacturers hard. But the imports, such as Toyota, Honda, and Volkswagen, fared better than most. Toyota was tempted to scale back on their marketing. After all, they were still enjoying strong sales. But they resisted the temptation. They adhered to a long-term marketing strategy that says invest in marketing in good times and invest even more in marketing in bad times. (Haven't we heard something like this before?). By 1976, Toyota surpassed Volkswagen, then the number one imported brand in the U.S., and Honda has never caught up with them.


Think about these examples in the months ahead. And as for the recession, maybe we should think about one more thing. When asked about a recession the country was then experiencing, Sam Walton, founder of Wal-Mart, said, "I thought about it and decided not to participate."


Whether you want to increase brand recognition, improve brand loyalty, increase web traffic, or increase conversions, DS&P is your one-stop shop for all your digital marketing needs.


If you’re interested in getting started, but aren’t sure where to begin, you've come to the right place. Contact us below and we will discuss your options.

Prepared for DS&P by AlturaSolutions Communications


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