Another economic recession is on everybody's mind as
businesses attempt to navigate their way through the novel coronavirus and is effects.
However, according to Forbes.com, when the economy does take a dive,
businesses should still be willing to advertise, and here's why.
Typically, in a recession, businesses reduce their ad
spending budget in an attempt to cut costs. In the 2008 recession, ad spending
was down in the U.S. by 13 percent. Yet a number of studies point to the
advantages of increasing ad spending in an uncertain economy.
Businesses that maintained or increased their ad-spending
budgets subsequently boosted both sales and market shares during the last
economic turndown and afterwards.
Here's a few reasons companies should continue
advertising—even in a recession:
1. The cost of advertising is usually reduced during an
economic decline, and this creates a "buyer's market" for brands.
2. If the "noise level" is low for a particular category or
product, it can create an opening for new competition to emerge or old
competitors to assert themselves.
3. Consumers can look to brands that maintain advertisements
as a sign of stability in unreliable times.
4. Finally, if the brand is no longer advertising, it loses
the so-called "share of mind" of its consumers, and that has the potential to
damage current and future sales.
There are several examples of companies who are under
economic duress but have successfully increased their profits by using this
advertising strategy, namely cereal giant Kellogg. During the Great Depression,
the company increased their ad spending, while their rival cut back. The
company's profits grew by 30 percent, and the brand has been the industry
leader for decades.
Companies can additionally employ other marketing strategies,
including short-term incentives or an adjustment of the company's message to
combat economic decline.
