Real-World Education for Modern Marketers

Join Over 612,000 Marketing Professionals

Start here!
N E X T
Text:  A A

Marketing in a Recession: What Do the Studies Really Tell Us?

by   |    |  8,933 views

Tell me whether you've heard this one: "All the research shows that companies that spend on marketing during a recession come out ahead of the competition as the economy rebounds."

I would estimate that I have heard that statement from a marketer at least once at every conference and networking event that I've attended in the past year. That's a catchy buzz phrase—and if people believe it, even better. As principal of a marketing agency, I need clients to trust in the value of marketing.

But here's the thing: What research? From the myriad marketers from whom I've heard utter those words of wisdom, I have yet to hear the name of a researcher or report related to those findings. Well, I decided to call their bluff on this one and look at "all the research" that my colleagues continue to tout.

Upon conducting an online search, I found several articles and papers that reference studies that support the sound bite:

  • "How Advertising in Recession Periods Affects Sales," American Business Press, Inc., 1979
  • ABP/Meldrum & Fewsmith study, 1979
  • Dhalla, Nairman K. "Advertising as an antirecession tool," Harvard Business Review, Jan.-Feb. 1980
  • Kijewski, Dr. Valerie. "Media Advertising When Your Market Is in a Recession," Cahners Advertising Research Report. The Strategic Planning Institute, 1982
  • McGraw-Hill Research. Laboratory of Advertising Performance Report 5262, New York: McGraw-Hill, 1986.
  • Greenburg, Eric Rolfe. "Fortune Follows the Brave," Management Review, January 1993

Eureka! With these studies in hand, I too could tell clients to "Spend, spend, spend!" And, they wouldn't have to take my word for it because now I've got backup. I just needed to brush up on the data.


Apparently, a citation for a 25-year-old research report is a lot easier to dig up than the actual report. I was able to find a more recent study as well as some summarized findings on the reports above; and, as with most data, there are several ways to spin the information.

In a 2005 study published in the International Journal of Research in Marketing titled "Turning adversity into advantage: Does proactive marketing during a recession pay off?"* the authors note that companies that actively market during a down economy report positive results from the effort.

Now I could leave you with that or also tell you that they caution that this does not apply across the board and it is not recommended for all companies to increase marketing spending in a recession.

Massive consumer-based brands such as BMW, Dell, and Wal-Mart are so tied to marketing as part of their business strategies that drastic marketing cuts would most likely have an even greater impact on their bottom line than the recession alone. On the other hand, B2B-focused organizations with active sales and business-development teams will not necessarily feel the same impact of a marketing-budget reduction because marketing is only a supporting component in filling the sales pipeline.

Companies need to understand marketing's role and its impact on sales in their organization. Are knee-jerk marketing cuts destined to hurt business in the long run? Most likely, but strategic reductions based on customer-spending capacity and the marketing impact on an organization's sales process is intelligent business practice.

From the group of studies mentioned earlier, it seems that the McGraw-Hill study on the 1981-1982 US recession is referenced with the most frequency. The study concludes that "business-to-business firms that maintained or increased their marketing expenditures during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased marketing."

At first glance, your gut reaction to this statement, like mine, may be, Well, duh. However, if framed differently, the idea behind that statement really does make an impact: "If your company reduces communications to your current and potential customers and your main competitor maintains or increases communications to your current and potential customers, whose business is more likely to grow during and following the recession?" Again, each organization is unique. But if you need a "why spend on marketing" clip, I like that one.

Regardless of the data, if the revenue isn't there... no one is going to be able make the marketing budget appear, especially for small to midsized businesses. So, instead of trying to fight the futile battle of finding yesterday's budget, marketing professionals need to become smarter with what they have. But what does that mean?

It means setting measurable campaign goals before kicking off a project. Talk about the result first. If you can't confidently say you can launch a campaign within the allotted budget and achieve the desired result, scrap the campaign and move on to something measurably achievable.

It doesn't mean social media "because that's free!" Unless you consider man-hours free, social media is not free, and it can in fact be a costly time drain without a clear vision of the social-media campaign and, again, measurable objectives.

It means continuing to spread your media mix but keeping it manageable. You can't be everywhere. Choose media that you can focus on and continually improve as initial results are analyzed. If you can do only enough of a campaign to pull one round of data from each communications channel, go with fewer channels that will have the most impact.

And, finally, it means fighting for customers. The fact is, some companies are not going to make it through the recession. You have to get creative with pricing, and product and service offerings, and work harder than the competition.

It's not that companies need to spend on marketing during the recession; rather, companies need to appropriately plan their marketing during the recession. Yes, market—but market smart.

* See the complete study "Turning adversity into advantage: Does proactive marketing during a recession pay off?" (pdf)


Join over 612,000 marketing professionals, and gain access to thousands of marketing resources! Don't worry ... it's FREE!

WANT TO READ MORE?
SIGN UP TODAY ... IT'S FREE!

We will never sell or rent your email address to anyone. We value your privacy. (We hate spam as much as you do.) See our privacy policy.

Sign in with one of your preferred accounts below:

Loading...
Christian Shea is a principal at P4MV (www.p4mv.com) and has been developing measurable marketing strategies for organizations across a wide range of vertical markets since 1995.

Rate this  

Overall rating

  • This has a 5 star rating
  • This has a 5 star rating
  • This has a 5 star rating
  • This has a 5 star rating
  • This has a 5 star rating
3 rating(s)

Add a Comment

Comments

  • by Doug Pruden Tue Jun 16, 2009 via web

    I applaud your effort to find the actual research that everyone seems to be quoting (but seemingly no one has bothered to source and review). I hope you'll next take on some more of the industry favorites. How about "A 5% increase in customer retention equals an 85% increase in profits". I hear that one all the time. It might make sense sometimes, but while a 5% increase for a company with poor retention might take little, that same percentage increase in retention for a company that's already performing well in retention might be astronomically expensive. Also, if they retain more unprofitable customers, keeping them would actually drecrease profitability. There's lots of other industry wisdom that deserves challenge. Good luck.

  • by Jorge Martinez Brandset Mexico Tue Jun 16, 2009 via web

    Though I support your view, something smells different about the current recession. How long will it take consumers to resume confidence in buying? It is not just research, companies are entering into a reengineering phase just to survive. Debt-driven marketing is not an option. Historical research is of little help in the avalanche of change. Prospective multivariate research focused on the shortcomings of evolving consumer behavior might be more effective.

  • by David Corkindale Tue Jun 16, 2009 via web

    I, too, applaud the principle of checking the source. To add to Doug's worry about the silly claim "A 5% increase in customer retention ...85% increase in profits." This did appear in a Harvard Business Review article but uses deceitful maths: the %5 increase is in percent points, that is for example, from 5% to 10% retention which is actually a 50% increase. There are other dubious aspects to the article. If it were that easy all companies would have done it long ago.

  • by wamai robert Wed Jun 17, 2009 via web

    The article hit the nail on the head. What is needed in a recession or any othe rtime is smart marketing. Also marketing is not just about advertising. One could cutb the advertising budget but still come up with clever marketing intiatives around say price or packaging. Offers such as bundle pricing for comapanies that market say toothpaste and soap where on offers a bundle of value. Also launching smaller pack sizes to get more people at the lower end of the market. Partnering with retail outleats to offer value say ' for this weekend only' price downs could be useful. This is what really lacks not just in a recession. Good ideas. The result is that, because marketing has not earned its pride of place in many firms, it suffers in a recession. Coming up with smart measurable ideas that need not cost lots of money is what will make business owners respect marketing not defending it with catch phrases backed with research done in a by gone era when things were less complex.

  • by cangel Wed Jun 17, 2009 via web

    You are absolutely right. In marketing flexibility is the most important thing. Because there is a recession marketing budgets may be tight. But it is important to be creative and make the most of budgeting money. It is true that you cannot make money without spending some. But it is important to spend wisely to reach the largest audience while spending the least amount of money. I have found that coupons make a difference. They are easy and inexpensive to produce but they can be put everywhere. And they give you an idea, when redeemed, of your potential customer base. Than this can help dictate further marketing techniques.

  • by Concerned Fellow Tue Jun 23, 2009 via web

    Gratitude to God for your idea on this project. It is already assisting numereous schoolars, students, researchers etc to ehance their knowledge in the area of marketing in this period of world economic downtown.

    More greese to your elbow.

MarketingProfs uses single
sign-on with Facebook, Twitter, Google and others to make subscribing and signing in easier for you. That's it, and nothing more! Rest assured that MarketingProfs: Your data is secure with MarketingProfs SocialSafe!